Polish economic performance to remain solid, foreign trade expected to deteriorate in coming quarters

Polish economy’s all significant macro fundamentals appear quite strong. This positive impression have been affirmed by the macro statistics released this week, which included the industrial production data, labor market data and retail sales data. In spite of an expected negative base effect the deceleration in the annual growth of employment, real wages and industrial production have been quite modest that signifies that all mentioned Polish economy’s parts have been performing well in the third quarter, noted KBC Market Research in a report.

The construction sector and the retail sales are the two segments of the economy that have been performing especially well. The construction activity rose by one-fifth of year-on-year basis in August, underpinned by solid infrastructure activity. Meanwhile, the retail sales growth reached nearly 7 percent year-on-year in real terms last month. This indicates to a very solid growth of the Polish domestic demand, which should guarantee another impressive GDP readings.

The strong domestic demand underpinned by low interest-rate environment and steady zloty have had some expected negative impact on the trade balance performance. The 12-month moving average of the Polish trade balance have deteriorated from the EUR 171 million surplus recorded at the end last year to the EUR 113 million deficit. While a part of the story has been the increasing oil price, the deterioration have also been driven by solid growth of non-oil imports.

“We expect that a worsening of the polish foreign trade will continue in quarters to come, but the implied (current account) deficit should remain on a very reasonable level (up to 1% of GDP this year)”, added KBC Market Research.