Polish economic growth likely to accelerate to 3.3 pct in 2017, inflation likely above 2 pct, says Commerzbank

Polish economic growth took a downturn in the second half of 2016 due to a combination of factors such as pause in EU structural funding, sluggish euro area demand and waning of the benefit from low energy prices. However, in the more recent times, the Polish economy has begun rebounding. The PMI is posting strong gains, while upbeat German orders have driven a rebound in confidence.

This has led to a solid economic growth of 1.8 percent rise in the December quarter. The Family 500+ subsidy, which is the government’s major fiscal initiative, has also stimulated growth in the fourth quarter. The EU fund inflow will pick up again in 2017, noted Commerzbank. Sustained growth acceleration is unlikely due to such factors, many of which would have a temporary impact.

“We forecast quarter-on-quarter GDP increase to progressively moderate through 2017, stabilising at around 0.6 percent q/q by Q4. Still, the upward revisions to Q4 2016 and Q1 2017 GDP means that such a quarterly profile will produce around 3.3 percent GDP growth for full year 2017”, said Commerzbank.

Consequently, the economic growth is likely to decelerate to 2.8 percent in 2018. Meanwhile, inflation is anticipated to accelerate in the months ahead from the effect of energy prices. According to the Commerzbank, the Polish headline inflation might coming in higher than 2 percent in 2017, but the core inflation is expected to come in just mildly positive. On the contrary, the core inflation is expected to keep accelerating gradually in 2018, reaching around 1.5 percent, whereas the commodity price driven headline inflation rise of 2017 is expected to wane, stated Commerzbank.

“Such inflation rates will still be below NBP’s 2.5 percent target, which is why we do not forecast any actual rate hikes even by 2018”, added Commerzbank.