Drop in car registrations in most of the CEE

On the radar

• Hungarian central bank left the key policy rate unchanged.

• Unemployment rate in Poland remained flat at 5.4%.

• Real wage growth in Serbia slowed to 7.2% y/y in January from 9.1% in the previous month.

• Today, Czech National Bank holds a rate setting meeting and we expect no change in key policy rate.

Economic developments

The dynamics of car registrations in the region appear to be shifting. While growth rates were positive across all CEE countries in 2024, the beginning of 2025 showed varied results. In the first two months of 2025, only Slovenia and Hungary reported an annual increase in new car registrations, although Hungary's figures for February were negative. Poland and Romania have reported stagnation in year-to-date car registrations, whereas Czechia, Croatia, and Slovakia are experiencing more significant declines. The situation in Slovakia is particularly concerning, with an annual decrease in registrations of approximately 20%. This decline, coupled with weak retail sales and industry figures for January, is pointing to a sluggish Q1 for the Slovak economy. Turning back to car registrations, EVs and standard hybrids are gaining popularity in the EU, with respective YTD annual registration growth rates of 30% and 19%. Conversely, purchases of pure petrol and diesel cars have decreased by 20% and 30% respectively, while plug-in hybrids also lose popularity (-5% YTD). Overall, the EU saw about 3% fewer cars registered YTD compared to January and February 2024.

Market movements

Today, Czech National Bank holds a rate setting meeting and we expect stability of rates at this meeting. In other words, the central bank takes a pause in the easing cycle. Hungarian central bank kept the base rate unchanged at 6.50%. The decision was in line with our expectations and the broad market consensus. At the press conference, the new governor stated that this year's inflation path would be higher than previously expected, delaying the achievement of the inflation target. In the Council’s assessment, a careful and patient approach, as well as the maintenance of tight monetary conditions, is warranted. The base rate may remain at the current level for a longer period. We maintain our view, however, that later in the year, cautious rate reductions (one or two) cannot be excluded, but only if risk assessment factors improve. Hungarian forint has weakened since the beginning of the week as opposed to Czech koruna and the Polish zloty. EURPLN dropped to 4.16. Hungarian long-end of the curve moved also more visibly down by as much as 15 basis points this week while in other countries volatility has been rather low.

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