TOP MACRO THEME(S):
- CPI keeps falling down: CPI inflation dropped to 14.7% y/y in April, driven by high base effect and normalization of food and energy prices. Core inflation also declined, although its momentum remains strong.
- GDP growth rate below zero: Output and retail sales figures for March confirmed our long-held view that GDP growth rate in 1q23 dived below zero (our estimate: -0.6% y/y) amid a sharp drop of private consumption, moderate expansion of investments and robust exports.
WHAT ELSE CAUGHT OUR EYE:
- State budget deficit hit PLN 12bn after March with revenues lagging behind. PIT rate reduction implemented in 2022 resulted in a sharp contraction of PIT revenues. On the other hand, a partial removal of anti-inflationary shield resulted in a boost of VAT revenues. On the expenditure side, interest payments as well as military spending started to weigh on budget results. All in all, the revenues shortfall will weigh on the overall fiscal result in 2023.
- Monetary and banking statistics for March confirmed our view that the impact of the recent US banking turmoil on the domestic banking sector was muted. Banking statistics reflect local macro story: the deleveraging of consumers continued in March amid a strong increase in households’ deposits and falling consumer and mortgage loans.
- Unemployment rate in March inched down to 5.4%, as expected, while declining number of job offers (by 31.3% y/y) proves that the labour market is cooling down.
THE WEEK AHEAD:
- Manufacturing PMI likely inched down in April as suggested by Eurozone and German flash figures as well as domestic business surveys.
NUMBER OF THE WEEK:
- 4.7% of GDP – fiscal deficit (in ESA terms) forecasted by the MinFin for 2023, as per the fresh Convergence Program provided to the European Commission. Given a cyclical slowdown, we think the forecast might be too optimistic (see chart of the week) and the fiscal deficit in 2023 will exceed a 5%-of-GDP mark.