CEE Sentiment Indicators Improve as Regional Economies Stabilize

Sentiment indicators across Central and Eastern Europe (CEE) have improved in recent months, signaling a gradual stabilization of the region’s economies after a period of elevated inflation and sluggish growth. The latest data, released in early 2025, show gains in both business and consumer confidence across major CEE markets, including Poland, Czechia, Hungary, and Romania.

What the Latest Data Show

According to the European Commission’s monthly Economic Sentiment Indicator (ESI), the CEE region has seen a noticeable uptick in confidence since the fourth quarter of 2024. For instance, Poland’s ESI rose to 98.2 in January 2025, 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, which had been particularly weak due to the cost-of-living crisis, has also recovered, supported by easing inflation and a resilient labor market. As of January 2025, annual inflation in the region averaged 4.2%, down from over 10% in early 2023.

Why Sentiment Is Improving

Several factors are driving the positive shift. First, inflation has cooled significantly across the region, allowing 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.

Second, external demand is stabilizing, particularly from the eurozone, which is a major trading partner for CEE economies. Germany’s gradual recovery is providing a tailwind for exporters in the region. Third, EU structural funds, including the Recovery and Resilience Facility, are beginning to flow into infrastructure and green transition projects, boosting investment sentiment.

Impact on Businesses and Consumers

For businesses, improved sentiment often translates into higher investment and hiring intentions. In Poland, manufacturing firms reported stronger order books in January, while services companies noted rising demand. In Hungary, retail sales have picked up, reflecting greater consumer willingness to spend.

Consumers, meanwhile, are feeling less pressured by price increases. Real wages are rising again in most CEE countries, and unemployment remains at historic lows, below 3% in Czechia and Poland. This is restoring purchasing power and confidence, which is crucial for sustained domestic demand.

Risks and Outlook

Despite the positive momentum, risks remain. Geopolitical tensions, particularly the ongoing war in Ukraine, continue to pose a threat to energy security and trade routes. Moreover, the pace of disinflation could stall if global commodity prices spike. Some analysts also caution that the improvement in sentiment may be uneven, with smaller economies like Bulgaria and Croatia lagging behind.

Nevertheless, the overall trajectory is encouraging. The European Commission’s winter forecast, published in February 2025, projects CEE GDP growth to accelerate to 3.1% in 2025, up from 2.4% in 2024. If sentiment continues to improve, the region could see stronger investment and consumption, supporting a more robust recovery.

Conclusion

The improvement in CEE sentiment indicators is a welcome sign for the region’s economic outlook. While challenges persist, the combination of easing inflation, resilient labor markets, and supportive external conditions is fostering a more optimistic environment. For businesses and policymakers, maintaining this momentum will be key to ensuring sustainable growth in the coming years.

FAQs

Q1: What are sentiment indicators?
Sentiment indicators are surveys that measure the economic mood of businesses and consumers. They provide insight into expectations about future economic activity, such as production, employment, and spending.

Q2: Which CEE countries showed the biggest improvement?
Poland and Czechia recorded the most significant gains in the European Commission’s Economic Sentiment Indicator, followed by Hungary and Romania.

Q3: Why do sentiment indicators matter for the economy?
They are leading indicators—when confidence rises, it often leads to increased investment, hiring, and consumer spending, which can drive economic growth.