CEE: Growth outlook revised downwards due to tariffs

Erste Bank Research Team Erste Bank

On the radar

The unemployment rate in Czechia eased to 4.3% in March.
Trade balance in February was published at -41 million Slovakia and -2.8 billion in Romania.
At 11 AM CET, Croatia will release tourism arrivals in February and January’s trade balance.
Hungarian central bank is scheduled to publish central bank minutes.

Economic developments

In response to the Trump’s announcement of global tariffs we adjust our growth forecast for all CEE countries for 2025 and 2026. Our initial growth expectations for CEE were between 2% and 3.8% in 2025 and between 1.9% and 4.3% in 2026. The revision of forecasts for 2025 is rather marginal, up to 0.3 percentage points depending on the country. The negative impact in 2026 is slightly bigger. However, in 2026, the final magnitude will depend on the durability of the current tariff rate (baseline scenario of tariffs reduction to 10% in 2H25 vs. adverse scenario of a 20% rate permanently set). The hit to economic development in the region should be mitigated to some extent by the expected fiscal stimulus in Germany.

Market developments

As of today, April 9, the global tariffs announced last week by President Trump take effect. The 10Y yields in the US increased sharply to 4.46% this week. In the region we have seen long-term yields increasing to a much lesser extent this week. The expectations for monetary easing in Poland build up quickly. The central banker Litwiniuk said that Poland has scope to cut interest rates by half a percentage point by mid-year, in one or two steps depending on incoming data. That marks a visible shift regarding monetary policy in Poland and speed of easing. In Hungary, consumer prices rose 4.7% y/y in March, well below expectations. Cap on margins of certain food products as of mid-March coupled with favorable base effects in the field of services played a key role in the inflation slowdown.

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Erste Bank Research Team

Erste Bank

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