CEE Bond Report: Monetary policy in CEE remains restrictive

Only Slovakia and Romania, which have been running the largest fiscal deficits in CEE, will deliver more substantial fiscal consolidation, primarily based on revenue measures. Romania will likely deliver some tax increases after the presidential election. The Hungarian primary balance is relatively solid, so if it is preserved ahead of next year’s elections, lower interest expenditures should automatically result in deficit reduction. Poland prioritized higher military spending and drawing loans from the RRF over consolidation, which will be postponed to 2026. In 2025, public debt ratios to GDP are set to stabilize or even decline in all CEE countries except for Poland, Romania and Slovakia. Those countries are facing the largest fiscal challenges in the next few years. Government bond yields have been stressed by global uncertainty. More relief should come with more clarity on tariffs and further monetary easing.