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Macroeconomic scenario

Economic growth

Having a majority of the most important macro data for the first quarter of 2024, we estimate that GDP grew by about 2% yoy. In March, we saw the first signs of a rebound of consumption in hard data, and business sentiment indicators and record-strong growth in real wages suggest a continued recovery in consumer activity in the coming months. Weakness of the domestic industry remains the elephant in the room and for now can only be slightly supported by domestic demand. Foreign demand, however, will remain a drag on Polish industry at least until rate cuts in the euro zone. The second half of the year should be more positive for both industry and the entire economy supported by the continued consumption recovery. As a result, we expect GDP growth by 3% throughout 2024.

Inflation

Disinflation in Poland is surprising in its strength and pace. At the beginning of the year, we expected that March would be this year's minimum, close to the target, but a reading below 2% is a "positive" surprise. The stay around the inflation target will be short-term, but will last at least until June. In turn, from the beginning of the second half of the year, the inflation path will strongly depend on regulated factors regarding energy tariffs (we should know the decisions soon). At the end of 2024, inflation will accelerate to about 4% yoy, but this rebound will be based solely on non-core factors. Core inflation will continue to decline asymptotically throughout the year.

Labour market

Wages stubbornly remain in the center of attention of the domestic labor market observers. And rightly so - the latest readings strongly surprised on the upside, and we see no room for them to slow down significantly in the coming months. However, we will see a downward trajectory in another indicator, the unemployment rate. In March, it begins a several-month period of seasonal declines. In turn, in the case of employment, we are still waiting for a breath of optimism, which is noticable in sentiment indicators, but not yet in hard data.

Monetary policy

Inflation slowed down to the levels close to the NBP target, but its stay here seems to be temporary. The MPC remains hawkish amid uncertainty related to the increase in regulated prices, as well as the scale of expected economic recovery and the resulting rebound in inflation in the second half of the year. The NBP forecasts published in March also indicate a significant risk of not achieving the inflation target in the medium term. We further assume that interest rates will remain unchanged until the end of 2024 or even 2025. Markets are also already pricing in stable rates this year.