CEE: Resilient growth meets fiscal and geopolitical headwinds
Lead — The desk continues to support a cautious outlook on the CEE currencies amid resilient growth juxtaposed with persistent fiscal and geopolitical tensions. Per the full note , while Poland's growth remained robust at 3.9% YoY in Q2 2026, risks from rising energy prices and geopolitical instability could dampen private consumption and investment sentiment moving forward. With a GDP growth forecast of 3.4%, the overall economic momentum appears resilient but constrained by external pressures. This aligns with our expectations for muted currency movement in the near term as we approach no significant economic data releases on the calendar to drive major shifts.
What the desk is arguing
The desk believes that while regional growth in Central and Eastern Europe (CEE) remains resilient, geopolitical and fiscal headwinds could temper this performance in the upcoming months. Per the full note , Poland's economy demonstrated notable stability against the backdrop of Middle East tensions, registering a year-on-year GDP growth of 3.9% in Q2 2026, aided by robust fixed investment.
However, the scenario remains precarious, as rising energy prices continue to pressure households and restrict private consumption growth, which fell below 3% YoY. The National Bank of Poland remains vigilant, maintaining a conservative GDP growth forecast of 3.4% for 2026 amid these challenges, indicating limited room for monetary easing this year due to inflationary pressures predominantly from fuel costs.
Where it sits in our coverage
Our internal consensus target for the EUR/PLN currently sits at 1.075, with a range anticipated from 1.04 to 1.12. Notable firm forecasts include:
This view positions our outlook at the upper boundary of current consensus expectations, highlighting that while risks are acknowledged, the expectation remains for modest currency depreciation driven by external pressures rather than internal economic weaknesses.
How other firms see it
Firms such as jpmorgan and credit suisse express alignment with our cautious outlook, emphasizing the intrinsic economic resilience despite external threats. Conversely, firms like bofa appear more pessimistic, forecasting sharper declines amid heightened geopolitical risks.
In the meantime, watch for developments in EUR/USD as it could indicate the health of CEE currencies or provide a spillover effect from the West impacting market sentiment overall, especially in light of fluctuating energy prices affecting Poland’s exports and import costs.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Poland's Q2 GDP growth at 3.9% YoY reflects resilience despite geopolitical risks.
- 02Inflation pressures persist, primarily from energy costs, restricting monetary policy flexibility.
- 03A conservative growth outlook of 3.4% is maintained amid external challenges.
- 04Geopolitical tensions, particularly in the Middle East, pose significant risks to private consumption.
Market implications
Watch for potential impacts on the EUR/PLN exchange rate, particularly around the 1.075 level as geopolitical tensions evolve. In the absence of significant economic releases, trader positioning will likely remain muted, maintaining a focus on global energy price trends.
Risks to this view
If energy prices were to stabilize or decline significantly, this could bolster domestic consumption and investment, prompting a reassessment of growth forecasts. Similarly, a reduction in geopolitical tensions could lead to an unexpected boost in business confidence and currency appreciation.
Articles CEE: Resilient growth meets fiscal and geopolitical headwinds Published 11:32 Czech Republic Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Poland remains resilient despite energy and fiscal risks; Czech growth is firm and inflation contained, but the Czech National Bank remains vigilant; Hungary’s recovery may revive assets, while Romania still faces stagflation and political uncertainty Frantisek Taborsky , Rafal Benecki , David Havrlant , Peter Virovacz and Stefan Posea Poland: The economy weathered the Middle East turmoil well in 2Q26, but headwinds remain Despite a spike in energy prices, Poland’s GDP growth reached 3.9% year-on-year in the second quarter. Fixed investment finally gained momentum, rising by 8.4% YoY, while net exports made a surprisingly positive contribution to growth despite a surge in import prices for energy commodities, triggered by the conflict in the Middle East. As expected, households were hit by higher fuel prices amid a continued slowdown in wage growth, pushing private consumption growth below 3% YoY.
Although economic activity remained robust in 2Q26 and the outlook for fixed investment in 2H26 is favourable given the final stage of Recovery and Resilience Facility implementation, risks stemming from tensions in the Persian Gulf may weigh on private consumption and business confidence in the second half of the year. We therefore maintain our relatively conservative GDP growth forecast of 3.4% for 2026. Fuel prices continue to exert upward pressure on headline inflation, even as the government seeks to cushion the impact of higher oil prices on retail fuel prices through temporary cuts in excise duty and VAT.
Headline inflation is close to the upper bound of the National Bank of Poland's tolerance band around the inflation target (2.5% +/-1ppt), leaving no room for rate cuts this year. Price pressures appear largely confined to fuels and closely related CPI categories. With no signs of broader inflationary pressures and food price deflation, there is no immediate case for monetary tightening either.
The 2027 draft budget confirmed a continuation of expansionary fiscal policy, although the authorities refrained from introducing sizeable tax cuts or additional social spending ahead of the 2027 elections, reflecting limited fiscal space for voter-friendly measures. The general government deficit is projected to remain close to 7% of GDP in both 2026 and 2027, keeping public debt on an upward trajectory and maintaining pressure on asset swap spreads (ASW). Czech Republic: Modest inflation amid a still sub-potential output Given the rather disappointing real GDP figures over the first half of the year, we marginally lower our economic performance outlook for this year to just below 2%.
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