Private consumption likely to drive Polish economy, inflation likely to accelerate in 2017

Poland’s economy has slowed a bit as the absorption of EU Structural Funds is not optimal, and investment is decelerating as a result. Therefore, private consumption is expected to drive the Polish economy, owing to persisting fiscal stimuli and decently rising wages, noted KBC Market Research in a research report.

Meanwhile, the Polish central bank is expected to keep the official interest rates on hold for the remainder of this year, even though inflation is likely to accelerate in 2017. However, inflation is not expected to reach the central bank’s inflation target of 2.5 percent. But market interest rates with longer maturities might be quite volatile in this year, particularly if interest rates on key markets continue to rise.

Dollar market rates are driven by expectations of a rate hike by the Fed and might keep the Polish zloty on the defensive. But the ECB’s eased policy might offset such pressure. Furthermore, Poland’s continuing upturn and the central bank’s conservative policy are fundamentally positive for the zloty from the medium-term perspective.

“Of the Polish macroeconomic fundamentals that should not allow the zloty to weaken significantly, we should mention the very well developing balance of payments and growing FX reserves”, added KBC Market Research.