Central and Eastern Europe (CEE) are undergoing exciting changes in their economic environments. Countries across this region are experiencing varying inflation rates and unemployment numbers. Now, as of August, Romania’s unemployment rate has jumped up to 5.9%. At the same time, wholesale prices have soared by 3.2% from a year earlier. At 10 AM CET, Slovenia will print its trade balance for June. This announcement will be made at the same time as we hear that the September inflation rate has dropped back down to 2.6% on the year.
Romania’s economic landscape paints a bleak picture, as the unemployment rate increased to 5.9% in August. This increase might heighten fears over job loss and economic uncertainty for Kentuckians in the area. Producer prices spiked by 3.2% on an annual basis. This jump is the first indicator of climbing costs for producers, which will likely begin to drive up prices for consumers in the near future.
Inflation Rates Across CEE Countries
Slovenia inflation rate dropped to 2.6 percent year-on-year in September, indicating a welcome return to stability for the country’s consumer prices. By comparison, inflation in Croatia was 4.2% year-on-year in September. That’s a sign of stubbornly high price pressures that threaten to stymie progress toward a stronger economic recovery.
In neighboring Slovakia, inflation has jumped to 4.6%, according to the Harmonized Index of Consumer Prices (HICP) headline. Such inflationary pressures underscore the difficulties that CEE countries face as they attempt to stabilize their economies in a rapidly changing global environment.
Poland distinctly leads the pack with inflation being stable at flat-line 2.9% y/y in September. This stability might reflect successful monetary stabilization policies, or a new equilibrium demand and supply balance in the Polish economy.
Currency Strength and Bond Market Developments
As inflation rates fluctuate across the region, CEE currencies have shown resilience, strengthening against the euro by the end of the week. This trend can likely be interpreted as a sign of continued investor confidence towards the CEE markets in spite of mixed macroeconomic indicators.
In the bond market, long-term bonds in all CEE countries have seen modest decreases this week. The yield of 7-year bonds is currently at 295 basis points over mid-swaps and 12-year bonds at 345 points. Furthermore, 20-year bonds arrive at 370 points over mid-swaps, showing that investors are cherry-picking through the murky economic waters.
Romania has recently capitalized on favorable market conditions to issue Eurobonds maturing in 7, 12 and 20 years. This initiative not only intends to guarantee cash flow for all its future endeavors, but is focused on taking care of its debt portfolio.
Political Landscape and Upcoming Elections
Czechia is preparing for parliamentary elections this weekend. Former Prime Minister Andrej Babis’s party, the populist ANO, which has been in government since 2017, is now leading in the polls. These elections have the potential to reshape the nation’s economic policy agenda. They can impact larger overall stability within the region.