Hungary has reduced its cash buffer

On the radar

• March retail sales in Poland arrived at -0.3% y/y.

• Today, unemployment data will be released in Poland.

• There are no other releases scheduled.

Economic developments

Earlier this week, Eurostat published government finance statistics for EU member countries in 2024. These statistics included the official general government balance (deficits in ESA), a breakdown of revenues and expenditures, gross public debt, and a breakdown of financial assets and liabilities. Croatia, Czechia, and Slovenia reported deficits well below 3% of GDP. In contrast, Hungary and Slovakia's deficits were close to 5% of GDP, Poland's deficit jumped to 6.6% of GDP, and Romania surprised with deficit at 9.3% of GDP, the highest in the EU. Changes in gross public debts (net debt + liquid financial assets) surpassed deficits, as all countries except Hungary bolstered their liquid financial assets alongside increased net debt. Hungary was the only CEE country to reduce its cash buffer in 2024, bringing it to the lowest level in the region (6.5% of GDP). It appears that cash deficits did not differ significantly from reported accrual deficits, as the increase in net debt nearly matched the deficit. Hungary was the only CEE country where the change in net debt was noticeably higher than the deficit. This discrepancy could be explained by the revaluation of the FX portion of government debt due to forint depreciation and acquisition of shares and equity (i.e. Budapest airport), which are not considered liquid financial assets.

Market developments

CEE currencies appreciated as the U.S. administration acknowledged that the current stance on China tariffs is unsustainable and will be softened. The Czech koruna surged below the 25 level against the euro, while the Hungarian forint and Polish zloty rebounded to 408.25 and 4.28 versus the euro, respectively. Bond markets remained relatively calm, with only 10-year POLGBs showing some correction after last week’s rally. In Czechia, the Deputy Governor of the CNB, Mr. Frait, provided an interview to local media, sharing his views on monetary policy challenges related to tariffs. He expressed his opinion that inflation and wage pressures may ease, allowing central banks to continue lowering their rates.

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