In today's Eyeopener:
GDP growth decelerated to 3.9% y/y, confirming the flash estimate. The slowdown was driven by softening of main components of domestic demand: investments, private consumption and inventories, while net exports surprised positively, adding 0.8pp to GDP growth. We expect Polish economy to keep slowing in the coming quarters at a moderate pace, as the impact of external shocks will gradually filter to investments and trade. CPI inflation inched up to 2.6% y/y in November, a bit less than we estimated and we think the final reading may be revised higher after taking into account rise of fuel and food prices at the end of the month. Core inflation rose to 2.6%, according to our estimate. We still think that the peak for both CPI and core inflation will take place 1Q20.
As expected, the Law and Justice (PiS) won the parliamentary elections in October, securing simple majority in the Sejm (235/460 seats) and will continue ruling alone. At the same time, the party has lost its majority in the Senate (48/100 seats). It will not paralyse the legislative process, as the Sejm can overturn the Senate's veto with an absolute majority, but can make it longer. The first meeting of the new parliament is scheduled for 12 November and before that we will not officially know the shape of the new government. Yet, the PiS officials have already suggested that the cabinet will not change dramatically and Mateusz Morawiecki should keep the Prime Minister's chair. (...)
In September's Rates and FX Outlook: