Economic Analysis

In today's Eyeopener:

• Today, final CPI inflation data for October
• GDP growth in 3Q25 reached 3.7% y/y, as expected
• Larger than expected improvement in current account balance in September
• Stronger zloty, slight decrease of bond yields and market rates

The coming week will be fairly calm in terms of domestic events. The local publication calendar includes only core inflation on Monday (which, according to our current estimates, fell to 2.9% y/y, the lowest since November 2019), consumer sentiment on Thursday, and business sentiment on Friday (the former may record a seasonal deterioration, the latter rather a slight improvement). Data on budget performance after nine months of the year may also be released. Only the following week will bring a cluster of key indicators regarding the economic situation in October. The European Commission will publish its autumn update of economic forecasts on Monday, including the trajectory of EU countries’ fiscal deficits and debt (...)

Final October CPI inflation data confirmed its decline to 2.8% y/y from 2.9% in September. Full data revealed that service prices fell by 0.2% m/m for the second consecutive month, and their annual growth slowed from 5.8% to 5.6% – the lowest since November 2019. Goods prices slowed from 1.9% to 1.7% y/y. The continued deceleration in inflation was also driven by an unusual lack of food price increases. Fuel prices rose by 1% m/m, while energy prices increased by 0.6% m/m (mainly due to a 2.5% m/m rise in heating prices). We estimate that core inflation fell in October to 2.9% y/y from 3.2% previously. The next CPI reading may be around 2.5–2.6% y/y. However, such a move seems largely anticipated by the MPC, which, we still believe, will wait with the next rate cut until January.

Despite the high volatility in high-frequency economic data, the trend of the domestic economy appears to remain moderately positive. Our forecasts suggest that after disappointing August publications, September data will show a clear improvement across most indicators. This will be partly due to calendar effects and an exceptionally weak base – recall that in September 2024, the domestic economy was dealing with the aftermath of floods and a difficult-to-explain collapse in retail sales data. Nevertheless, even after adjusting for these effects, we should see signs of further gradual improvement in economic conditions. GDP growth in 3Q (the preliminary figure will be released in mid-November) is likely to accelerate again to 3.6–3.7% y/y, confirming that the full year may close with growth near 3.5%, possibly with a slight upside risk. (...)

In September's Rates and FX Outlook:
 

• Poland’s GDP growth failed to accelerate in 2Q16, with investments surprising negatively (-4.9% y/y), and we think that the second half of the year will see no significant improvement in economic growth. Although private consumption is likely to gain strength in the coming quarters, supported by solid labour income and the new child subsidies, it may take time until investments recover, and the positive impact of net exports will be hard to maintain (export growth may decelerate and imports accelerate). We expect a more significant investment pick-up next year, but by then the impact of the 500+ child benefit programme on consumption will be dissipating. Therefore, we forecast that GDP will grow 3.1% in 2016 and 2.9% in 2017.