Economic comment

The Monetary Policy Council kept all the policy parameters unchanged, with the main rate at 0.10%. The NBP staff projections update resulted in an even higher CPI path than in the November edition (the mid-point for 2021 up to 3.15% from 2.5%, 2022 up to 2.8% from 2.6%) and a substantial upgrade of 2021 GDP growth (3.95% vs 2.65% previously). For the first time the projection covered 2023 and showed that inflation is going to stay much above the official target then (mid-point at 3.2%) while GDP growth is going to be 5.4%, as in 2022. Despite this clearly bullish changes to the projection the tone of the MPC statement has not changed (...)

GDP in 4Q20 was confirmed at flash -2.8% y/y and -0.7% q/q sa. Details proved to be roughly in line with our estimates based on the annual data. We think that the GDP growth will remain sluggish in 1Q21 (close to zero in q/q sa terms), there is also an increasing risk that the weakness may be prolonged in to 2Q, as the third wave of Covid-19 seems to be around the corner. Nevertheless, we stick to the view that in 2H21 the economic growth will gain pace significantly as vaccination rollout will be progressing. Our forecast for 2021 sits at +4.6%.

Our analysis of retail sales, retail trade turnover and card payments shows that the occurrence of pent-up demand, i.e. appearance of strong purchases after a decline during lockdown, was not widespread in 2020. This type of demand could have been found so far only in some limited spending categories. The potential for pent-up demand to show up could be higher in the future, when vaccination of sufficiently large share of population allows to get rid of the uncertainty more persistently. However, it will most likely still affect goods and services representing a rather small part of the consumer demand. Thus, we think it is hard to expect that the pent-up demand could be a major factor behind rebound in GDP