Poland Macro Weekly: 2023 failed to meet expectations

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TOP MACRO THEME(S):

• Wacky race towards inflation target in the CEE (p.2) - As the progress in disinflation in the CEE-4 has been substantial, the time has come to place bets in the race who will be first to bring inflation back to the target.

WHAT ELSE CAUGHT OUR EYE:

• Tentative full year GDP data for 2023 turned out to be quite disappointing. Economy grew by a mere 0.2% vs 5.3% in 2022, much weaker than the most recent estimates ranging 0.4-0.6% and very close to our below-consensus, extremely bearish prediction for 2023 presented in the late 2022. The result for 2023 as a whole implies that GDP growth in 4q23 alone was 0.9-1.3% y/y, weaker than expected. The main negative surprise came from consumption, which decreased by 1% in 2023 as a whole and stagnated in 4q23 alone (result implied from full-year number is -0.1 to +0.3% y/y), after increasing by 0.8% y/y in 3q23. Investments stand out positively (again) with 8.0% growth. Somewhat disappointing result for 2023 does not reduce our optimism with regard to 2024. We still see good reasons to expect growth picking up to 3.9%.
• Poland’s PMI manufacturing disappointed in January falling to 47.1 from 47.4 in December, which suggests the fastest decline in activity since October 2023, driven by strong declines in new orders and output. However, it is encouraging that production expectations are the highest since the outbreak of the war in Ukraine. We believe that situation in the domestic manufacturing is not as bad as PMI shows, which is suggested by alternative survey data as well as the slowly emerging upward trend in the industrial production.
• Poland’s President A.Duda decided to sign the budget act for 2024 but at the same time he sent it to the Constitutional Tribunal to examine its compliance with the Constitution. At this stage this decision does not affect the validity of the 2024 budget act.

THE WEEK AHEAD:

• Key focus of attention will be on an outcome of the MPC meeting. We have no doubts that the NBP rates will stay unchanged this time, but press conference of the NBP governor will be an opportunity to verify our scenario assuming a fine-tuning rate cut in March-April.

NUMBER OF THE WEEK:

• 102pts – ESI indicator for Poland in January exceeded neutral level of 100pts for the first time since the outbreak of war in Ukraine.

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