Polish GDP growth maintained its heady pace thus far in 2017 as it pushed to a seasonally-adjusted 4.4% y/y in the second quarter, a flash estimate released by the Central Statistical Office GUS on August 16 showed.
The result shows that the surprisingly rapid rate of growth recorded in the first three months of the year, when GDP gained 4%, persists. That is in line with similarly strong results across the Visegrad region as the region benefits from strong private demand, recovering investment, and robust activity in the Eurozone, the source of the majority of export demand.
Unadjusted, the economy expanded 1.1% q/q and 3.9% in annual terms. After the strength of the economic expansion in Q1, forecasts had been updated, but the April-June result still outstripped consensus.
The flash release did not include a breakdown of contributing elements to the growth, but it seems likely that private consumption remains the leading driver, as the tight labour market and fiscal transfers continue to encourage household spending. The pace of growth also suggests that investment continues to recover from a deep lull in 2016.
The strength of private consumption and investment in Q2 is likely to have seen the contribution of net exports to GDP growth slip due to a rise in imports. At the same time, industrial output data and PMI readings in June suggest external demand - particularly for the auto segment - may have declined.
While surprising to the upside for a second straight quarter, the Q2 GDP growth is in line with the projection of the National Bank of Poland, and is therefore unlikely to affect monetary policy, which guides for the benchmark interest rate to remain at 1.5% until at least the second half of 2018.
However, Capital Economics warns the growth spurt is likely to be short-lived. “We think that this golden period of strong economic growth in Central and South Eastern Europe will soon come to an end,” they write. “Growth is likely to peak in Q3. Beyond that, we think that the region’s economies will start to slow towards the end of this year and throughout 2018/19 as higher inflation and interest rates – coupled with tighter fiscal policy – start to weigh on domestic demand.”