Fiscal situation varies across CEE

On the radar

• Moody’s affirmed the Baa3 rating and negative outlook for Romania, S&P affirmed A- rating with positive outlook for Croatia.

• Industrial production in Romania arrived at 2.3% y/y.

• Today, Poland and Croatia will publish the full details of August’s inflation.

Economic developments

As budget discussions and consolidation efforts gain momentum across the CEE region, we take a look the expected fiscal performance for 2025 and 2026. Romania faces the largest fiscal challenges in the region. Despite recently approved consolidation package, the fiscal outlook for 2025 is not optimistic, with the upcoming budget revision likely to widen the deficit to 8% of GDP, up from previously targeted 7%. For 2026, we anticipate a reduction to 6.4% of GDP, due to the full implementation of the extensive fiscal measures. Poland also maintains a loose fiscal stance, with deficits projected at 7% in 2025 and 6.8% in 2026. The recently announced 2026 draft budget shows limited consolidation efforts, with the bank tax emerging as the primary new potential revenue source. In Slovakia, authorities have introduced consolidation measures totaling approximately EUR 1.5 billion, primarily focused on boosting revenues. Hungary has unveiled a series of targeted pre-election measures, which are expected to worsen the primary fiscal balance in both 2025 and 2026. For other EU member states in the CEE region, we expect fiscal deficits to remain below the EDP threshold of 3% in both years.

Market developments

Moody’s Ratings has affirmed Romania’s long-term issuer and senior unsecured ratings at Baa3, maintaining a negative outlook. The decision reflects ongoing implementation risks associated with the government’s ambitious fiscal consolidation programme. S&P has reaffirmed Croatia’s credit rating at A- with a positive outlook, supported by continued strength in economic and trade performance despite global headwinds. The positive outlook signals potential for an upgrade, contingent on sustained fiscal discipline and progress in structural reforms. An important development was the downgrade of France’s sovereign rating by one notch, from AA- to A+. On the FX market, the Hungarian forint and Romanian leu slightly appreciated, while 10-year government bond yields in both countries declined.

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