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2020/02/24 / Erste Group Research

Poland Weekly Focus | Markets fear COVID-19


Sharp increase in number of COVID-19 infections in Italy caused panic on markets. Global risk-off mode will likely affect Polish bonds and zloty. Structure of 4Q19 GDP growth will likely not attract too much attention.

February 28 | Private consumption has driven growth. The flash estimate of 4Q19 GDP growth arrived at 3.1% y/y (0.2% q/q), the upper limit implied by the annual growth figure of 4.0%. We expect the flash to be confirmed at 3.1% y/y. As far as the structure of the growth is concerned, we believe that private consumption has remained the key driver, although the dynamics likely slowed down at the turn of the year. Investment activity recovered in 4Q19 after a somewhat weaker print in the previous quarter. We keep our FY20 growth forecast unchanged at 3.0%.

Bond market drivers | Yield curve shifted down. Global markets are afraid of the Covid-19 development and its spread outside of China. Moreover, worse than expected PMIs in the US likely decreased the sentiment further. Over the course of the week, the 10Y German Bund went down by 6bp to -0.44%. The downward move on the Polish curve was even stronger, as 10Y yields decreased by 15bp to 2.05%. As a result, the spread over the 10Y Bund narrowed visibly and returned back to below 250bp.

FX market drivers | EURPLN heading towards 4.30. The FX market (similarly to the bond market) is focusing entirely on the virus news. On the back of the increased global risk-off mode, the zloty weakened substantially and the EURPLN moved towards 4.30. We expect the uncertainty over the economic impact of the Covid-19 epidemic to remain the major market determinant in the coming weeks. The zloty will likely follow core market developments and might weaken further if virus fears remain high.

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General information

AuthorErste Group Research
Date2020/02/24
Languageen
Product nameCEE Country Update
Topic in focusMacro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-
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