Economic Analysis

In today's Eyeopener

- Today German ZEW, markets’ reaction to D. Trump’s first decisions
- Kotecki: cuts no earlier than in July, Wnorowski: cuts in 2Q25
- Złoty stronger, dollar weaker, domestic yields slightly higher

This is going to be an extremely interesting week. Already on Monday, the inauguration of US President Donald Trump will take place and, at the same time, the World Economic Forum in Davos will begin and last until the end of the week. Both events are likely to bring new information shaping investors' expectations on the global economic outlook. Particularly awaited will be the first statements, let alone decisions, of D. Trump and key representatives of his administration after taking office.
The calendar of domestic data releases is quite rich: on Wednesday, December wage and employment data, industrial production and PPI, and January economic activity; on Thursday, construction production and retail sales; and on Friday, money supply. Abroad, on the other hand, there is a very sparse list of publications, the most important of which will be the preliminary January PMI indexes on Thursday. (...)

NBP governor Adam Glapiński was even more explicit than in December, presenting argumentation against any monetary policy easing at his January’s conference. He said that government’s decisions regarding the energy price freeze have completely changed inflation outlook. As a result, current NBP forecasts show inflation bouncing up again in 4Q25 and ending this year at almost the current level. He said that the entire macroeconomic picture has changed and any interest rate cut would extend further inflation’s return to the target, therefore a discussion on rate cuts has to be delayed “for some time” (...) We stick to our view that the moment of first rate cut may be July 2025.

Based on the currently available data, we can say that the economic scenario that materialized in 2024 was close to the one we sketched out a year ago. Despite the unfavourable external environment and the protracted downturn in the euro area, the domestic economy returned to GDP growth of around . 3%, mainly due to robust domestic demand, including consumption, supported by rapidly rising household incomes. The results for the third quarter were a big disappointment, but we consider them a temporary disruption of the trend, not a signal of its fundamental change. We are still not able to explain exactly what was behind the sudden slump in demand in 3Q, but we do not share the opinion about the "death of the consumer" (if anything, it was only resting) and in the coming quarters we expect the pace of economic growth to return above 3%, with further significant contribution from domestic consumption.  (...)

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.