OECD revises Eurozone growth downwards

Erste Bank Research Team Erste Bank

On the radar

In Romanian December’s retail sales landed at 1.5% y/y.
In Hungary, industry contracted visibly by -8.7% y/y at the end of the year, while retail sales dropped marginally by -0.2% y/y in December.
In Czechia, industrial output declined in December by -0.7% y/y (SA).
In Slovakia, December’s retail sales landed at -4.0% y/y.
At 10.30 AM CET, Slovenia will publish January’s inflation rate.
Today, Polish central bank begins its two-days meeting with interest rate decision on Wednesday.
Tomorrow in the morning, Czechia will release retail sales in December.

Economic developments

The OECD has revised global growth for 2024 marginally upwards, while keeping the 2025 global GDP forecast unchanged in its Interim Economic Outlook. The United States' growth forecast for this year has also been revised visibly upward (by 0.6 percentage points compared to November's projections). However, prospects for developments in the Euro area are of particular importance to the region. Unfortunately, the outlook for the Eurozone has worsened, as the 2024 GDP growth forecast has been revised down to 0.6% and to 1.3% in 2025 (from 0.9% and 1.5% respectively). At the same time, inflation projections have been adjusted downward as inflationary pressure keeps easing (also due to weak demand). The need to reroute trade flows due to attacks on shipping in the Red Sea has not only increased the costs of shipping but also disrupted production schedules in Europe, particularly for car manufacturers, becoming one of the biggest risks in the short term.

Market developments

At the beginning of the week, the CEE currencies weakened against the euro. Today, the Polish central bank begins the rate-setting meeting with the interest rate decision due on Wednesday. Long-term yields increased across the region, mimicking the development on the core markets. Romania and Slovakia held successful auctions on Monday. Romania sold more T-Bills and Bonds maturing in 2029 than planned, as demand was solid with a bid-to-cover ratio slightly above 1.5. Slovakia enjoyed a similar appetite for the new issuance of 2Y and 4Y Bonds. The 2026 Bonds were priced to yield 3.26%, while the 2028 Bonds were priced to yield 3.09%.

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Erste Bank Research Team

Erste Bank

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