Page 9 - Poland Outlook 2020

After peak growth of 12.2% y/y in Q1 vs. a meagre 4.7% y/y in Q3, investment dynamics are set to slow further due to lower outlays in the public sector and declining absorption of EU funds. On the positive side, investment outlay data from non-financial firms above 50 employees show that in the year-to-date the only sector which posted a fall in investment outlays was construction, while others reported solid dynamics.
That said, uncertainty about investment is far greater than in recent years, as evidenced by the wildly ranging forecasts by Poland’s leading banks.
2020 investment forecasts from selected banks operating in Poland, in %
BNP Paribas 2.6
Credit Agricole 1.9
Citi Handlowy 3.1
mBank -3
Deutsche Bank Polska 4.1 Alior Bank 3
Bank Pekao 4.5
BOŚ Bank 3.7
Santander Bank Polska 0.2 Bank Pocztowy 3.7
PKO BP 2.3
Bank Millennium 2.1
Bank Śląski 2.7
(source: Puls Biznesu)
• External environment
On the external side, because of a bottoming-out of the EA slowdown, conditions should improve in late 2020 and therefore smooth the GDP growth path in Poland. It is also worth noting that Polish exporters are managing the external downturn quite well being able to increase exports to other markets than the core ones. Year to date, both the share of exports and annual
growth have increased most to France, USA, Russia and Hungary while the share of exports dropped in case of Poland’s top 3 trading partners, Germany, Czech Republic and the UK. The stabilization in external conditions
should limit the scope and duration of the slowdown.
• Inflation and monetary policy
CPI and core inflation are on the rise but will probably peak in Q1 2020. CPI may break out of the National Bank of Poland’s (NBP’s) target range, although largely due to regulatory price increases in early-2020, such as for garbage collection.
Forecasts from analysts and NBP assume that CPI and core inflation will decrease mildly after Q1, which would allow the MPC to remain neutral and keep the key rate at 1.50% for the fifth year straight. The MPC remains confident that CPI will move back to target of 2.5% y/y in the second half of 2020 and the governor of the NBP Adam Glapiński sees no change in monetary policy for the foreseeable future, a position he has reiterated at every press conference following new decisions on rates.
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