TOP MACRO THEME(S):
- It’s just a temporary power outage: 2023 will surely be another interesting year. We have prepared a year-ahead presentation covering top economic themes for this year. Please see it here: Poland Macro Outlook 2023
WHAT ELSE CAUGHT OUR EYE:
- MPC kept interest rates on hold in January, for the fourth straight month (reference rate: 6.75%). NBP governor stated that no further rate hikes reflected the economic downturn and signs of a weakening in cost pressures. At the same time, he reiterated that the rate hikes cycle has not been ended yet. In our opinion, the current pause will turn into the end of the monetary tightening cycle, and then, in late 2023, into interest rate cuts.
- CPI inflation declined sharply in December, to 16.6% y/y from 17.5% y/y, the lowest since August. In m/m terms prices rose by 0.1%, the least since June 2021 (excl. Feb.22 due to VAT cuts). Energy, with prices down by 3.4% m/m, mainly thanks to lower heating coal prices, was the main contributor to the decline in CPI inflation (y/y). Food prices rose by 1.4% m/m - stronger than implied by the seasonal pattern, but weaker than before. Core inflation keeps growing but its momentum is slowing down. We expect that CPI inflation will rise to 19-20% y/y in January and February and then enter a downward trend, which will bring it below 10% y/y at the end of 2023.
- Poland's lower house of parliament passed an amendment to the judiciary system law introducing changes that would allow for unblocking EU recovery fund payouts for Poland.
- Current account deficit after November fell to 3.5% from 3.7% of GDP, as exports growth surpassed imports growth for the first time since May 2021.
- Manufacturing PMI in December increased for the second month in a row, to 45.6pts from 43.4pts in November, significantly above forecasts.
THE WEEK AHEAD:
- Consumer sector data this week should confirm that the confidence is low, but has stopped deteriorating. December labour market data has been affected by flu outbreak (lower employment in FTE terms due to sick leaves), while wage growth at the end of the year reflects bonus payment shifts in mining.
NUMBER OF THE WEEK:
- 2.3% of GDP – general government deficit after 3q22 (4q rolling), which means an upward risk to our whole-year estimate (1.7% of GDP).