A look at the GDP structure and inflation in August

It will be quite a busy week in the region, as numerous important releases are planned. Let's start with the GDP structure for Croatia, Czechia and Poland in Q2 2024. While the flash estimate of growth for Czechia and Poland was published in mid-August, Croatia's growth dynamics in Q2 2024 will become visible for the first time. We believe that private consumption remains the main growth driver. In addition, flash estimates of inflation for August will be published in Croatia, Poland, Slovenia and Slovakia (as part of the flash estimates of the HICP for the Eurozone). We expect inflation to be similar to the July figures. In Hungary, the main event of the week is the central bank meeting, and this time we do not expect any change in key interest rates due to inflation developments in July. Finally, Serbia will publish the development of the industrial and retail sectors in July, as well as trade data for June. We expect Serbia to remain on track for solid economic development in 2024. Retail sales growth for July is also expected in Croatia and Slovenia this week. Finally, Fitch will publish the rating and outlook revision for Romania on Friday after the market closes. We do not expect any changes.

Developments on the foreign exchange markets

Over the course of the last week, EURCZK and EUHUF declined more significantly, while EURPLN moved in the opposite direction but returned to 4.26. One reason for this development of the Polish zloty could be a change in Governor Glapinski's stance regarding the start of monetary easing. Last week, he hinted that there might be room for discussions on rate cuts before 2026. This week, the Hungarian central bank is holding an interest rate meeting. This time, we do not expect any changes in the key rate, as inflation was surprisingly positive in July. However, for the rest of the year, we still see some room for a rate cut.

Developments on the bond markets

Bond yields declined last week in both Central and Eastern Europe and major markets, amid expectations that the Jackson Hole symposium will provide more clarity on the extent of the Federal Reserve's monetary easing, which is expected to begin in September. Hungarian government bonds benefited from lower yields on US Treasuries, particularly at the short end of the curve. Although we expect the Hungarian central bank to pause its monetary easing at Tuesday's meeting, we believe that monetary easing by major central banks this fall will pave the way for further rate cuts in Hungary. Romanian government bond yields rose slightly last week as the Ministry of Finance placed a smaller volume of government bonds than originally planned due to low demand. This week's auction calendar includes Hungarian government bonds, ROMGB 2026, and various bonds offered by Poland.

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