Central and Eastern Europe (CEE) is an economic picture of contrasts. Each country in the region is experiencing their unique growth dynamics, as central banks proactively respond as conditions rapidly evolve in global financial markets. For the third week in a row, the Romanian central bank has pumped liquidity into the money market. This action underscores the district’s commitment to fiscal responsibility. Meanwhile, Croatia and Poland are on track for GDP growth around 3% this year. Other countries are facing the prospect of having to downgrade their economic predictions.
Croatia, Czechia and Poland were at the forefront of the entire region. This is despite the fact that they all posted handsome economic growth during Q1 of this year. On the other hand, Slovakia and Slovenia have experienced sharp contractions in industrial production, showcasing an emerging slowdown of their national economies. This article explores some of the new economic trends in Central and Eastern Europe. It features key GDP growth forecasts, central bank market interventions and industry snapshots.
Central Bank Actions and Economic Stability
For the past three weeks, the Romanian central bank has actively intervened to improve liquidity in the money market. Such a decision would be a signal that prioritizing financial responsibility in the face of unprecedentedly erratic economic conditions remains a policy priority. Through easing liquidity, the central bank seeks to restore confidence in investors and companies, preventing credit from evaporating.
Last week the government of Hungary announced intentions to increase its gross issuance of foreign-currency-denominated debt. They plan to raise around EUR 3 billion. Earlier this year, Hungary floated 2.5 billion euros in bonds, suggesting a far more confident play to shore up its economy against the storm. These developments are under the careful scrutiny of the Hungarian central bank. Later today, it will release the minutes from its latest meeting, providing stakeholders with incredibly useful insight into its decision-making process.
Czechia’s central bank Governor Michl noted that interest rates should stay unchanged for a longer period. This new strategy intentionally prioritizes preventing inflation from returning. This is a major concern for most economies in the region. Vigilance on inflation and interest rates will help foster the investment and consumer spending needed to support robust economic growth and rising standards of living.
Diverging GDP Growth Dynamics
Croatia and Poland are on course for close to 3% GDP growth this year. This is a testament to the robust economic activity flourishing in both countries. Both countries have shown incredible resilience, supported by strong domestic demand and a gush of positive external play. These are promising growth rates, both for their immediate economies and as a harbinger of further positive movement on the development front.
Czechia is projected to grow by almost 2% of its GDP. Even though this growth rate is significantly slower, that’s still a sign of permanence. This is particularly the case when looking at some of its neighbors. The recent firming up of Czechia’s inflation rate at 2.4% would represent a totally commendable focus on commitment to price stability. The people’s bank is very much in market tending growth balancing inflation taming seem.
The deepest cut came in Hungary, where forecasts for the growth of the economy were cut to a mere 0.8% this year. This unusual one-notch downgrade illustrates the persistent problems in Hungary today. Inflation and wider market forces are exacerbating the impacts of this shortfall.
Industrial Performance and Challenges Ahead
Slovakia’s industrial production shrank by -0.4% yy in April, heightening fears about the central European country’s economic future. This follow-up reduction in industrial production is a sign that Slovakia has been unable to keep up the pace of development within its manufacturing base. In much the same way, Slovenia recorded a larger drop with -4.7% year-on-year industrial output decrease.
Corrections in GDP growth predictions have recently affected Serbia. Projections for this year have been lowered to 3.1%. In mid-June, Slovakia and Slovenia saw their GDP growth forecasts downgraded to 1.5% for 2025. This shift underscores the growing desperation of these countries to address their fundamental economic issues.