Poland Macro Weekly: Poland’s public finances are safe

Public debt-to-GDP ratio still on a downward path: Poland’s public finances are under pressure but remain healthy. With strong nominal economic growth, the public debt to GDP ratio continues to fall, despite widening deficit and some structural challenges.

M3 aggregate rose by 7.9% y/y in June boosted by low base effect. For the first time since March 2022 the PLN-denominated mortgage loan volume increased in monthly terms, by 0.2%. This is most likely a new trend, as data on loan applications shows a strong uptick in demand, driven by the introduction of 2% Safe Mortgage Scheme subsidized by the government.
Unemployment rate in June declined to 5.0% from 5.1% in May. Considering the seasonal pattern, the monthly fall in the number of unemployed persons was rather meagre, which may be related to an anaemic start of the tourist season amid retrenchment in consumer spending. However, we do not see any signs of amplification in layoffs – the number of redundancies due to workplace reasons is close to historic low, similarly to the number of unemployed persons per vacancies.
New industrial orders declined by 5.1% y/y in June (-8.1% y/y in May), with export orders looking slightly better than domestic ones. Data on industrial production and foreign trade results imply that exports remain resilient to the unfavourable external environment.

Flash estimate will show further CPI inflation drop in July (PKOe: 11.1% y/y; consensus: 10.9% y/y vs 11.5% y/y in June).
Manufacturing PMI has likely declined again in July, dragged down by weaker output and new orders, though on a smaller scale than in Germany, as the Polish manufacturing sector has been decoupling from its German counterpart in recent years.