The economic trajectories of Central and Eastern European (CEE) countries are drifting apart, with growth, inflation and policy direction showing increasing divergence. According to a recent commentary by ING, Poland and the Czech Republic are outperforming expectations, while Hungary and Romania continue to lag behind, creating a fragmented regional outlook.

Poland remains the region’s strongest economy, with inflation decelerating and monetary policy set to shift. “Lower-than-expected CPI inflation in the first quarter of the year, slowing core inflation, easing wage pressure and probably softer annual GDP growth... all bolster the argument for the adjustment,” ING analysts said. With CPI falling to 4.2% in April and forecast to reach around 3% by July, the National Bank of Poland is expected to cut interest rates by 50bp in May.

Policymakers are also delaying household energy tariff approvals until late 2025, aiming to lock in lower prices amid declining wholesale electricity costs. ING sees the policy rate falling to 3.75% by end-2026, with a more gradual pace of cuts following an initial adjustment. "Markets have priced aggressive and frontloaded cuts in – so a potential pause in June... could trigger a rebound in PLN yields," the bank noted.

In the Czech Republic, strong consumer spending continues to drive the recovery. “Consumers are still king, with their budgets benefiting from tamed inflation and nominal wage increases,” ING stated. Residential construction is booming, while industrial confidence remains fragile due to weak German demand and global trade tensions. The Czech National Bank is expected to cut its policy rate to 3.25% by summer, though elevated core inflation may limit further easing.

“Hungary,” ING said, “faces the prospect of yet another technical recession,” marking the third year of repeated economic disappointment. The bank points to a sharp drop in GDP in the first quarter and structural weaknesses, including collapsing investment and weak external demand. While consumption offers some support, inflation has declined due to government price controls and lower oil prices. ING now expects 2025 GDP growth of just 1.2%, down from 1.9%. It forecasts no further rate cuts this year but warns that weaker-than-expected inflation or growth could bring easing forward.

The Hungarian forint is expected to weaken, with ING predicting a return to the EUR/HUF 410–420 range. This reflects "rising expectations of monetary easing, but also... rising fiscal concerns and the elevated risk of negative credit rating actions."

Romania is set for modest recovery, with GDP growth forecast at 1.2% in 2025, helped by investment, healthy consumption, and infrastructure improvements. However, the post-election political environment introduces new uncertainty. “Risks to the outlook stem from scenarios of weaker-than-expected consumption and potentially tougher financing conditions,” ING warned.

While the National Bank of Romania is seen maintaining a cautious stance in the near term, 50bp of rate cuts may still come in the second half of the year. ING expects a fiscal deficit of 7.0% in 2025, improved from 8.6% in 2024, but warns this outlook hinges on better revenue collection and political stability.

“We’ve seen divergence beginning to widen across Central and Eastern Europe,” ING said. “There is more divergence in the direction of inflation, as well as monetary and fiscal policy.”