Poland Macro Weekly: The economy is gaining steam

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TOP MACRO THEME(S):

• The economy is gaining steam (p. 2) – GDP growth in 1q24 was 1.9% y/y, just a tad lower than our estimate and a bit above market consensus. We stick to our full-year GDP growth forecast of 3.7%.

WHAT ELSE CAUGHT OUR EYE:

• CPI inflation in April was confirmed at 2.4% y/y. The monthly increase was slightly revised upwards: to 1.1% m/m from 1.0% m/m. The main factor behind the increase in inflation was the return of the 5% VAT rate on food. Services prices rose by 6.2% y/y and goods by 1.1% y/y. Core inflation dropped to 4.1% y/y. We expect CPI inflation to increase to 5.0-5.5% y/y by the end of 2024, mainly due to growing prices of energy carriers and, to a lesser extent, the persistence of core inflation, which may increase to 4.5-5.0% y/y.
• Poland’s current account surplus started to narrow in March. Monthly current account balance was EUR 325m compared to EUR 511m in February, and 12m rolling sum dropped to 1.2% from 1.4% of GDP in February. Negative growth rate of exports and imports was a consequence of negative calendar effects. In the near future, we expect both to revive - the former due to the economic recovery, and the latter thanks to the improved global economic situation and the earlier inflow of FDI, which increases the export potential.
• The budget deficit after April reached PLN 39.9bn, i.e. 21.7% of the plan for 2024. In January-April 2024, state budget revenues rose by 23.3% y/y, with a significant increase in CIT and PIT revenues, and with lower growth of VAT and excise tax revenues. Ministry of Finance commented that ‘possible poor VAT revenue readings in the following months would create risks for the implementation of the revenue forecast included in the Budget Act for 2024’.

THE WEEK AHEAD:

• Next week will bring a wide set of monthly macro indicators (details in the calendar), which should point to a decent start of 2q24.

NUMBER OF THE WEEK:

• ‘A-‘ – Fitch and S&P rating agencies both confirmed long-term rating of Poland.

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