MACROscope

While the decline in inflation in major economies has slowed and the market expects fewer rate cuts in the US and the euro area, inflation in Poland once again surprised on the downside and fell to 1.9% y/y, below target for the first time since May 2019. The next few months are likely to bring higher inflation readings, while core inflation is likely to remain elevated, in the 4-5% range until the end of 2025. Real wage growth accelerated to nearly 10% in February, the strongest since the late 90s, and nominal wage growth will remain in double digits in our view. This will contribute to the acceleration of consumption, which will be the main driver of growth. Activity data for February showed positive surprises in sales and industrial production. The prospect of a recovery in GDP (we expect 3% this year) and continued elevated core inflation and will make it likely that the MPC will not change rates until mid-2025.

More than two years since the start of the full-scale Russian invasion of Ukraine and roughly a year since the turmoil in the banking sectors in the USA and Europe, the vision of a so-called hard landing in the global economy has not only not materialised, but is still being postponed into some indefinite future. This does not mean that everything is alright, because, for example, the economic situation in Germany still stands out strongly in a negative light. Nevertheless, there are more and more signs that the global industry has put the worst behind it.
We maintain our GDP growth forecast for Poland for this year at around 3%, believing that moderate growth in consumption and investment and the reversal of the inventory cycle will be able to offset the continued weakness in external demand. (...)