In today's Eyeopener:
- ECB more dovish than expected
- In January, the MPC voted both to hike and to cut rates
- Zloty and other CEE currencies weaker, dollar appreciated
- Polish bond yields down, but less than abroad
- Today flash PMIs for industry and services in euro zone, Polish M3 money supply
Retail sales expanded by 5.7% y/y in December, in line with our expectations and slightly below the market consensus. We see some minor slowdown in retail sales and consumption to come, but private consumption will remain the main growth driver given rising social benefits. The implications from January consumer survey data are similar – in general, the sentiment is going down gradually, but the indicators regarding openness to larger expenditures remain robust.
Poland is lagging the developed Europe in this economic cycle. The slowdown, which started quite late, may not end before the end of 2020. We see chances for a gradual improvement of business activity in Germany and the euro zone in the second half of the year, but we may have to wait until 2021 before we see a visible pickup in Polish GDP growth, due to domestic demand inertia (sluggish investments) and base effects (expiring boost for consumption from the pre-election fiscal package). According to our forecast, GDP growth will slow to almost 3% in 2020, from around 4% in 2019 and 5% in 2018.
In September's Rates and FX Outlook: