Economic Analysis

In today's Eyeopener:

• Today, industrial output data in Czechia and Hungary, US Michigan index
• Glapiński: next interest rate cut possible in March
• Polish zloty and market rates stable 

After the weekend, the domestic and international data release calendar will be relatively light. On Monday, data on average wages in the national economy for 4Q25 will be published (we assume an acceleration from 7.5% to 8.1% y/y). After that, the domestic calendar will become more interesting only on Fat Thursday, when Statistics Poland will release preliminary data on GDP growth in 4Q25. The preliminary estimate of GDP growth for the whole year, published last Friday, came in at 3.6%, confirming our expectations. This result suggests that GDP growth in the final quarter was in the range of 3.9%–4.2% y/y. Our forecast is at the lower end of this range, supported, among other factors, by weaker-than-expected growth in services in the final months of the year and a larger foreign trade deficit than a year earlier. (...)

Today’s conference of the NBP Governor did not sound dovish, in our view. Adam Glapiński explained that the decision to keep interest rates on hold in February was justified by the fact that no new information on inflation emerged since the previous meeting, while data on real activity were quite strong – which is fully in line with our argumentation. Interestingly, his comments suggested that there was no unanimity at this week’s MPC meeting, so probably some members proposed to continue with monetary easing (...) For now, we keep our view that two more rate cuts are possible in the nearest months: the first one in March, and the next one in April or May, depending on the data. So, the NBP rate should stabilise at 3.5%.

In European industry we are seeing signs of a recovery, suggesting that domestic exporters may enjoy a modest tailwind this year, not least due to the acceleration of the German economy. Domestic data confirm rising activity across most sectors. Demand for credit is clearly increasing. We continue to expect solid consumption growth to be maintained and a strong acceleration in investment. On the other hand, an exceptionally harsh winter is generating additional costs for household and local government budgets, which over time may weigh on their spending, while delays in the disbursement of funds from the Recovery and Resilience Facility mean that even the government is now pointing to the risk that grants may not be fully utilised. As a result, we keep our GDP forecast for this year broadly unchanged, with average growth at 3.9%. (...)

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.