Economic Analysis

In today's Eyeopener:

• Today we will see the first estimates of March inflation in Poland and the eurozone
• According to ESI indicators, sentiment in Poland did not deteriorate significantly in March
• Weakening of the zloty and domestic bonds, further rise in oil prices

In the final week before Easter, we will continue paying closer attention to oil and gas prices than to the prices of eggs and butter. Donald Trump has extended the suspension of attacks on Iran by another 10 days, but this has failed to calm either commodity or financial markets, which remain concerned about the security of energy supplies in the coming months. Polish drivers will be closely watching the fate of a government bill allowing for a temporary reduction in fuel taxes, which should be sent to the President for signature in the coming days.

In the calendar of domestic economic releases for the coming week, there are only two key items: the flash CPI inflation reading for March and the manufacturing PMI. Our estimates suggest that CPI inflation rose in March to 3.1% y/y from 2.1% in February (...)

Rising fuel prices pushed inflation up to 3% y/y  in March. A slight decline is likely in April, but the size of this move will depend on the behaviour of commodity prices in the coming weeks. Given developments in the Middle East, we currently assess that even in a scenario of a relatively rapid de-escalation of the conflict, the return of commodity prices to lower levels will be gradual. As a result, the inflation path for the coming months is shifting upwards, which will most likely rule out any interest rate cuts this year.

This was supposed to be a very good year for the Polish economy, with GDP growth close to 4%, the peak of the investment cycle, resilient consumption and a strong labour market, inflation stabilising close to the NBP’s target, and slightly declining interest rates. We still see a chance that this scenario will materialise, although its success depends to a large extent on how persistent the disruption in commodity markets triggered by the US-Israeli attack on Iran proves to be. Since the beginning of the decade, the global economy has been fighting one battle after another, grappling with, among other things, the global pandemic, the energy crisis, rising geopolitical instability, a wave of economic protectionism, volatility in financial markets, and now a severe disruption in commodity markets. (...)