2024 GDP data, inflation and central bank meetings in Romania and Serbia

The most interesting data will be released at the end of the week as 4Q24 GDP releases are scheduled in several CEE countries. That will complete the data for 2024 economic performance in most of the region. Only Croatia will publish GDP data at the end of February. Other than that, headline inflation will be released in Hungary and Romania, as in other countries, such as Czechia or Poland, we have already seen the January’s flash estimates. While in Hungary inflation is expected to increase, in Romania, it should marginally ease. Further, two central bank meetings are planned in Romania and Serbia. We expect no change in the policy rate in either country. Finally, December’s industrial output growth will be released in Slovenia and Romania, wage growth will be published in Slovakia and Romania and trade data is due in Poland and Romania. Last but not least, Fitch is scheduled to review Czechia’s rating and outlook. 

FX market developments

CEE currencies have strengthened against the euro over last week. The EURCZK moved to 25.07, the EURPLN touched 4.19, which is the lowest level since the beginning of 2018. The Hungarian forint gained the most as the EURHUF moved to 404, the lowest since November 2024. We believe that global factors are driving the FX market in the region. For example, speculation about the end of the war in Ukraine is positive for the region. The Polish central bank kept the policy rate unchanged as Governor Glapinski sees no space for rate cuts at the moment. The Czech central bank lowered the key policy rate to 3.75% last week amid easing inflation. We see further rate cuts only in the second half of the year. This week, central banks in Romania and Serbia will hold rate-setting meetings. Neither Romania nor Serbia is expected to change the key policy rate. In Romania, monetary easing in 2025 will strongly depend on the fiscal outlook. Serbia is also in no rush to deliver rate cuts.

Bond market developments

CEE government bond yields moved down last week, most notably in Romania (-30bp w/w at the 10Y tenor). The situation in the local ROMGB market somewhat eased as Romania’s first foreign issuance of the year finally took place. Romania borrowed EUR 2.8bn in a multi-tranche Eurobond issue (5Y and 9Y), plus USD 1.25bn via a 12Y dollar-denominated Eurobond. This amount should be sufficient to overcome the uncertain period until the presidential elections (scheduled for May), after which the Ministry of Finance is expected to execute bolder consolidation measures, especially on the revenue side. However, the risk of a rating downgrade below investment grade due to deferred or insufficient fiscal action has so far kept many investors at bay, which has been reflected in higher spreads compared to the last issue of Eurobonds. Croatia and Poland also tapped foreign markets last week. Croatia borrowed EUR 2bn via a 12Y Eurobond, and Poland raised USD 5.5bn through a dual-tranche of dollar-denominated Eurobonds (5Y and 10Y). This week, Romania will reopen ROMGBs 2030 and 2038, and Czechia, Hungary, and Poland will offer various bonds. Additionally, Hungary and Slovenia will be selling T-bills.

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