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2020/02/17 / Erste Group Research

Poland Weekly Focus | Poland springs into 2020

January real economy data is due this week. Industry might return to red, due to unfavorable calendar effect. Retail sales are likely to lose some of their strong dynamics, as trends on labor market stabilize. Markets are to focus on global news regarding Coronavirus development.

February 20 | Weak start of year for industry. We see industrial production output to increase by a meager 1.4% y/y in January, while the market is more pessimistic and expects a decrease of 0.4% y/y. The negative calendar effect (-1WD) as well as dropping market sentiment (PMI Index at 47.4 in January) will likely weigh on the performance of industry.

February 21 | Retail sales to remain strong. Retail sales growth has been oscillating around 6% y/y in 2H19, and we expect this trend to continue in January. We see retail sales to increase by 5.6% y/y (4.5% y/y in real terms) at the beginning of the year, while the market is a bit more optimistic and expects the figure to land at 6.1% y/y. With GDP landing at 4.0% in 2019 and private consumption slowing down to 3.9%, from 4.3% in 2018, the retail sales development will likely be carefully watched in the coming months.

Bond market drivers | Spreads widened due to inflation fears. Over the course of the week, the whole Polish yield curve moved up by roughly 10bp. The 10Y yield increased to 2.2%, while the spread over the 10Y German Bund widened to 260bp. We think that regional factors were in play last week, especially the higher than expected inflation readings. In Hungary, inflation surged to 4.7% y/y in January, triggering a reaction from the central bank. Vice Governor Nagy reassured the markets that the MNB is doing what it possibly can to get inflation back under control. We believe it could have an influence on the whole region by building up expectations for a similar reaction in Poland.

FX market drivers | EURPLN returned below 4.25. Despite renewed fears about the Coronavirus outbreak in China, the zloty remained strong and appreciated over the course of the week. Unlike in the case of the Hungarian forint, which appreciated visibly following the January inflation reading, the zloty’s reaction was mild. We see the zloty remaining under the sway of global factors in the coming weeks and moving towards 4.28 vs. the EUR until the end of 1Q20.

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General information

AuthorErste Group Research
Product nameCEE Country Update
Topic in focusMacro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-


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