BNY expects Central and Eastern European currencies and fixed income to strengthen by year-end, but says winter energy costs could strain public finances and weaken the case for a regional rebound.
Eurostat’s provisional figures show differing debt trends across the region. Poland’s general government gross debt-to-GDP ratio climbed 3.0 percentage points to 64.5% in the second quarter of 2026. Hungary’s ratio fell 2.0 points to 75.6%, and Czechia’s slipped 0.3 point to 43.8%. France’s rose 1.4 points to 119.1%.
FXStreet reported Oct. 21 that BNY senior EMEA market strategist Geoff Yu saw a risk of larger near-term deficits if borrowing costs remained high and governments needed more energy support this winter. BNY’s public Oct. 1 research note separately identifies winter energy pressure as a risk to its outlook for regional currencies and bonds.
FXStreet also reported Yu’s estimate that BNY’s CE3 currency basket had returned just under 1% year to date, trailing a cash benchmark by about 2.5 percentage points. BNY defines the basket as an equal weighting of the Polish zloty, Czech koruna and Hungarian forint against the euro and U.S. dollar, including interest earned from holding the currencies.
BNY cited regional real interest rates and limited investor positioning in its case for a rebound. It identified reliance on imported energy and large deficits as vulnerabilities. The bank said a need for more energy subsidies would burden public finances and weaken the case that fiscal spending was directed toward investment that improves productivity. Its note also compared the region’s ability to withstand energy pressure with 2022.
At its Oct. 20 meeting, Hungary’s central bank, the Magyar Nemzeti Bank, kept its base rate at 5.50%, effective Oct. 21. It said the country’s fiscal path, expectations about euro adoption and external markets would shape its assessment of risk.
The European Central Bank’s deposit rate has stood at 2.50% since Sept. 16. The bank has made no commitment to a future rate path. Its next monetary policy meeting concludes Oct. 29.
