Polish economic outlook continues to be strong; PLN likely to be stronger in medium term

For the first time since April, the EUR/PLN has broken below 4.30. The shock following Brexit vote proved to be temporary. Instead, the focus has been on the country’s domestic developments. The ruling Law & Justice party policies of Poland have cast a shadow over the investment climate. However, proposals revealed in August regarding the Swiss loan conversion imply that the Polish government is taking a pragmatic approach to domestic economic policy, said Lloyds Bank in a research report.

In the meantime, the central bank of Poland appears to be in no hurry to lower interest rates despite negative inflation, leaving the Polish zloty properly supported. This is more in terms of the euro, if the European Central Bank expands its stimulus program. Still the risks to the EUR/PLN projections continue to be on the upside, stated Lloyds Bank. Political risk in Poland continues to be quite lower than over the past few years, while recent economic data have come in mixed.

The Polish economic outlook continues to be bright, said Nordea Bank in a research note. The recently released labor market data indicated that employment in the nation rose 3.2 percent year-on-year in July, while wages rose 4.8 percent. The robust labor market augurs well for the persistent momentum in consumer spending in the quarters ahead.

Robust labor market developments is also expected to gradually assist core inflation bottom out and affirm the NBP’s view that inflation would slowly return to the target rate without the need of additional easing, stated Nordea Bank.

“We stick to our view of a stronger PLN in the medium term (although we might smooth the forecast profile a bit next week)”, added Nordea Bank.