Our key highights: 

  • We are optimistic on economic growth in Poland, forecasting an expansion of 5.0% in 2018E, before slowing to 3.5% in 2019E.
  • We expect household consumption to continue to rise and the recovery in investment to remain strong.
  • Inflation was surprisingly low in the early months of 2018 – we have downgraded our forecast for this year to 1.7%.
  • We have also downgraded our rate forecast to no change this year. NBP Governor Adam Glapinski: “In the perspective of the next two years, I do not see anything that could prompt us to increase rates, barring a major crisis like armed conflict or a trade war on a huge scale.”
  • Production expectations have been positive across sectors (order-book levels have shot upwards and both production and selling price expectations are on upwards trends). Industrial survey indicators highlight labour shortages as a limiting factor for production; lack of demand, not so much.
  • Wage growth is above 4% and rising while the unemployment rate is at a historical low.
  • Consumer confidence has been surging lately but retail sales have been improving slowly (the Sunday retail ban is being eased in so the impact this has should be closely monitored).
  • Government revenue growth was strong in 2017 due to improved VAT collection and the fast economic growth. This trend has continued in the early months of 2018, with the budget posting a surplus of EUR1.1bn in January-February.
  • The dispute with the EU over reforms to the judiciary is unlikely to have any short-term ramifications. The Hungarian government has repeatedly given its Polish counterpart its reassurance that it will veto any potential sanctions.

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