Composition disappoints as Poland’s 1Q GDP growth is confirmed at 4%

Composition disappoints as Poland’s 1Q GDP growth is confirmed at 4%
By bne IntelliNews May 31, 2017

The Polish economy accelerated growth to 4% y/y in the first quarter, statistics office GUS confirmed on May 16.

The result confirms the flash estimate published earlier in May. However, the composition of the expansion disappointed, as the data showed that private consumption remains largely alone in driving growth.

The performance of the economy sat on the back of a 4.1% y/y expansion in domestic demand. However, that included 4.7% y/y growth in private consumption. Investment, which due to the recent recovery in the construction sector was widely predicted to have rebounded from the deep lull into which it fell in 2016, surprised to the downside.

Gross fixed investment dropped a further 0.4% y/y in the first quarter - from an already low base in 2016, despite a 4.6% y/y pick up in the construction sector. Retail benefitted from the rise in consumption. Industry enjoyed a lift from the strong activity in the Eurozone, but domestic demand suffered from continued sluggish investment.

GDP expanded a seasonally adjusted 1% q/q, GUS also noted. With the growth surge confirmed as the fastest rate since the first quarter of 2015, the outlook for the year remains positive, suggest optimists.

“In coming quarters, the economy should sustain a robust growth and expand 3.8% in 2017,” Erste noted. Bank Millennium was less exact, but still bullish, pitching growth at “near 4%”.

On the other hand, BZ WBK considers the growth structure in the first quarter a disappointment, especially because of a drop in investment. The bank also noted that a rise in inventories helped raise industry's contribution.
The growth reading is not expected to give Polish Monetary Policy Council (MPC) much food for thought, given that inflation decelerated to 1.9% y/y in May, according to a flash estimate released the same day.