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Macroeconomic scenario

Economic growth

In light of the recent GDP data (annual average growth rate of 0.2%, 1.0% yoy in Q4), the Polish economy proved to be less dynamic than anticipated. In particular, household consumption is recovering at a singularly slow pace. This supports our forecast of a limited rebound in consumption in 2024 (certainly not a boom). Despite very fast real income growth (7-8%), consumption is slated to rise by less than 4% due to high interest rate burden and the need to rebuild real savings following the recent inflationary episode of. At the beginning of the year Poland will also suffer from poor external demand. All in all we expect Polish GDP to rise by 3% this year.

Inflation

No major changes in the inflation scenario. The first quarter of 2024 will bring a continuation of rapid disinflation. In turn, inflation path in the next months will be strongly dependant on regulated factors (we should know the government decisions soon). With the implementation of our assumptions: return of the 5% VAT rate on food (from the beginning of the second quarter) and new energy tariffs for households (freezing until mid-2024, then introducing other protective measures), CPI in March will reach a minimum of around 2.5% yoy. For a while, inflation will be within the band for deviations from the target to accelerate in the second half of the year to about 4.5-5%. However, this rebound will be based solely on non-core factors - downward trend of core CPI will be continued.

Labour market

Dealing with the labour market data teaches a lesson: one shall always expect surprises. In January there was a positive surprise in wages; in February we shall see to what degree that hike had been due to minimal wage rise; therefore, the February reading will have impact on the all-year wage path estimations. On the other hand, unemployment rate was in a short-run rising trend due to seasonality – we expect it to start falling in March or April. We are still waiting for the February data on employment. Image of the domestic labour market was somewhat blurred in January due to yearly sample adjustments in the enterprise sector. Average employment shall crawl upwards in the upcoming months.

Monetary policy

Unchanged. At the beginning of the year we decided to change our interest rate forecasts. The MPC’s hawkish turn, the revival of NBP projections as a key waypoint for the MPC and the expected acceleration in both GDP and prices (suggesting that the window for rate cuts is closing fast) are all arguments in favor of unchanged rates in both 2024 and 2025. There are some risks of rate cuts only due to potential excessive PLN appreciation.