Economy to recover in 2021, more visible rebound to follow in 2022
Following last year’s slump in economic activity, which resulted in GDP contracting by 2.7%, we expect the Polish economy to rebound this year. However, we remain cautious and see FY21 GDP growth at 3.4%, followed by a more visible rebound of 4.7% in 2022. The pandemic development and vaccine rollout remain the key risk factors to our growth forecast.
The still solid situation on the labor market will support the recovery of private consumption. On the other hand, increased uncertainty will weigh on investment activity this year, especially in the private sector. EU funds available within the Recovery and Resilience Facility should mainly support investment activity in 2022-23, while only 13% of the country’s allocation could be pre-financed this year.
Inflation will remain elevated throughout the year, as increases of administered prices and newly introduced taxes shifted the inflation path up at the start of the year. We see CPI on average at 3.0% this year. Furthermore, the base effect from last year’s collapse of oil prices will likely push up the headline figure.
We expect the central bank to tolerate increased inflation as it is driven by factors outside the impact of monetary policy (administered and oil prices) and to remain on hold until the end of 2022. The NBP will continue its asset purchases program, while further FX interventions aimed at weakening the zloty cannot be ruled out.