This week, Eastern Central European economies are poised for a major reset. Today’s GDP growth estimate likely isn’t the worst of it, with 3 major projections and data releases to move the financial markets. Romanian industrial production growth forecasted at +0.4% y-o-y. We emphasize that this high water mark of growth is driven by firm external demand and base effects. Slovakia, for its part, anticipates a 3.7% CPI on an annual basis. This jump is primarily driven by increasing inflation on services and robust wage growth. In the Czech Republic, members of the monetary policy committee (MPC) see no immediate need to adjust interest rates, maintaining stability in their economic outlook.
The Hungarian central bank is expected to publish its revised economic projections within days. These projections would have an enormous effect on their region. Croatia and Slovakia are to release important unemployment and current account numbers on Friday. At the same time, Slovenia will release its PPI print. Taken together, these releases can help shed light on the tightness of labor markets and inflationary pressures throughout the region.
Romanian Industrial Production Growth
Romania’s industrial production is projected to increase by 0.4% y-o-y, indicating an upward trend in the overall production activity of the manufacturing industry. External demand and base effects mainly explain this growth. This really gets to the heart of the importance of exports in generating economic activity.
Analysts point out that Romania’s strength in industrial production is a beacon of resilience amid regional adversity. While positive growth is expected to be fairly weak, it gives Romania the upper hand versus some other countries in the region facing serious economic challenges.
The Romanian economy is in constant recalibration towards market’s new trends. Moving forward stakeholders are hopeful that the additional expansion can pave the way for continued future expansion. They caution that continued key sector competitiveness will be critical for continuing this growth momentum.
Slovak Inflation and Unemployment Data
Slovakia is bracing for a CPI surprise to the upside at 3.7% year-on-year, higher due to boosting prices for services and strong wage pressures. The increase in consumer prices is a clear indication that inflationary pressures continue to build up in our economy. Given these important developments, analysts expect that this trend will continue to shape monetary policy decisions in the months ahead.
Alongside inflation numbers, Slovakia will publish unemployment figures on Friday. Investors are closely tracking these indicators, as they are helping to paint the true picture of the health of the labor market. Observers and analysts expect that the positive stable wage growth will provide a significant boost to domestic consumption, which in turn will support economic activities within the country.
This release of current account data will be particularly illuminating. It will shed light on Slovakia’s growing trade surplus and point towards trends in foreign direct investment. As Slovakia faces a more challenging regional economic landscape, these factors will be central in determining the country’s economic resilience.
Czech Monetary Policy and Market Movements
In the Czech Republic, we observe the monetary policy committee members asserting over-confidence. Well, they decided to leave interest rates where they are for the time being. Meanwhile, the Czech National Bank is scheduled to meet on policy this Thursday. Most are expecting them to reaffirm their dovishness and keep rates unchanged at 3.50%. This relative steadiness in interest rates is a sign that market participants are taking a wait and see approach during this volatile period.
Yields on Czech 10-year government bonds have jumped around 50 basis points over the last two months. They now sit at an average of approximately 4.75%, reaching a two-year peak. Market analysts explain this jump by a number of economic factors, including expectations of inflation and developments in global markets.
Additionally, the year-on-year industrial producer prices in Czechia are expected to stay in the red zone at -1.50%. This steep drop suggests that producers will find it increasingly difficult to pass rising costs onto consumers. This scenario would be a triple whammy, making the country’s inflationary picture much worse.
In Serbia, the central bank opted to keep interest rates unchanged due to pressures on the dinar, reflecting a cautious monetary policy stance amid external economic influences. The decisions made by regional central banks will undoubtedly play a significant role in shaping the economic landscape over the coming weeks.