Polish economy likely to have grown 4.7 pct in Q1 2019, NBP likely to stand pat

Polish first quarter economic growth data is set to release tomorrow. According to an Erste Group Research report, the real economy did not show any signs of decelerating in the March quarter in spite of the rather soft market sentiment. The average growth of industrial output accelerated to 6.2 percent and retail sales also stayed strong. Euro area economic growth also surprised to the upside, leaving room for optimism.

“We see 1Q19 GDP growth at 4.7 percent y/y”, said Erste Group Research.

Meanwhile, the National Bank of Poland’s MPC is set to meet tomorrow for the interest rate decision. The central bank is expected to keep the interest rate on hold at 1.5 percent. Given that the inflation acceleration to 2.2 percent on a year-on-year basis in April and the GDP growth is expected to stay strong, this might generate speculation that the interest rate might increase.

Indeed, the likelihood that inflation might reach 3 percent by the end of 2019 has visibly risen. Even then, however, average inflation is expected to remain close to the target.

“We thus expect the MPC to stick to an interest rate stability scenario. However, confidence that the policy rate should remain flat beyond 2019 may drop if inflationary pressure continues to increase”, added Erste Group Research.