A wave of notable economic news is set to hit the Central and Eastern European region later this week. Slovakia will be watching as key unemployment data comes out, and in Hungary inflation continues to climb. Romania’s debt agency announced plans to reconsider its foreign issuance strategy amid soaring fiscal pressures. At the same time, countries like Poland, Serbia and Czechia are preparing to sell green bonds as they navigate their own fiscal environments.
Next week, Slovakia will release its unemployment rate. This announcement should provide valuable context and analysis to a continuing evolving labor market. This information is exceedingly important, as it signals we are still in recovery from the pandemic recession and economic disruptions. According to analysts, the surprising figures should inform future policy decisions in the region.
In Hungary, the annual inflation rate broke through the ceiling of 4.0% in May, increasing fears that cost-of-living pressures are accelerating. This inflationary trend has led to calls for Federal Reserve monetary policy changes while the government works to stabilize the economy. The Hungarian government is now planning to borrow an additional EUR 3 billion in foreign currency debt. This new plan will improve its financial position even further than what was originally called for.
Fiscal Policies and Bond Issuances
Romania’s debt agency has gone public with proposals to cap foreign bond issues. They would like to see greater clarity on the fiscal consolidation package before moving on. In fact, just a few days ago, Fitch Ratings underscored the importance of fiscal discipline for Romania’s short- and medium-term economic outlook. Yet this decision holds against that significant commentary. The agency’s cautious approach reflects a broader trend in the region as countries strive to balance growth with sustainable debt levels.
Meanwhile, other countries are issuing bonds, both actively and passively. Further east, Slovakia is to re-open its SLOVGBs 2031, 2033, 2035 and 2051 bonds this week. This very strategic play is sure to get investors looking and bring much-needed capital for public infrastructure projects. Romania is planning to reintroduce its ROMGBs in 2027, 2031 and 2034. The initial target of the country is RON 400 million per bond issuance.
Czechia will reopen its CZGBs 2033, 2036 and 2044 bonds this week. Croatia and Hungary are preparing for their first T-bill sales. In the meantime, Poland is getting ready to sell all sorts of bonds. These things together show a strong commitment to fiscally responsible stewardship of the nation’s balances sheets in an increasingly dynamic economic environment.
Central Bank Decisions and Economic Indicators
Serbia’s central bank announced it would hold its key policy rate at 5.75%. This is evidence of their dovish tilt, reacting to deteriorating economic signals. Such a decision is in line with continued evaluation of inflationary pressures and growth potential of the Serbian economy, said the NBS. To bring long-run stability to a shaky economy, the central bank is right to choke off inflation.
Coming up this week are current accounts for Slovakia and Serbia. Market participants will be especially attentive to these figures for indications as to the trade balance and our external economic vitality. The upcoming current account data should be a bellwether indicator. This will allow us to better gauge how these economies are faring in the increasingly competitive global environment.
The Hungarian government bond curve has moved sharply higher. This shift is largely fueled by heightened expectations for the pace of future issuance and a pickup in inflation. Government securities have received a big boost in investor demand as a result of these dynamics. This dramatic increase in demand could set off even more volatility in the bond markets.