Poland’s manufacturing remained on an even keel in January and February. Industrial production surged in headline terms in February; however this was all calendar effect. Output, in adjusted terms grew 0.2% m/m and around 3% y/y, indicating a stable trend in recent months. Therefore, the data is not spectacular for February, but is encouraging against a backdrop of a sharp EM sell-off.
Within the CEE regions, Poland’s economy has the most number of domestic buffers against an external shock. EM turmoil is expected to be seen first in Czech and Hungarian manufacturing before it impacts Poland. However, Poland’s stable economic growth is not an argument against lowering of rates. After the recent revisions in the forecasts by the Fed, the ECB and the NBP itself, it is evident that central banks see that a stable demand growth is not enough to warrant a return to inflation target.
“We forecast the base rate being cut from 1.5% to 1% this year, but in our view, the risk is now even to the downside – of course, we shall have to wait a bit because the MPC has just been overhauled and a new governor is yet to take office”, says Commerzbank.
