Look for:

Our offer for

Research Detail

2022/06/15 / Erste Group Research

A rollercoaster ride for the economy


Brisker 1Q22 growth to be followed by a slowdown

Despite the headwinds from the war in Ukraine, supply-side issues and high inflation, Polish GDP exceeded expectations and rose by 8.5% y/y in 1Q22. However, the above issues have not dissipated and growth is set to slow down markedly in the coming quarters, as high inflation and interest rates, together with elevated uncertainty weigh on consumer demand and investments, and supply-side problems cause trouble in trade.

Yet, higher fiscal spending and consumption linked to the sizeable number of refugees from Ukraine help cushion growth to some extent. Given the strong start of the year and its carryover effect, GDP growth may rise close to 4.2% on average in 2022. Next year, growth should moderate towards 3%. The unlocking of Recovery and Resilience EU funds is definitely a positive, especially from next year onwards as it will boost investments. Nevertheless, the current outlook remains highly uncertain and a lot depends on further development in Ukraine.

Inflation has accelerated over the past few months and remains in the double-digits. The key culprits behind the rise are food, energy and housing, as the start of the war in Ukraine exacerbated the already existing supply-side pressures and created new ones. The demand-side factors remain proinflationary, as well, given loose fiscal policy and tight labor market. We expect the government to prolong the anti-inflation measures until the end of 2023. Nonetheless, inflation is likely to average 13.1% this year, with a peak around 15% y/y in the autumn, before easing to 8.1% in 2022.

Thus, further rate hikes from the National Bank of Poland are on the cards and we expect the peak of the tightening cycle at 7.5% by the end of 3Q22. In light of further tightening by the central bank and the expected flow of EU money into the economy, we expect the currency to appreciate in the medium-term. However, taking into account headwinds from abroad, the firming may be limited.
LCY bond yields have been on an upward drive since the beginning of this year and the yield curve inverted in March. Although the inversion was later reversed for a few weeks, June brought it back again. The current high yields and spreads are hardly justified by fundamentals, given central bank’s commitment to contain soaring inflation, but geopolitical risks continue to remain the main driver for the local bond market. We expect the 10Y yields to mark some correction by the end of the year, accompanied by gradual narrowing of spreads vis-à-vis the Bunds.

PDF Download Download PDF (152kB)

General information

AuthorErste Group Research
Date2022/06/15
Languageen
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-
Download





Decline
Accept

We use cookies and web analysis software to give you the best possible experience on our website. If you consent, these tools will be used. For more details please read our Data protection policy.

INFORMATION FOR PRIVATE CLIENTS / CONSUMERS

Any information, material and services regarding financial instruments and securities provided by Erste Group Bank AG or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites”) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions (the “Interested Party“).

The publication and distribution of information as well as offering and selling of products and services described on the Websites is prohibited by law in some jurisdictions. For this reason, persons in countries in which the publication as well as the offering and selling of products and services described on the Websites are not permitted by law, must not enter the Websites and/or acquire the products displayed on the Websites.

Neither Erste Group nor any third party shall offer access to the Websites or offer the products to especially, but not limited to citizen/residents of the United States and “U.S. person” (as defined in Regulation S under the US Securities Act 1933 as amended). For this reason, the distribution or redistribution of the information, materials and products into United States or into any other jurisdiction where it is not permitted under the applicable law, as well as to the citizens/residents of these countries shall be prohibited. The securities displayed on the Websites have not been and will not be registered under the US Securities Act of 1933 and trading in the securities has not been approved for purposes of the US Commodities Exchange Act of 1936. For this reason the securities may, inter alia, not be offered, sold or delivered within the United States or, for the account and benefit of U.S. persons.

The Interested Party is solely responsible to examine, whether he may enter the Websites under the law applicable to it. Erste Group shall not be responsible for the distribution of content of any of the Websites to individuals or entities which provide false information about their right to enter the Websites. For this reason Erste Group shall not be liable for any legal claims or damages which may result from the unauthorized entering or reading of the Websites.

By agreeing to this hereto, the Interested Party confirms that
(i) It has read, understood and accepted this Information and the Disclaimer;
(ii) It informed itself about any possible legal restriction and warrants that it is not restricted or prohibited to enter the Websites according to any law applicable; and
(iii) It does not make available the contents of the Websites to any person who is not qualified by law to enter the Websites.