ESI with a slight improvement in CEE

On the radar

• Moody’s announced completion of a periodic review of ratings for Romania without announcing any rating action.

• In Hungary, producer prices rose by 3% y/y.

• In Poland and Slovenia flash estimates of inflation will be published at 10 and 10.30 AM CET.

• In Croatia and Serbia, retail sales and industrial output growth in August will be releases at 11 AM CET and at noon.

• In Serbia, trade data will be published at the top.

Economic developments

In September 2024, the Economic Sentiment Indicator (ESI) remained broadly stable in both the EU and the euro area. The development of the ESI in the EU resulted from improved confidence in construction and among consumers, offset by a decrease in industry confidence. Further, the Employment Expectations Indicator (EEI) remained broadly unchanged as well. While the EEI is at or very close to its long-term average of 100, the ESI continues to score below that reference value. When we look at the ESI in the region, the indicator improved slightly in September for the second consecutive month. Such development brought the 3Q24 average of the ESI indicator slightly higher compared to the 2Q24. The change is rather marginal and is driven by improvement of the sentiment in Czechia, Poland and Serbia. In other countries economic sentiment declined. Further, consumer confidence deteriorated marginally in September. All in all, the market sentiment points to rather sluggish recovery in the second half of the year.

Market movements

Moody’s Ratings announces completion of a periodic review of ratings of Romania. It stressed, however, that the publication did not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Romania's ratings reflect the economy's strong growth potential, which is supported by strong EU funds and foreign direct investment (FDI) inflows. These strengths are balanced by relatively weak institutions and governance strength and elevated fiscal and current account deficits. CEE currencies depreciated last week against the euro, with the Hungarian forint losing almost 1% w/w as the central bank resumed its monetary easing. This week, the Romanian central bank is expected to be next in CEE to cut interest rates, while Poland’s central bank should keep rates on hold. Government bond yields in both major markets and CEE edged down last week. In Romania, budget deficit reached -4.6% of GDP at the end of August.

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