Poland Macro Weekly: 1q24 inflation supports cuts in most of the CEE

TOP MACRO THEME(S):

All quiet on the inflationary front in the CEE (p. 2) – the disinflation continued in the CEE region throughout 1q24. Our interest rate forecast for regional central banks remains intact by the data.

WHAT ELSE CAUGHT OUR EYE:

NBP’s Deputy Governor, M.Kightley, said that the current interest rate level is appropriate and it is hard to see interest rate cuts this year. Management Board of the NBP decided that within 2024 and 2025 it will increase gold reserves to 20% of total reserves compared to 12.6% as of March.
According to the World Bank, GDP growth in Poland should accelerate to 3% in 2024 (upward revision of 0.4pp against the previous forecast) and to 3.4% in 2025, mainly on the back of strong consumption, lower inflation and increasing wages. In 2024 inflation should equal approx. 5% on average and return to the inflation target in the medium term.
In Feb., the CAB surplus surprised negatively by shrinking to EUR 465 million from the upwardly revised EUR 1,742 million in Jan. On a 12m basis, the surplus shrank to 1.4% of GDP from 1.5% of GDP after Jan., nevertheless was the highest among CEE countries. The period of rapid CAB improvement has ended, and the surplus can be expected to slowly shrink over the next year.
Polish government has adopted the "Active parent" program. The draft law provides for three types of benefits, including subsidies for care of children aged 12-15 months in the amount of PLN 1,500 for parents, who are professionally active. The net effect of all the proposed actions is a deterioration of the result of the public finance sector by a total of PLN 20 bn in the perspective of 10 years.

THE WEEK AHEAD:

The details of the March CPI inflation will provide more insight into the causes of the lower than expected reading (1.9% y/y acc. to flash estimate), followed by the publication of core inflation the next day (which we estimate at 4.7%). Consumer confidence will be the first monthly indicator enabling us to assess (most likely improving) economic conditions in April.

NUMBER OF THE WEEK: