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Polish economic growth likely to remain sluggish in 2017, inflation to accelerate in coming months

Polish economic growth likely to remain sluggish in 2017, inflation to accelerate in coming months

WARSAW: The Polish economy experienced a downward trend in 2016 and is expected to continue to see a downturn through 2017, with the economic growth averaging just slightly faster in 2017 than in 2016, while remaining below 3 percent, noted Commerzbank in a research report. The downturn in Polish economy has been driven by a softer-than-anticipated household consumption and a decline in private investment. Household consumption failed to increase after the introduction of the Family 500+ subsidy, in contradiction with what policymakers had anticipated. According to policymakers, the pause in the EU funds is mainly the cause behind the slowdown; however, the most significant factor is believed to be that the upswing in interest rate sensitive sectors, such as durable goods and auto beginning 2013, and the helpful effect of declining energy prices have run their course, stated Commerzbank.

Net exports are no longer contributing positively to the economic growth. Only a slight rebound in momentum is expected in quarters ahead, driven by slightly greater EU fund inflow. After the subdued GDP data for the third quarter of 2016, consensus forecasts have dropped steadily. The latest data underpins the projection of 2.7 percent growth for 2017, added Commerzbank. There is upside risk to the projections only in a situation where the European Central Bank manages to turn around the euro area manufacturing cycle significantly in the quarters ahead. Meanwhile, inflation is likely to rise in months ahead due to the effect of energy prices. Poland is expected to experience mild positive inflation in 2017 and more positive inflation in 2018.