Valentin Tataru

Faced with endless political turmoil and likely another snap election, the Bulgarian economy is largely on autopilot, tracking its trading partners in its own region and the West. Despite meeting almost all criteria, joining the eurozone is unlikely to happen without a stable government, and we’re shifting our estimate towards 1 January 2026

We expect the National Bank of Romania (NBR) to keep the policy rate at 6.75% at its 7 August meeting. However, the Bank’s updated inflation forecasts are likely to edge lower, hence another 25bp rate cut will very likely be on the table as well. We believe that prudence will prevail and that the next cut will come together with the November Inflation Report

Romanian consumers have been maintaining their spending spree in the second quarter, although at a slightly lesser pace than in the first. Vigorous private consumption is set for a second consecutive quarter which may be another constraint on near-term policy easing by the central bank

As elsewhere in the world, EMEA FX has been hit by the sharp sell-off in risk assets. However, we think hawkishness in Poland and the Czech Republic is underpriced and that these currencies can find some more support. Further afield, the rand has benefited by being off investors’ radars this year, but could now start to take advantage of a softer dollar

Our latest Romania update highlights the impact of recent activity data on the economic growth outlook. We also outline our latest views on the fiscal situation, and what it means for inflation and rates

While private consumption and investments were again strong positive drivers for the second quarter’s 0.8% annual growth, the Romanian economy is performing poorly at not letting the benefits of strong activity dissipate externally through imports. This is weighing visibly on growth. We are revising our 2024 growth forecast lower from 2.0% to 1.3%

Having been a market favourite for the majority of this year, the Polish zloty now seems that it will struggle to rally any further. The more dovish stance from the National Bank of Poland is to blame. We think EUR/HUF can continue to trade in narrow ranges and EUR/CZK, after a brief rally, should be able to break below 25.00 later this year

We expect policymakers to refrain from cutting rates at the October meeting. Although recent disinflation trends provide more policy flexibility, we believe the National Bank of Romania will increasingly focus on robust credit activity and the fiscal outlook. We hold on to our view of no more rate cuts this year, with risks tilted to the downside

The National Bank of Romania (NBR) kept the policy rate on hold at 6.50%, in line with our expectations. Policymakers highlighted the need for caution due to both internal and external risks. We retain our view that rates will remain in place through year-end, with downside risks at play

While interest rate markets are proving supportive for the Polish zloty and the Czech koruna, the outlook is not so clear-cut for the Hungarian forint, which will remain fragile. Elsewhere, expect investors to continue to chase carry in the Turkish lira. And we are starting to now think that the South African rand can surprise on the upside