Polish economic growth likely to decelerate, private consumption to mainly drive growth in H2 2018

The leading indicators such as market sentiment implies that the Polish economy might decelerate, rather than accelerate further. Private consumption is expected to mainly drive the economic growth in the second half of 2018. Nevertheless, it will most likely not break the 5 percent growth dynamics, noted Erste Group Research in a report. This is because of the flattening of wage growth and employment figures and a slower fall in the jobless rate.

Furthermore, the introduction of the new retirement savings plan next year might furthermore restrict the growth dynamics of consumption in the second half of this year and beyond, stated Erste Group Research. A 2 percent net salary contribution is assumed by the PPK. Given that the savings rate continues to be low, it limits the possible substitution with other voluntary savings, and might restrict the household spending growth in the coming years.

In spite of the inflows of EU funds, investment growth in the first half of 2018 was comparatively disappointing and reached 6 percent on average. Furthermore, the growth has been solely, driven by public investment; while private investment continues to be sluggish, dragging the overall growth figure lower compared to what might have been anticipated, given the momentum.

“In consequence, the share of investments to GDP in nominal terms dropped in Poland to around 17 percent (as of 2017) compared to 21 percent for the CEE region. Despite underlying weakness, however, in the coming quarters, the industrial production and construction output data suggests positive growth of investment”, added Erste Group Research.