Erste analysts have significantly revised growth forecasts for Central and Eastern European (CEE) countries after the release of GDP signal data for the first quarter of 2025. In April, the previous version of the forecast had only taken into account the tariff increases announced by the Trump administration. However, at that time, the revision to the forecast for 2025 was marginal because the impact of the fiscal package (positive) announced by Germany was considered to be superior and would offset the (negative) tariff shock on CEE economies performance.
However, after the publication of signal data on GDP growth in the region in Q1/2025, Erste Bank analysts further reduced their growth forecasts for 2025 in the case of Hungary (0.8%) and Slovenia (1.5%).
Forecasts were maintained for Romania and Slovakia, but with increased risks to the downside. Only the Czech Republic and Poland recorded growth in line with expectations and with solid dynamics (2.0% year-on-year and 3.2% year-on-year, respectively), with 2025 GDP forecasts for these two countries maintained.
Apart from the Czech Republic and Poland, the rest of the region grew at a much slower pace or not at all. In quarterly terms, Hungarian economy contracted, while Romanian economy stagnated. This translated into zero growth in annual terms in Hungary and a modest 0.2% year-on-year growth in Romania. Slovenia’s GDP fell by -0.7% year-on-year, the first negative growth rate since Q4 2020. Serbia and Slovakia grew in annual terms, but growth dynamics were below expectations.
Following the release of GDP signal data for the first quarter of 2025, growth forecasts were further reduced for Hungary (to 0.8% in 2025) and Slovenia (to 1.5% in 2025), while risks still tilt to the downside in Romania and Slovakia. The GDP structure will only be released in late May and early June.
Romania and Hungary – highest inflation in CEE
With the exception of Romania and Slovenia, headline inflation fell in April in all other Central and Eastern European countries. The recent decline in energy prices is a positive factor for price developments. On the other hand, the food price index has recently increased and remains elevated. Despite a downward trend, inflation rates remain above the central banks’ target in all countries except the Czech Republic. April’s inflation of 1.8% is the lowest since March 2018. Average inflation in 2025 is likely to be higher compared to 2024 in most Central and Eastern European countries.
Average inflation in 2025 is expected to be lower only in Romania and Serbia, compared to 2024. However, Erste forecasts an inflation of 4.7% in Romania for the end of the year, and 3.5% for 2026.
Monetary policy
The Czech National Bank cut its interest rates to 3.25% since the beginning of the year. Looking ahead, Erste anticipates the next interest rate cut by the NBR will occur in November. In May, the NBR kept the interest rate unchanged at 6.5%.
Similarly, the Polish central bank reinstated monetary easing ahead of the presidential election and cut its key interest rate by 50 basis points, from 5.75% to 5.25%. In the baseline scenario, there will be further cuts of 50-75 basis points by the end of the year.
„In other countries, namely Hungary, Romania and Serbia, we anticipate monetary easing only in the second half of the year. In Romania, monetary easing will depend on the fiscal consolidation plan and its impact on economic growth and inflation,” the Erste analysis shows.
Romania still has the largest deficits in CEE
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