Germany’s underperformance is sneaking into CEE

Erste Bank Research Team Erste Bank

On the radar

Lorem Net wage growth in Romania accelerated to 14.8% y/y in July in nominal terms.
Today at noon, Serbia will publish inflation rate in August and interest rate decision.

Economic developments

In the new CEE Macro Outlook Germany‘s underperformance is sneaking into CEE we revised the 2024 growth forecast down in several countries. There are growing risks that 2025 will also be weaker than expected. In Czechia, the revision is marginal (from 1% to 0.9% in 2024), while in Hungary, Romania and Slovenia, revision is more extensive, reflecting the size of the 2Q24 GDP growth surprise. In Hungary, 2024 growth forecast sits at 1.4% (down from 2%), in Romania we reduced our expectations to 1.9% (from 2.6%), while in Slovenia to 1.5%. Serbia and Croatia are on track, as real wage growth is strong, and these two countries will grow the most dynamic in 2024. Poland surprised to the upside, and we fine-tuned 2024 Polish GDP to 3.2%. As far as the outlook is concerned there are some clouds, however. Germany’s weakness is sneaking into CEE and we touch upon recent development in Germany as well. Average inflation is expected to ease further in 2025, and monetary easing should continue in all CEE countries next year.

Market developments

Today, the Serbian central bank holds a rate setting meeting. We expect a 25 basis points interest rate cut to 5.75% as inflation should fall toward the tolerance band in August. The Serbia’s central bank decision will come shortly before the ECB announcement on the interest rate that is scheduled on Thursday afternoon. It is expected that the ECB will almost certainly make its next interest rate cut of 25 basis points today. The Czech koruna and the Hungarian forint remain weaker against the euro this week, while EURPLN moved up to 4.28. Long-term yields have moved down ahead of the ECB meeting. Poland successfully placed bonds maturing between 2027 and 2036. The total supply reached PLN 8 billion. Romania announced plans to tap Japanese market and place Samurai bonds in the fourth quarter.

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Erste Bank Research Team

Erste Bank

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