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2022/12/13 / Erste Group Research

Loosing steam

The Polish economy is expected to stagnate throughout 2023, due to the weakening domestic demand, as the high inflation and interest rate environment takes its toll. Consumers have never been more pessimistic about their financial situation or, in general, economic conditions, and they are curbing their level of spending, as real wage growth has been dented. The boost to investment activity from Recovery Funds has been delayed. On top of that, the base effect will be particularly unfavorable after the upward revision of historical growth dynamics. All in all, we see GDP growth at 0.4% and only in 2024 we expect the economy to recover.

Inflation has been soaring and it will remain double-digit well into 2023. According to the latest central bank projection, it should return to the target only in mid-2025. The downward trajectory should begin in the second half of the year, however. The underlying demand pressure is likely to remain elevated, holding off monetary easing next year. Once the inflation begins to decline, expectations for the monetary conditions to ease will be building up more evidently with interest rate cut(s) likely in 2024 only. The Polish zloty and long-term yields are likely to be driven by global risk-on and risk-off modes and the monetary policy of major central banks. In the second half of the year as expectations for moneatry easing builds up more evidently, further decline of interest rates is likely.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-


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