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2022/09/14 / Erste Group Research

Economy to take a hit in coming quarters


The dynamic growth from the beginning of the year driven by inventory buildup was practically wiped out in the second quarter. As a result, Polish economy stagnated in the first half of the year. Thanks to the strong carry-over effect the GDP growth in 2022 should remain close to 4% despite expected contraction in the second half of the year. Sentiment indicators point to such scenario as increasingly likely: PMI dived toward 40 in August, consumer confidence is as low as during pandemic. The full hit will be visible in the 2023 GDP numbers. We revised the forecast visibly down to 0.7% and expect negative annual growth dynamics at the turn of the year amid weakening consumption and investment growth

The peak of inflation is still ahead as costs of housing are expected to rise substantially with higher electricity prices fully reaching households and businesses over the coming months only. The tightening cycle comes to an end, however. Most likely the MPC will turn a blind eye on the inflation increases at the beginning of the year (external character of high energy prices). Governor Glapinski has even indicated that the monetary easing could begin at the end of 2023. The persistency of the underlying demand pressure fueled by the government policies that are pro-inflationary in their nature will stand in the way of such scenario, however.

LCY bond yields had been on an upward drive until late June. At that point, the trend changed, and we have seen a correction of both short- and long term interest rates. The long end of the curve dropped to a greater extent, such that the yield curve has remained inverted since then.

The very strong negative correlation with the EURUSD pair suggests a dominant influence of global factors as far as the zloty is concerned. As local factors speak in favor of higher EURPLN levels, we expect to see more pronounced appreciation only in the case of a decrease of global risk aversion. Otherwise, we see the EURPLN moving in the range of 4.65-4.75 until the end of the year.

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General information

AuthorErste Group Research
Date2022/09/14
Languageen
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-
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