Poland Macro Weekly: Decision time

TOP MACRO THEME(S):

Elections and what’s next – This Sunday parliamentary elections will take place in Poland. We describe a potentially long process of forming a new government. Looking at opinion polls it is too close to call a winner. It may be necessary to form a coalition, extending the entire process.

WHAT ELSE CAUGHT OUR EYE:

Detailed CPI figures for September confirmed that the headline inflation rate dropped to 8.2% y/y. In monthly terms prices fell by 0.4%. We estimate that core inflation declined to 8.4-8.5% y/y from 10.0% y/y in August with the first monthly drop in prices of core items since May 2020. Lower core inflation reflects dissipating second round effects and limited ability of firms to pass higher costs to final prices. In addition, disinflation in core components was boosted by implementation of free medicines for elderly and children, warm September (delayed entry to stores of autumn collections) and lower than a year ago increase in prices in education. We predict that CPI inflation in October will fall below 7% and remain close to this level until 2024.
CAB in August was worse than expected – deficit amounted to EUR 202m against EUR 62m deficit in July (a downward revision). For the first time since the beginning of 2021, there was a decline in exports expressed in EUR, by 2.2% y/y. At the same time, imports decreased by 12.3% y/y, which is a consequence of reversing cost shock. As a result, August was the eighth consecutive month with a surplus in trade of goods. On a 12-month rolling basis, CAB after August improved to +0.3% of GDP. Despite some disappointment in data for August, we expect that the improvement in the CAB will continue towards +1% of GDP at the end of 2023.

THE WEEK AHEAD:

The key focus of attention this week will be results of parliamentary election, which should be confirmed by the mid of the week. Besides, we will get a whole bunch of local macro data for September, incl.: core inflation (Mon.), industrial production and wages (Wed.) as well as retail sales (Fri.), which should confirm that disinflation continues, supporting consumer recovery.

NUMBER OF THE WEEK:

6.4% – share of foreigners among employees in the national economy as of April 2023.