Economic Analysis

In today's Eyeopener:

• Today at 3 pm, NBP President Adam Glapiński holds conference
• The Monetary Policy Council cut interest rates by 25bp, as expected
• The new NBP projection revised GDP growth slightly upwards and inflation significantly downwards
• FX markets partly trimmed losses, but PLN still weak; strong correction at the short end of the yield curve

The coming week in Poland will be sponsored by letters: PMI, GDP and the MPC. On Monday morning, we will see the February reading of the manufacturing PMI. (...) An hour later, Statistics Poland (GUS) will release detailed GDP data for 4Q25. (...) On Wednesday, the Monetary Policy Council will conclude its meeting. Before taking its interest rate decision, the Council will see the results of the new NBP projection. We assume that the MPC will decide to cut interest rates again by 25bp, in response to the slight decline in CPI inflation in January and to the projection results, which will most likely confirm the stabilisation of inflation in the coming quarters close to the 2.5% target . (...)

The “Polish SAFE 0%” project, discussed on Wednesday by President Karol Nawrocki and NBP Governor Adam Glapiński, has not been explained in detail. Based on the available information, we are not certain what the mechanism guaranteeing PLN185bn in financing would look like, how it would avoid interest and debt, and how it would operate (at least in the initial phase) within the existing legal framework. The variants we are able to envisage could be seen as a de facto attempt to circumvent regulations prohibiting the central bank from financing government deficits, carrying inflationary risks as well as risks to the credibility of the central bank. (...)

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%. (...)