Poland Macro Weekly: Fiscal glass: half full or half empty?

Fiscal glass: half full or half empty? (p.2): A prolonged fiscal expansion means that Poland’s debt sustainability position deteriorated compared to EU peers. The deterioration of Poland’s mid-term debt sustainability position is based on potential output estimate, which – in our view – is at least debatable. Nevertheless, we agree with the EC’s assessment, that the tightening of financial conditions (which in Poland is one of the most pronounced in the EU) will require some fiscal tightening next year.

Growth in average wage in the enterprise sector slowed down to 12.6% y/y in March vs 13.6% y/y in Feb., driven mainly by the transport and construction sectors. Meanwhile, employment declined by 9.2 thous. m/m. In seasonal terms, higher scale of employment reduction was only recorded in March 2009 (GFC) and March 2020 (Covid-19).
An aggregated (by PKO) business sentiment indicator based on GUS sentiment survey inched up in April again, amid promising details, incl. an improvement of sentiment index in retail trade (a figure above a multiyear average for the first time since Nov-21, see chart of the week).

M3 money supply for March will shed more light on the impact of US banking sector turmoil on local deposits/loans and cash in circulation – we think it will be muted, the local macro story has been shaping them for some time (consumer recession and rising propensity to save, among others).
The data for March from the linchpin branches (industry, construction and retail trade) will arrive on Monday - the numbers are big this time (see calendar) as they will point to Poland flirting with a recession in 1q23, which is likely to have a lowering impact on 2023 GDP growth bets in the consensus (again).
On the inflation front, while the underlying price trends outside of energy remain hot, strong disinflation of energy prices continued and will be the feature story for March PPI inflation print (Mon.). Moderate food prices will drag down flash CPI figure for April (Fri.). Both inflation measures most likely dived in y/y terms, but still stay at double-digit levels.
Statistics Poland will likely confirm unemployment rate for March (5.4%, as expected).