CEE Economies Show Signs of Stabilization

The economies of Central and Eastern Europe (CEE) are showing signs of stabilization, according to recent data from the European Commission's Economic Sentiment Indicator. The indicator has improved in major CEE markets such as Poland, Czechia, Hungary, and Romania, with business and consumer confidence rising.

In January 2025, Poland's ESI rose to 98.2, up from 94.5 in October 2024, while Czechia's improved to 95.7 from 91.3. Hungary and Romania also recorded gains, albeit more modest.

The improvement is broad-based, with industrial, services, and retail trade confidence all trending upward. Consumer sentiment has recovered due to easing inflation and a resilient labor market. Annual inflation in the region averaged 4.2% in January 2025, down from over 10% in early 2023.

The positive shift is attributed to several factors, including cooling inflation, which has allowed central banks to pause or even begin loosening monetary policy. The National Bank of Poland kept its policy rate at 5.75% in January but markets expect cuts later in 2025. The Czech National Bank has already reduced rates by 200 basis points since mid-2024.