Poland Macro Weekly: Poland after 20 years of EU membership

TOP MACRO THEME(S):

20 charts for 20 years of Poland’s membership in the EU (p. 2) – May marks the 20th anniversary of the Poland’s accession to the European Union. On this occasion we decided to summarize this undoubtedly successful period in 20 charts.

WHAT ELSE CAUGHT OUR EYE:

The Polish MPC has kept interest rates unchanged again. It continues to emphasize elevated uncertainty regarding the impact of fiscal and regulatory factors on inflation, even though it has decreased since April. In particular, CPI inflation in April rebounded to 2.4% y/y (against 2.0% in March) due to a return of 5% VAT rate on food, but price growth in this category was lower than expected. In addition, according to governmental estimates based on the project of the Energy Voucher Act, July electricity bills will increase by approx. 29% and gas bills by approx. 15% compared to 1h24. It implies that CPI inflation at the end of the year may reach 5-6% y/y against 8% y/y in the negative scenario included in the NBP projection in March. The governor A.Glapinski, said that interest rates need to remain at the current level due to an elevated core inflation, adding that it is not the right time to lower interest rates, however, discussion on cuts may take place in early 2025.
Poland’s PMI manufacturing surprised to the downside, falling to 45.9pts against 48.0pts in March, which is the deepest monthly decline since July 2022. 4 out of 5 sub-indices (except for the production sub-index, which did not change) contributed to the index decline. In our opinion, the PMI indicator overestimates the scale of the problems of the domestic industry, but clearly confirms a number of challenges that exporters are facing.

THE WEEK AHEAD:

The week promises to be interesting, mainly due to the first estimate of GDP growth in 1q24 (our nowcast based on monthly indicators is relatively high and stands at 2.0% y/y). This will be accompanied by final CPI estimate for April as well as current account data for March. Minutes from the MPC meeting in April will be of secondary importance.

NUMBER OF THE WEEK: