Economic Analysis

In today's Eyeopener:
 
- Today NBP governor’s press conference
- MPC kept rates unchanged
- German inflation lower than forecasts, annual HICP growth down
- Strengthening of Polish government debt and the zloty

The calendar of events over the next week will be rather light. On the domestic front, the MPC decision (Wednesday) will be in the spotlight, followed by the conference of the NBP president (due probably on Thursday at 15:00 CET). On Tuesday, the Sejm session begins, at which the Senate's amendments to the Supreme Court Act will be considered (its enactment is a key milestone to unlock the EU financing of the National Recovery Plan). Interest rates are likely to remain unchanged for the fifth consecutive time and the Council will remain in a wait-and-see mode, looking out for more reliable signals from the economy on growth and inflation trends. The information that emerged recently has been mixed: the economy is decelerating more slowly than expected and a recession may be avoided, but at the same time, consumption dynamics have faded significantly and wage growth has disappointed, and the question is for how long (...)

We estimate that the weak result of private consumption in 4Q22 (about -1.6% y/y) was partially caused by lower number of refugees from Ukraine. However, this was not a key factor and it could have deducted about 0.2-0.3% q/q from consumption, while contribution of refugees was positive in annual terms (1 percentage point). In entire 2022, refugees added about 0.9% in real terms to domestic consumption or about PLN15bn in nominal terms. In 2023, assuming their number remains at current level, they will add 0.1% y/y in real terms to total private consumption and the nominal value of their consumption will amount to cPLN20bn.

The first GDP estimate for 2022 at 4.9% proved better than expected, indicating that the deceleration of the economy continues to be slower than we had anticipated (4Q GDP growth was probably slightly above 2% y/y). At the same time, the exceptionally mild weather is reducing the risk of energy crunch in Europe. Yet, it is not the case that the news is exclusively positive - the latest consumer spending data not only in Poland, but also in other European countries, look worrying, and a strong slump also affected the world trade turnover at the end of last year. However, on balance, we think there are more reasons for slightly greater optimism - as a result, we are moving our GDP forecast for this year slightly up, from 0.1% to 0.7%. The impending global recovery is indicated, among other things, by a growing number of leading indicators, which have begun to rebound noticeably.  (...)

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.