Economic Analysis

In today's Eyeopener:

- Today Donald Trump speaks in Davos 
- MPC’s Marcin Zarzecki: disinflationary March projection is a prerequisite for further cuts
- State Treasury debt in 2025 approached PLN2tn
- Higher optimism in assessment German economic outlook according to the ZEW index
- Further US dollar weakness, strengthening of short‑term Polish bonds

The first month of the new year did not bring another interest rate cut, but comments from MPC members suggest that there is still room to ease monetary policy further (...) We hope for further MPC commentary this week. In the coming days we will learn December wage growth in the enterprise sector – after November’s 7.1% y/y, a result close to 6.9%, i.e. our forecast and the market consensus (7.0%), would likely support delaying the next cut. Although this was the first December with Christmas Eve as a public holiday, it should not, in our view, produce weak readings of industrial output and construction‑assembly output (...) President Karol Nawrocki has until Tuesday to sign the 2026 budget act.

Since 2011, a steady improvement in the services balance was a characteristic phenomenon in Poland’s balance of payments. In 2024, this process came to a halt, mainly due to a slowdown in the growth of transport service exports and a rapid increase in imports of tourism services. In our view, a further – though not necessarily rapid – improvement in the services balance will occur once the European economy, especially Germany, gains more momentum. However, in the longer term, the AI revolution poses a risk, as it may reduce demand for domestic business and ICT services, which generate around 30% of the surplus in Poland’s trade in services. The data also show a very strong expansion in the export of domestic construction and repair services, which, in our opinion, will increase their share in service flows in the years ahead. 

Recent positive data from the domestic economy have sparked a wave of optimism about the prospects for economic growth in Poland. For us, this optimism is nothing new. We wrote about the fact that the coming years would be marked by strong investment growth and that 2026 would be better than 2025 in terms of GDP growth before it became trendy. At the same time, it is worth bearing in mind that these will not be easy years, free from uncertainty, and that the acceleration in domestic growth will be moderate rather than spectacular. In our opinion, the increasingly popular slogan ‘GDP at four plus’ will materialise more likely in the form of nominal GDP level exceeding PLN 4 trillion, rather than in the form of average real GDP growth for the entire year above 4% (although this may not be far off) (...)

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.