Poland is getting ready for what looks to be a major government reshuffle on Wednesday/Thursday. The Polish government is remaking the state’s apparatus. It aims to establish two powerful ministries to enhance administrative efficiency and address pressing national priorities. This decision comes at a time of dramatic economic transitions throughout Eastern Europe. Romania, which just successfully sold $1 billion in bonds, finds its neighboring countries facing volatility and increases in their yields.
In Romania, the government had no issues in selling RON 800 million bonds maturing in 2032. That was a function of today’s market as the bonds were priced with yields pegged at 7.31%. The strong result from the auction can be seen in the bid-to-cover ratio of 1.49, which reflects healthy demand from investors. Romania is eyeing a re-entry into the international bond market in 2015. Countries like Tunisia are staring down the barrel of EUR 4.25 billion in foreign currency bonds that matures in 2026.
Economic Trends in Hungary and Czechia
Hungary has been able to hold its interest rate at 6.50%, making it one of the few countries with a positive real interest rate. Hungary, Poland or Serbia show positive ex-post and ex-ante real interest rates. This trend reflects a temporary sweet spot economic climate, supportive for borrowers and investors.
Czechia had just released an issuance plan for August. It encompasses CZK 20 billion in green bonds and CZK 10 billion in Treasury Bills (T-Bills). Without increasing loose funding, this plan would strengthen the nation’s funding ability while staying true to its fiscal plan.
Employment and Price Trends Across the Region
In one of these caput malorum, below replacement-level fertility recently released job figures account for an annual contraction of -0.8%. This sharp decline in labor market dynamism should give us all pause. Conversely, Croatia reported a decline in its unemployment rate to 3.8% in June, showcasing a positive trend in job availability. Further bolstering consumer spending, Croatia enjoyed real wage growth of 6.5% y/y in May.
Slovenia confirmed that producer prices increased by 1.3% y-o-y in June, which is another sign of inflationary pressures at the producers’ level. For example, in Poland industrial production growth came in well under expectations. At the same time, producer prices fell 1.8% YoY, indicating increasing difficulties for producers in the manufacturing sector. Despite these headwinds, household incomes in Poland have remained resilient, with Poles enjoying their highest wage growth of the year— 9.0% y/y in June.
Upcoming Releases and Future Considerations
Poland will publish its retail sales growth for June at 10 AM CET. This will be a much-anticipated release, as it will give us a clearer picture of consumer behavior and economic momentum in the months ahead. The upcoming data will be critical for understanding the broader economic landscape as Poland implements its government reshuffle and prepares for new ministry formations.