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2020/02/03 / Erste Group Research

Poland Weekly Focus | Central bank to remain dovish

MPC to keep rates unchanged. Slowing economic growth supports stability of rates scenario. We revised this year’s growth forecast to around 3.0%. Markets to focus on global news regarding coronavirus.

February 5 | Central bank to keep rates unchanged. We expect the Polish MPC to keep rates unchanged this week. We continue to think that the central bank will reiterate that the recent jump in headline inflation (we see CPI increasing to 4.0% y/y in January) is being driven by non-core items that are out of the scope of monetary policy. Furthermore, inflation is expected to reverse its upward trend in the second half of the year.

Forecast revision | FY20 growth forecast down to 3.0%. The Polish economy grew by 4.0% in 2019, slowing down more considerably than expected. We see GDP growth cooling further to around 3.0% in 2020. Despite increases in social transfers in 2H19 and the still favorable situation on the labor market, private consumption disappointed. Although the dynamics of household consumption should ease somewhat this year, it should remain the pillar of growth. Investment activity is set to cool down as well this year due to multiple factors.

Bond market drivers | Long end followed core market. Overall, global risk-off mood due to coronavirus news dragged the 10Y German Bund down by 10bp to below -0.4%, which is the lowest level since mid-October 2019. The long end of the Polish curve followed core markets and went down as well, to below 2.15%, meeting our quarter-end forecast. The downward trend observed on the long end of the local curve could also reflect decreasing market expectations for rate hikes (FRA 9x12 went down) as the performance of the economy might be weaker this year than previously expected.

FX market drivers | EURPLN above 4.30 due to risk-off mode. During the week, global markets were nervous due to fears regarding the outbreak and spread of the Chinese coronavirus. The zloty and other regional currencies remain under pressure. The EURPLN lost more than 1.0% and went above the 4.30 margin.

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General information

AuthorErste Group Research
Product nameCEE Country Update
Topic in focusMacro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-


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