Introduction to Central and Eastern Europe’s Economy
Central and Eastern Europe (CEE) has been experiencing various economic developments, with countries showing different trends in retail sales, inflation, and industrial output.
Recent Economic Trends
Some notable trends include:
- Retail sales growth in Romania declined by -2.1% year-over-year (y/y) in August.
- Slovakia saw a decline of -0.7% y/y in retail sales growth during the same period.
- In contrast, Hungary’s retail sales increased by 2.4% y/y in August.
- The inflation rate in Czechia eased to 2.3% y/y in September.
Upcoming Economic Data Releases
Several countries are set to release important economic data, including:
- Hungary, which will release industrial output growth data for September at 8:30 AM CET.
- Czechia, which will release industrial output growth and trade data at 9:00 AM CET.
- Serbia, where producer prices will be released at noon CET.
Economic Developments in CEE Countries
Recent flash inflation releases in several CEE countries show a decline in food prices in September in month-on-month terms. For instance:
- In Poland, food and beverages declined by -0.5% month-over-month (m/m), allowing headline inflation to remain flat at 2.9% in September.
- In Croatia, inflation remained at elevated levels in September, with food prices down by 0.3% m/m.
- In Czechia, prices of food, beverages, and tobacco dropped significantly by -0.6% m/m, contributing to a decline in headline inflation from 2.5% y/y in August to 2.3% y/y in September.
Impact of Food Prices on Inflation
The World Food Price Index has been slightly easing over the last couple of months, which is likely to guarantee a limited contribution of food prices to headline inflation in the months and quarters to come.
Market Movements and Political Developments
In Czechia, Andrej Babis, the leader of ANO, declared that he will seek to govern alone with the support of two parties, SPD and Motorists. He also stated that he is pro-European and pro-NATO.
In Poland, the Minister of Finance, Domanski, said that interest rates in Poland are high, just a day ahead of the central bank’s meeting and interest rate decision.
Romania placed 2028 and 2034 government papers that were priced to yield 7.36% and 7.33%, respectively.
In Hungary, Orban would prefer lower interest rates, but the central bank has been hawkish, which may lead to a reconsideration of interest rate forecasts in favor of stability of rates for a longer period.
Conclusion
The CEE region is experiencing a mix of economic trends, with some countries seeing declines in retail sales and inflation, while others are experiencing growth. The upcoming economic data releases will provide further insight into the region’s economic developments. As the World Food Price Index continues to ease, the contribution of food prices to headline inflation is likely to be limited in the coming months. Political developments, such as Andrej Babis’s declaration to govern alone, and market movements, including interest rate decisions, will also play a significant role in shaping the region’s economic future.
