Poland Macro Weekly: Inflation back on target, but not for long

TOP MACRO THEME(S):

CPI inflation on target – CPI inflation dropped deeper than expected in February and was within the target range for the first time since March 2021.

WHAT ELSE CAUGHT OUR EYE:

The European Commission’s V.Jourova said that conditions for unblocking the RRF funds for Poland are met (EUR 60bn in total), but the achievement of milestones will be constantly monitored.
Fitch Ratings lowered forecast for Poland’s GDP growth in 2024 to 2.2% from 2.5% (while consensus trends higher and is above 3%) and maintained at 3.2% for 2025. Inflation forecast for the end of 2025 was lowered to 3.0% from 4.0%, under the assumption of energy price freezing over the forecast horizon.
Poland had current account surplus of EUR 1.17bn in January (PKOe: EUR 0.92bn; cons.: EUR 1.43bn), which implies that 12m CAB in relation to GDP dropped to +1.4% from +1.6% at the end of 2023, the first deterioration since September 2022. A year ago, Poland’s current account recorded the first of many monthly surpluses (EUR 2.25bn), followed by a continued improvement in terms-of-trade. In our opinion, due to statistical factors, the period of rapid improvement in the 12-month current account balance is over, but we expect a solid surplus above 1% of GDP to remain throughout 2024.

THE WEEK AHEAD:

Next week will bring labour market statistics and main monthly economic activity indicators for February. As labour market data for January were disrupted by methodical changes, figures for February will help to assess actual underlying trends for employment and wage growth. The latter likely remained elevated (PKOe: 11.3% y/y) as the impact of large minimum wage hike is stronger than the influence of softening of labour demand (see chart of the week). Combination of strong nominal wage growth and surprisingly sharp disinflation (classical ‘positive inflation surprise’) should support retail sales (PKOe: 5.1% y/y) and consumer confidence. Industrial and construction output numbers, on our estimates, remained soft and will be below consensus.

NUMBER OF THE WEEK:

1mn – According to Statistics Poland, the number of foreigners officially working in Poland exceeded 1mn (6.5% of total working population) as of the end of September 2023.