Polish Q3 real GDP growth likely to disappoint, NBP to keep rates on hold for foreseeable future

Poland’s real GDP is expected to disappoint in the third quarter of this year because of lack of investment. According to a Barclays’ research report, the Polish economy is likely to expand 2.9 percent year-on-year in the third quarter. Barclays’ projection is lower than the consensus expectation of 3 percent.

Even if corporate credit demand rebounded in the September quarter, subdued investments are expected to weigh on the economy’s performance in the third quarter. Construction, which is a dependable predictor of investments, has continued to be subdued in the third quarter. This is possibly due to new management in large Polish state-owned firms, who have yet to approve huge EU funded investments.

Given that the new managers might not want to be accused of inefficiently using the EU funds, these large projects are expected to be approved soon and appear in hard data next year, said Barclays. Meanwhile, the consumer price index almost reached inflationary territory in October. Moreover, the Polish labor market is also tightening, though any wage pressure would be countered by the entry of over one million Ukrainians into the Poland’s labor market this year.

This development is expected to exert downward pressure on the consumer price index via lower wages in 2017 and 2018. Against this backdrop, the Monetary Policy Committee is expected to keep rates unchanged at 1.5 percent in the near future, added Barclays.