Weekly Focus Poland
New year had sound beginning, as industry and retail grew above 8% y/y in January, while unemployment went up seasonally to 6.9%. This week, 4Q17 GDP breakdown will be published, likely revealing strength of investment rebound. Domestic data should be neutral for markets and global events (data releases in US) are likely to drive development on FX and bond market.
February 28: GDP structure should show strength of recovery of investment activity in 4Q17 The economic growth in 4Q17 at 5.1% was the strongest in a couple of years. Domestic demand was the pillar of the growth. While robust private consumption growth is not a surprise, investment recovered visibly and the growth dynamics should be double-digit. This year, we expect a further increase in investment activity (the 35% y/y growth of construction output indicates a further recovery of investment), while the tight labor market supports a high level of household spending. All in all, FY18 growth should remain robust at close to 4%.
10Y yields went down slightly to 3.44% The long end of the curve moved further down last week, while the spread vs. Bunds held stable slightly below 280bp. This week, we expect domestic macroeconomic data to remain neutral for the bond market. The Ministry of Finance is expected to publish the bond supply plan for March and may further limit the supply, which could keep the pressure on longterm yields limited. On the other hand, US data releases that would support a hawkish approach of the Fed may push the yield curve up slightly.
Zloty has weakened The zloty has weakened over the last week and the EURPLN ended the week at 4.17. The move on the EURUSD pair was most likely the main driver behind the zloty depreciation. This week, global events are likely to remain a key driver of the zloty. As the domestic macroeconomic outlook has been stable, the US data releases, if supportive of the hawkish tone of the Fed, are likely to remain zloty-negative.