OECD revised global growth down

On the radar

• Unemployment rate in Romania was at 5.4% while producer prices grew 1.8% y/y in April.

• 1Q25 GDP in Hungary was confirmed at 0% y/y and -0.2% q/q contraction.

• In Croatia, inflation rate increased to 3.5% in May.

• Today, at 9 AM CET, Czechia published flash inflation for May, retail sales growth in April as well as wage growth in 1Q25.

• Slovenia is scheduled to release trade data.

• In the afternoon hours, Poland’s central bank holds interest rate decision.

Economic developments

According to the OECD, substantial increases in trade barriers, tighter financial conditions, weakened business and consumer confidence, and elevated policy uncertainty all pose significant risks to growth. The OECD has therefore revised its global growth forecasts down to 2.9% for both 2024 and 2025. If these trends continue, they could substantially dampen economic prospects. On the other hand, an early reversal of recent trade barriers could boost economic growth. Most recently, we have seen an easing in the Trade Policy Uncertainty Index, driven by hopes that negotiations on tariffs will lead to some agreement. However, the index remains at unprecedented levels. As for the growth forecasts of the CEE countries, the OECD holds a similar, though marginally more optimistic, view for most of them. Only in Romania and Slovakia are our growth forecasts slightly higher compared to those of the OECD. However, we acknowledge the persisting downside risks to the economic performance of these two countries.

Market developments

Today, Poland’s central bank is holding a rate-setting meeting, and the key policy rate is expected to remain at 5.25%. The bank cut the key rate by 50 basis points in May, and the next move is expected in July, when new inflation and growth projections will be published. The EUR/PLN moved back up to 4.27 on Tuesday after Prime Minister Tusk called for a confidence vote. Political risks are expected to remain elevated in the near future. The Czech koruna and the Hungarian forint have strengthened marginally against the euro this week. In Romania, President Dan announced that a new government is likely to be formed in the next couple of weeks, with fiscal consolidation as a top priority. In the meantime, the Romanian government has sold debt in private placements while delaying Eurobond issuance until the fiscal consolidation plan is finalized. Poland and Romania have seen 10-year yields increase since the beginning of the week. In other countries, long-term yields have moved down.

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