Economic Analysis

In today's Eyeopener:

- Today preliminary CPI inflation data for November
- President signed the bill to raise CIT for banks
- Slight improvement in sentiment in the Polish economy according to ESI
- No significant changes in the FX and debt markets 

December will kick off with the release of Poland’s November manufacturing PMI and detailed GDP data for 3Q. (...) The highlight of the week will be the last MPC meeting this year. After successive weaker-than-forecast inflation prints (CPI slowed to 2.4% y/y in November) and earlier data showing wage slowdown, a 25bp rate cut at the upcoming meeting seems a done deal. As November CPI data lowered our projected inflation path for the coming quarters (it looks like inflation may stay below 2.5% y/y for much of 2026), we have also changed our view on the monetary policy outlook. We assume that in 1H26 the MPC will cut the main reference rate to 3.5% or even lower (moving in small steps of 25bp). Thursday’s NBP Governor press conference will be an opportunity to verify this view.  (...)

CPI inflation surprised to the downside again, falling in November from 2.8% y/y to 2.4% y/y, versus market consensus and our forecast at 2.6% y/y. The main source of the downward surprise must have been core inflation, which – according to our estimate – dropped in November from 3.0% y/y to 2.6–2.7% y/y. It looks like inflation may remain below 2.5% target for the better part of 2026. Therefore, we are changing our view on monetary policy outlook. We think that a 25bp interest rate cut in December is now very likely. It may be followed by a two-month pause, and in March the MPC may resume the easing cycle and – moving in small steps – bring the NBP key rate down to 3.5% or lower.

Despite the high volatility in high-frequency economic data, the trend of the domestic economy appears to remain moderately positive. Our forecasts suggest that after disappointing August publications, September data will show a clear improvement across most indicators. This will be partly due to calendar effects and an exceptionally weak base – recall that in September 2024, the domestic economy was dealing with the aftermath of floods and a difficult-to-explain collapse in retail sales data. Nevertheless, even after adjusting for these effects, we should see signs of further gradual improvement in economic conditions. GDP growth in 3Q (the preliminary figure will be released in mid-November) is likely to accelerate again to 3.6–3.7% y/y, confirming that the full year may close with growth near 3.5%, possibly with a slight upside risk. (...)

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.