Poland Macro Weekly: Consumer rises, inflation falls

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TOP MACRO THEME(S):

• Consumer recession is over now (p.2) – Domestic economy has rebounded from the low point of the economic activity and the following quarters should bring further recovery, fuelled by reviving consumption. In 3q23 GDP increased by 0.5% y/y after two quarters of declines.
• Core inflation falls, energy prices depend on regulation (p.5) -CPI inflation in November fell to 6.5% y/y from 6.6% y/y in October. The CPI path in 2024 will be to high extend determined by administrative decisions regarding food and energy prices.

WHAT ELSE CAUGHT OUR EYE:

• Budget deficit at the end of October amounted to PLN 36.4 bn compared to PLN 34.7 bn at the end of September, 39.6% of the budget target (PLN 92 bn). A visible recovery was observed in tax revenues, in particular in VAT which is crucial for the budget. On the expenditure side, strong increase in debt servicing costs continued.
• On the 11^th the vote of confidence on the new government of PM M.Morawiecki will take place. The speaker of the Sejm, Sz.Hołownia, said that if the vote of confidence is not obtained (which seems highly likely), the new PM (most likely D.Tusk) may be chosen on the very same day.
• S&P Global Ratings expects interest rates in Poland to remain stable in 2024 and sees inflation in 2024 at 6.0% (around 2pp higher than we do), accompanied by GDP growth at 3.1% (close to our forecast).
• PMI in Nov. was much higher than expected, at 48.7 pts (against 44.5 pts in Oct.) on the back of significant deceleration in fall of output and new orders. Moods among manufacturers are the best since early 2022.

THE WEEK AHEAD:

• Our attention will focus on the MPC meeting on Wednesday, followed by the press conference (most likely on Thursday). After October surprise, we expect a continuation of a narrative about interest rates remaining stable for longer, since high uncertainty still remains regarding future fiscal policy.

NUMBER OF THE WEEK:

69 – the dependency ratio (the ratio of non-working age population to working age population) according to 2021 national census against 55 in 2011.

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