Poland Macro Weekly: Signs of recovery

 TOP MACRO THEME(S):

• GDP growth back in the positive territory – Monthly data for September released over the past week reinforce our view that the economy has started to recover and GDP growth in 3q23 will turn positive.

 

WHAT ELSE CAUGHT OUR EYE:

• Opposition parties (Civic Platform, The Third Way, New Left) will have majority of seats (248 out of 460) in the Sejm (the lower house of parliament in Poland). However, the ruling PiS party gained the highest support (35.4% of the votes, 194 seats in 460-seat Sejm). In the Senate (the upper house) 66 seats out of 100 went to the opposition and PiS will have 34. The process of forming the new government may be lengthy (even until early 2024 - see our previous Poland Macro Weekly for details). In the short-term fiscal policy is unlikely to significantly differ from the budget draft submitted by the PiS government, with a possible amendment later in 2024.
• Core inflation (CPI less food and energy) fell to 8.4% y/y in September from 10.0% y/y in August, with the first monthly decline in core prices (-0.1% m/m) since May 2020. The are some one-offs behind the decline (introduction of free medicines for youth and elderly, delayed introduction of new autumn clothing collections), but we also see encouraging underlying developments like fading second-round effects (e.g. in education).
• The leading consumer confidence indicator rose in October to the highest level in 2 years. The consumer recovery is under way, mainly linked to lower inflation and recovering real incomes.
• The state budget deficit in Jan-Sep rose to PLN 34.7bn (up by PLN 18.1bn in September alone) and the rolling 12-month budget deficit rose to PLN 75bn, the highest since March 2021. Higher spending on military as well as social expenditures are boosting expenditures. On the revenue side we notice a gradual revival of VAT, but CIT revenues are below expectations. We forecast that fiscal deficit in 2023 will widen to 5.5% of GDP from 3.7% in 2022.

 

THE WEEK AHEAD:

• The focus of attention will be on political developments (formation of a new government and coalition negotiations) while another dose of local macro data (see details in the calendar) will be in the background.

 

NUMBER OF THE WEEK:

• 74.4% – turnout in elections, the highest ever in post-communist Poland.

Drukuj