Poland Macro Weekly: Stronger imports push current account into deeper deficits

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TOP MACRO THEME(S):

  • Polish labour market under the microscope (p. 2) – Despite accelerating real GDP growth, there are clear signs that the Polish labour market is cooling down, while detailed regional data point to notable differences between regions and between genders.

WHAT ELSE CAUGHT OUR EYE:

  • CPI inflation in August was confirmed at 4.3% y/y against 4.2% y/y in July. Service inflation remained unchanged at 6.2% y/y, while goods inflation increased to 3.6% y/y from 3.5% y/y. We estimate that core inflation may have slightly decreased in August, to 3.7% y/y from 3.8% y/y in July. We expect CPI inflation to remain below 5.0% y/y by the end of the year. The peak level of inflation in 1q25 will depend on decisions regarding energy prices (CPI will likely peak slightly above 6% y/y if prices are unfrozen and about 0.8 pp lower if current solutions are maintained).
  • Current account deficit in July turned out several times deeper than expected, increasing to EUR 1462 mn amid strong export growth (4.6% y/y) and even stronger import increase (10.5% y/y). Monthly balance in the trade of goods was the lowest since 2022. Surplus in services also deteriorated somewhat. Primary income balance has increased on the back of normalisation (decline) of foreign companies’ profits.
  • The degree of funding for gross borrowing needs for 2024 has reached approximately 90% according to the Budget Act, and around 95% according to the projected execution presented in the 2025 budget draft. This confirms there should be no difficulties in financing, despite very high borrowing needs (PLN 449 bn according to the 2024 Budget Act and PLN 425 bn according to the projected execution for 2024).

THE WEEK AHEAD:

  • Next week will bring first monthly indicators for August, including data from the labour market – amid normalisation of wage pressures the focus has shifted on employment data, which have not so far heralded any rebound in labour demand. Publication will be accompanied by industrial data and preceded by consumer confidence indicator.

NUMBER OF THE WEEK:

  • 4666 PLN – latest government’s proposal of the level of gross minimum wage in 2025 (increase by 8.5% compared to the current level).

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