The German industry is currently experiencing its most severe contraction in two decades, with recent data revealing a significant decline in industrial production. The downturn, recorded at -2.8% year-on-year for November, marks the steepest fall since the Great Financial Crisis of 2008-2009 and the recent pandemic. Although the contraction was less severe than the expected -4.5%, it underscores the ongoing challenges facing Germany's economic engine. Meanwhile, Serbia's central bank is expected to maintain its key interest rate at 5.75% during its upcoming rate-setting meeting, providing stability amidst market fluctuations.
Data released on Thursday indicates that German industrial production is showing signs of having reached its nadir. A three-month moving average trend suggests that the industry may gradually begin to recover. However, the Bundesbank has revised its economic growth forecast for Germany in 2025 from 1.0% to a mere 0.2%, reflecting persistent vulnerabilities in the economy and heightened global uncertainties. These factors pose significant risks for the Central and Eastern European (CEE) region's economic outlook.
In related developments, Serbia's Finance Ministry recently issued €1.5 billion ($1.5 billion) each in 5-year and 10-year notes, with yields set at 110 basis points above midswaps for the longer maturity and 60 basis points for the shorter security. This move aims to bolster fiscal stability as Serbia navigates the global economic landscape.
Elsewhere in Europe, Poland has followed Hungary and Slovenia in accessing the international bond market, indicating a regional trend of seeking external funding. Hungary, however, faces fiscal challenges, with projections suggesting it may exceed its budget deficit target of 4.5% of GDP, potentially reaching 4.8% in 2024.
The global economic environment remains tense, with the U.S. Federal Reserve's hawkish stance, high U.S. bond yields, and a strong U.S. dollar limiting potential gains in other currencies. Market participants are also closely monitoring the release of the U.S. Non-Farm Payroll report this Friday, which provides crucial insights into the health of the U.S. labor market.