Poland Macro Weekly: Spring is coming after all

Better projection, but no pivot: As expected, the MPC left NBP interest rates unchanged. However, despite a downward revision of inflation projection, it has not started to herald rate cuts.

Budget deficit in 2022 was PLN 12.4bn, way lower than planned PLN 29.9bn. Revenues were supported by high inflation, solid company profits and strong wage bill growth, which increased VAT, CIT and PIT revenues by 6.8% y/y, 33.9% y/y and 7.5% y/y, respectively. In January 2023 central budget had a surplus of PLN 11.2bn, around half smaller than a year earlier. This is broadly in line with our prediction that overall fiscal gap in Poland in relation to GDP will widen from around 3.0% GDP in 2022 to 6.0% GDP this year due to costs related to the mitigation of energy crisis, higher defence spending and a reduction of effective tax rates as part of the Polish Deal.
Registered unemployment rate in February stabilized at 5.5%, 0.4pp lower than a year ago.
Official reserve assets in February increased by EUR 3.8bn to EUR 158.2bn, and were close to 25% GDP, mainly as a result of an increase in value of highly credible government and corporate securities.

The key local event this week will be CPI inflation for February and revised data for January based on updated weights in the consumption basket. February will mark the peak of CPI inflation in this cycle. Preliminary data for January showed a surprisingly low m/m growth in electricity, gas and other fuels – it will be interesting to see whether it is confirmed or revised. Core inflation measures for January and February will be revealed on day after CPI figures. Here the question is whether an upward trend is broken eventually.
Balance of payments data for January should show an improvement of the current account balance supported by normalisation of the terms of trade and resilient export performance.

14.6% – the scale of decline of vacant places in the economy in 4q22 compared to a year earlier.