TOP MACRO THEME(S):
- Back to current account surplus soon: In our new scenario we see a solid CAB surplus in relation to GDP at 0.8% in 2023. Next year we expect a further improvement.
WHAT ELSE CAUGHT OUR EYE:
- The MPC kept interest rates unchanged for the ninth time in a row (reference rate: 6.75%). NBP governor said that if CPI inflation declines to the single digits and it is certain that it will fall in the coming quarters, then there will be a possibility of a rate cut. He believes a single-digit inflation is possible already in September (we also think it is very likely). This supports our view that the first rate cut will take place in 4q23 (most likely in November, along with publication of another NBP projection).
- The EU Court of Justice stated that the EU law does not preclude consumers from seeking compensation from the bank, which would go beyond the reimbursement of monthly instalments paid, in the event of the annulment of a mortgage loan agreement. By contrast, the law precludes the bank from relying on similar claims against consumers. Poland’s financial regulator said the ruling was negative for the banking sector and the economy, although it considers banks to be well-capitalized and able to absorb additional costs. The NBP outlined that legal settlements are the most attractive and rational alternative to a costly and lengthy legal path.
- CPI inflation in May was confirmed at 13.0% y/y vs 14.7% y/y in April. Core inflation (excl. food and energy) declined to 11.5% from 12.2% a month before.
- The government approved the amendment to 2023 budget that pushed the deficit up by PLN 24bn to PLN 92bn (2.7% of GDP). Apart from signalling the fiscal stance deterioration, this may be part of the fiscal consolidation (lower extra-budgetary funds). Our forecast of general government deficit to GDP ratio at 5.4% in 2023 vs. 3.7% in 2022 remains intact.
THE WEEK AHEAD:
- Monthly data for May (see calendar for more details) will likely confirm that the activity kept falling amid weak, but not worsening, domestic demand. The labour market remained solid, as the return of real wage growth is under way.
NUMBER OF THE WEEK:
- PLN 40 bn/PLN 50bn – the scale of additional provisions made by banks for the legal risk of FX housing loans estimated by the NBP, depending on a predominance of settlements/court proceedings.