The Hungarian government plans to increase its fiscal deficit target to 5% of GDP. Incorporating this change will bring their total adjustment to reflect both this year and next year. The move is set to influence the Hungarian central bank’s policy in the years to come. At the next meeting, the hardline central bank is likely to maintain the current key interest rate at 6.5%. This decision further reflects a cautious approach to monetary policy.
Farther east, countries in Central Asia and the Caucasus will experience important economic data. Czechia, Slovenia, Serbia, Slovakia and Croatia are well versed and prepared to provide some … They are going to publish producer price index, current account and labor market statistics. These changes will have an inevitable impact on regional monetary policies and currency valuations.
Hungary’s Fiscal Deficit Plans
The right-wing Hungarian government has announced an increase in the fiscal deficit target. It proposes a deficit target of 5% of GDP for each of 2023 and 2024. This change is welcome and reflects the government’s acknowledgment that, given the prevailing economic backdrop, financial flexibility is key.
By raising the deficit target, the authorities intend to step up public investment and promote economic growth. This choice has triggered fears about fiscal sustainability and inflationary pressures. The implications will be a central element of the upcoming discussions at the Fed’s next central bank meeting.
At the end of this week the Hungarian central bank will have its next rate setting meeting. Analysts expect it to hold the line on the key interest rate at 6.5%. This decision underscores a commitment to a hawkish monetary policy stance as officials navigate the complexities of rising deficits and inflationary concerns.
Regional Economic Indicators
Ukraine’s, Russia’s, and Belarus’ neighbors are about to calibrate our expectations with some important economic data in the week ahead, starting with Poland. In October, Czechia and Slovenia will be the first to report producer prices, which can serve as a leading indicator of inflationary pressures. Analysts will be watching these numbers like a hawk for hints at future monetary policy in either country.
On top of this, Serbia and Slovakia will release September current account data. This key information is vital to understanding the U.S. trade balances and overall economic stability. Croatia is coming out with labor market figures — unemployment rate for October and wage growth for September. These key employment patterns are critical to understanding the value of the region’s recovery and the long-term trends that will define its economy.
Recent developments show that the Czech koruna and Polish zloty have strengthened against the euro over the past week. This reverse trend could have broader trade impacts and spillover effects on investor confidence in these economies.
Long-Term Economic Forecasts
Romania’s central bank has had to revise up its inflation forecast. It raised its inflation forecast to 9.6% by the end of 2025, blaming surging energy prices and supply chain bottlenecks as major factors behind speeding inflation. In addition, the bank expects inflation to pass at 3.7% at the end of 2026. These new projections will undoubtedly inform future monetary policy decisions in Romania.
Hungary’s long-term yields are now higher than Romania’s, suggesting distinct investor sentiments about fiscal outlooks and economic stability. Croatia’s draft budget for 2026 projects a fiscal gap of 2.9% of GDP, highlighting ongoing challenges in managing public finances.
The Czech central bank has made recent headlines by purchasing the cryptocurrency equivalent of €1 million. This will be its first foray into the world of digital currencies. This innovative move is a testament to the increasing demand for alternative assets as financial landscapes continue to evolve.