Poland: Time to polish up forecasts

• Better than expected data from major PolandUpdate_March2012economies, approval of the second aid package for Greece and ECB’s LTRO decreased risks regarding further developments in the Euro area and improved sentiment in the global markets. This improved our assessment of the external environment of the Polish economy for this year. However, there are still important external risk factors such as uncertainty regarding implementation of the aid package for Greece, heavy election calendar in developed and emerging economies, and growing geopolitical tensions (strong rise in crude oil prices).
• Given some improvement in external environment of the Polish economy and better than expected local macro data (proving strong resilience of the domestic economy to negative events abroad), we have revised upwards our GDP growth forecast for Poland for this year.
• With improved outlook for economic growth, there is growing probability of further, significant progress in fiscal consolidation started in 2011 and we expect that the general government deficit will reach not much above 3% of GDP this year from ca. 5.5% of GDP last year.
• Decreased risks for the Euro area, strong resilience of the Polish economy to external shocks and better chances for further progress in fiscal consolidation led to improvement in our forecasts for the PLN.
• Although faster economic growth and higher oil prices negatively affect the inflation outlook, the impact of these factors will be offset by faster pace and larger scale of the PLN appreciation.
• In response to improved GDP growth prospects and still elevated level of current inflation measures, the Polish MPC remains in hawkish mood and central bankers explicitly talk of possible rate hikes. However, we still think that economic slowdown, PLN gains and expected inflation drop will lead to change in rhetoric of the MPC to neutral within a few months while in the final quarter of the year (somewhat later than we have expected so far) the central bank will reduce interest rates.

Latest research

Minor changes to longer-term GBP forecast

Published date: 19 Jun 2013 | Analyst: Anders Svendsen

We have made minor adjustments to our longer-term financial forecasts for the UK. Below we summarise our scenario and the key reasoning behind the numbers.

Global FX Strategy – A new paradigm?

Published date: 18 Jun 2013 | Analysts: Jonas Thulin, Aurelija Augulyte, Nils Rosendahl, Fredrik Paulsson

EURUSD has of late also been supported by higher peripheral bond yields, which attracts investors to EUR assets, hence supporting long EURUSD, – but is this correlation sustainable? History strongly suggests NO. This begs the question what will drive a change and how big will…

Inflated expectations deflating

Published date: 18 Jun 2013 | Analyst: Jan von Gerich

Inflation is quickly becoming a topic again – not because of concerns the huge stimulus measures pursued by central banks would be creating inflation, but because the falling inflation rates are raising questions of whether central banks are doing enough. Bonds should thrive in an environment of falling inflation.