Brexit to impact Polish economy in medium term; growth of investment might suffer next year

The Polish economy is expected to witness several adverse effects of Brexit. Investment growth in the country is likely to face certain challenges in the coming years. Moreover, inflation is likely to accelerate slightly from 2017 because of a weaker Polish zloty, said Societe Generale in a research report. Government and central bank are likely to be cautious while making their policies .

In the medium term, the effect of Brexit vote on Polish economy will be evident, predominantly because of investment issues beginning next year. Certain projects of the country that are funded via the EU budget will be compromised.

It might be a drag on Polish investment growth in the coming years, added Societe Generale. Investment is unlikely to rebound in the new economic scenario. The Polish government doesn't have fiscal space to boost its investment spending. Meanwhile, the likelihood of lower growth in Germany and probable issues with exports to the UK might affect Poland’s trade, according to Societe Generale.

In the mean time, increase in uncertainty will adversely affect Poland’s debt, equity and FX markets in the short term. But FX interventions are unlikely. Alterations in the UK’s labor market might be slight positive for Polish market. Wage conversion is expected to see acceleration and Brexit might underpin this trend, noted Societe Generale.