For 2024, the GDP forecast was marginally revised down for Poland and Hungary, while it was improved for the Czech Republic
Central banks in emerging Europe are easing monetary policy, taking into account developments in inflation. In Poland, the Monetary Policy Committee (MPC) proceeded at the beginning of September to reduce the key intervention rate, which was unchanged from October 2022, by 75 basis points (bp), to 6.0%. This decision was taken following the decline in inflation from 18.4% in February to 10.1% in August. In October, and while inflation had fallen further in September (8.2%), the ECB cut the intervention rate by 25 bps, to 5.75%.
The smaller adjustment is also due in the fact that its biggest decline in September was followed by a 3.5% devaluation of the zloty against the euro within a week, which was then partially reversed, indicating that the next steps in easing monetary tightening should be softer.
In Hungary, the country's central bank (NBH) maintains the key intervention rate at 13.0% from September 2022. However, since last May, the one-day deposit rate, which has been in place since October 2022, when it was established as an additional monetary policy tool, has been gradually lowered to 18%. In the period May – September 2023 the one-day interest rate was reduced by 500 bp. and equated to the key policy rate.
Monetary policy decisions in the coming months will depend on incoming data and expectations regarding the evolution of inflation and risks to the economy.
NBH estimates that inflation will decrease to 7%-8% by the end of 2023, but sees 2024 being higher than expected earlier this year due to the carry-over effect of higher fuel prices.
The importance of easing monetary policy in emerging Europe in order to to support its growth, is reinforced by the recent forecasts of the IMF in the World Economic Outlook report. Revisions to growth estimates for major regional economies in 2023 and 2024 are soft but not moving in the same direction, suggesting uncertainty about the outlook for the region as a whole.
For 2023, the growth rate slightly revised upwards for Poland and the Czech Republic and in the opposite direction for Hungary.
For 2024, the GDP forecast was marginally revised upwards for Poland and Hungary, while improved for the Czech Republic.