Polish GDP expands 5.2% y/y in Q3 but investment growth disappoints again

Polish GDP expands 5.2% y/y in Q3 but investment growth disappoints again
By bne IntelliNews December 1, 2017

Polish economic growth accelerated to a seasonally adjusted 5.2% y/y in the third quarter, statistics office GUS said on November 30, revising the figure from the 5% adjusted annual growth reported in flash estimate earlier in the month. Growth relied on household consumption yet again in the third quarter, while investment disappointed. 

Unadjusted annual growth came in at a solid 4.9% y/y, a positive revision of 0.2pp. The economy grew 1.2% q/q in seasonally adjusted terms, which is an upward revision of 0.1pp against the flash estimate. 

The performance of the economy sat on the back of a 3.9% y/y expansion in domestic demand (unadjusted data), compared to the annual growth of 5.5% in the previous quarter. That included a 4.8% y/y growth in private consumption, which is 0.1pp below the annual reading in April-June. 

The expectations for a decisive rebound in gross fixed investment were not quite met, however. Investment grew what analysts said was a disappointing 3.3% y/y, even if the figure marked an acceleration on the 0.8% y/y investment growth in the second quarter.

“Infrastructural investments were the main factor responsible for investment growth, as indicated by data on construction and assembly output,” Bank Millennium noted. 

However, the bank’s analysts point out that the data suggests private investment is lagging, despite business sentiment running high, good utilization of production capacity, and good financial results of companies.

Apart from the construction sector going strong in the third quarter, retail, industry, and transport also showed positive performance. Exports also contributed positively, unlike in the previous quarter.

Despite limping investment, with consumption going strong, the outlook for the remainder of 2017 remains positive.

“In the coming quarters, economic growth will slow down somewhat, although it will still remain above the potential growth rate,” Bank Millennium noted.

“Private consumption will remain the main driver of growth, however, due to fundamentals and inflation, it will slow down slightly. Investments will gradually accelerate, mainly due to increased public investment, co-financed by the EU, but private sector investments will recover at a slower rate due to persisting uncertainty, including tax law,” the bank added.

“The current macroeconomic conditions, particularly the difficulty in access to workers, should provide an impulse for investment in fixed assets and automation of production, but companies refrain from implementing such projects at the moment,” Bank Millennium also said.

“We expect economy to expand 4.4% this year and 3.7% next year. We believe that domestic demand will remain the pillar of the growth [while] the development of external environment is positive for Polish economy as well,” Erste wrote.

“The weak spot in the GDP structure is low investment activity,” the Austrian bank added.