Economic Analysis

In today's Eyeopener

- Today NBP data on December core inflation
- CPI inflation confirmed at 2.4% y/y in December
- Adam Glapiński pointed to 3.50% as target rate
- EURPLN stable, bond yields down

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.

Final data for December confirmed CPI inflation at 2.4% y/y and 0.0% m/m, compared with 2.5% y/y in November. In our estimate, core inflation stood at 2.8% y/y, slightly above November’s reading. Services inflation eased to 5.2% y/y from 5.3% y/y, while goods inflation declined to 1.3% y/y from 1.4% y/y. Downside pressure from imported goods and the relatively small increase in energy prices in 2026 may push CPI below 2% y/y in January. In our view, the MPC will remain in “wait‑and‑see” mode through February, after which it will consider further policy easing. By mid‑year, we expect the key rate to stand at 3.50%.

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.