Poland Macro Weekly: Warm warmer

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TOP MACRO THEME(S):

• Good start into the good year (p. 2) – The February data from the Polish economy generally surprised on the upside, confirming that the expected economic activity revival is gaining momentum at the beginning of the year.

WHAT ELSE CAUGHT OUR EYE:

• According to media reports, the preliminary motion to bring the governor of the NBP before the State Tribunal includes 8 charges, related among others to conducting QE without the authorisation of the MPC or cutting interest rates due to the election campaign. The motion will be submitted to the corresponding Committee next Tuesday, while the assessment of the justification of charges may last approx. 12m. Depending on the result of the investigation the Committee will either submit a proposal to the lower house to discontinue the proceedings or to put the governor in front of the State Tribunal (this will likely result in his suspension).
• Core inflation (excl. food and energy prices) continued a downward trend, by falling to 6.2% y/y and 5.4% y/y in Jan. and Feb. respectively (from 6.9% y/y in Dec.). Core momentum (sa) equaled 0.2-0.3% m/m, indicating that the underlying price processes have been slowing down. Annualized measure remains elevated, at 4.4%. PPI deflation in Feb. turned out both deeper (data for Jan. revised downwards to -10.6% y/y from -9.0% y/y) and shallower (deflation decreased in Feb. to “only” 10.1% y/y). In the coming months we expect the pace of deflation to slow down, due to gradual m/m price increases, a foretaste of which we saw in Feb. when prices increased 0.1% m/m, for the first time since Sep.
• Minister of finance, Domanski, announced proposed changes to health care contribution for entrepreneurs, which should apply from 1^st Jan 2025 and cost around 4-5 bn PLN. As a consequence, the health care contribution will be lower than the one applicable to employees earning a minimum wage.

THE WEEK AHEAD:

• After lower than expected Feb. reading, we forecast March inflation to fall to approx. 2%. Since higher VAT on food should return in April, Mar. inflation will mark a trough in this year’s inflation path. Unemployment rate has likely stabilized at 5.4%, though un upside risk remains to our estimate.

NUMBER OF THE WEEK:

• 9.9% – Real wage growth in the enterprise sector in Feb., highest on record

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