Poland Macro Weekly: The CEE region is looking to Germany

TOP MACRO THEME(S):

The CEE region is looking to Germany (p. 2) – Poland, like most of the CEE region, still enjoys positive CAB, but its further deterioration seems inevitable.

WHAT ELSE CAUGHT OUR EYE:

CPI inflation in September was confirmed at 4.9% y/y against 4.3% y/y in August. The increase was primarily due to a low base from the previous year, with the current momentum remaining at 0.1% m/m. Core inflation (CPI less food and energy prices) rose to 4.3% y/y from 3.7% y/y in August, in line with our forecast. We expect both CPI and core inflation to remain at around these levels until the end of 2024.
The World Bank has raised its forecast for Poland's GDP growth to 3.2% (+0.2pp) in 2024 and to 3.7% (+0.3pp) in 2025.
The state budget deficit reached PLN 107.3bn (58.3% of the annual plan) at the end of September. We observe a gradual increase in VAT revenues alongside declines in CIT. On the expenditure side, the increase is driven by factors such as social benefits, higher debt servicing costs, subsidies for local governments, and defense spending.
Demand for residential real estate weakened slightly in 2q24 (due to the end of the government mortgage loan subsidy program) but remained supported by strong wage growth. The cost of building apartments continued to rise. This was reflected in further increases in apartment prices, both in nominal terms (14.7% y/y) and in real terms (12.6% y/y).

THE WEEK AHEAD:

Next week will begin with labour market data and economic activity indicators for September. Industrial and construction output figures will be released on Monday, followed by retail sales numbers on Tuesday (see our forecasts in the calendar on p.4).

NUMBER OF THE WEEK:

32.5% – the increase in construction starts in 2q24, as developers ramped up their activity. The number of issued building permits also rose (23.8% y/y).