GDP structure, central bank and inflation

This week, there are several economic events taking place. In Hungary, a central bank meeting is scheduled for Tuesday; we expect stability of rates. In Croatia, we will see 1Q25 GDP, including the structure. In Czechia, the structure will be published at the end of the week as well. Other than that, retail sales growth in April will be released in Slovenia, Serbia, Croatia and Poland. In Serbia and Croatia, industrial output will also be published, Trade data will be released in several CEE countries (Serbia, Croatia, Hungary). Finally, in Poland and Slovakia, flash inflation for May will be published. In Romania, there are no economic events, but the new president is to begin negotiations to form a new government. On Friday, after market close, Moody’s will evaluate Hungary, which already has a negative outlook. Although no improvement has been recorded on the issues pointed out as weaknesses, a negative outlook is likely to prevail.

FX market developments

The EURRON moved down at the beginning of the week in the aftermath of Dan’s victory in Romania's presidential elections. It seems that 5.05-5.10 is the new range for the central bank. The recent comments suggest that the central bank will be resuming cuts in the second half, with the rate conditional on fiscal stability and less pressure on the currency. We expect no interest rate cut at the upcoming meeting in Hungary, but still see space in the reminder of the year. The EURPLN also declined, while the Hungarian forint and Czech koruna have been relatively stable.

Bond market developments

Slovakia sold EUR 680mn in bonds, amid strong demand. At this point, Slovakia has 60% of its financing needs covered for this year. In Romania, we have seen yields declining after centrist candidate Dan won the presidential elections, with hopes for political and fiscal stability from now on. The 10Y yields moved toward 7.5%. In other countries, bond markets were quite stable. Croatia will offer retail bonds, but the yield is expected to be lowered roughly 1 percentage point, so we are curious as to what extent it will impact interest among households in buying government bonds. This week, Romania, Czechia and Poland will be active on the bond market as well.

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