Polish economy likely to expand 4.6 pct in 2017, NBP likely to hike key rate in early Q3 2018 – Danske Bank

Poland’s economic growth continues to be strong. The child benefit cheque, higher real wage growth and record low jobless rate are boosting private consumption in the nation. Moreover, rising absorption of EU funds is adding to investment activity, which rose 20 percent year-on-year in October. Given the solid performance, the Polish economy is expected to expand 4.6 percent in 2017 and 3.8 percent in 2018, noted Danske Bank in a research report.

On the political front, the conflict with the EU has disappeared for now amidst delays in forming a new German government and Brexit negotiations. The reshuffling of the Polish government in December is not expected to significantly change the direction of economic policies until the next election, but it might enhance relations with the EU, stated Danske Bank.

Meanwhile, the National Bank of Poland is in no hurry to hike interest rates despite the headline inflation acceleration. But the meeting’s minutes showed that many MPC members are starting to feel uneasy regarding the monetary policy stance. But the core rates have stayed fairly constant in recent months. The headline rate is expected to drop slightly in months ahead before rebounding in April given the rise in domestic inflation pressures.

“The financial market is pricing in a 25bp hike over the next year, which we think is too dovish, as we expect a rate hike in early Q3 2018”, added Danske Bank.

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