Poland’s economy posted stronger-than-expected growth in Q1

By bne IntelliNews May 15, 2014

Jan Cienski in Warsaw -


Poland’s economy recorded a stronger-than-expected increase in GDP in the first quarter of this year, growing by an annual 3.3%, according to a flash data release May 15 from the government’s statistical agency.

The growth was significantly faster than the 2.7% increase posted in the final quarter of 2013, as other data suggested accelerating growth in retail sales and industrial production. Poland is also benefiting from a recovery in the Eurozone and particularly in Germany, Poland’s largest export market, where Polish factories churn out components used by Germany’s industries. 

“Although the structure of the growth will be released at the end of the month, we expect to see a growing positive contribution from domestic demand, at the expense of net exports, as both investment and private consumption should already post relatively solid growth,” notes Katarzyna Rzentarzewska of Erste Group Research.

Analysts expect growth to flatten over the coming quarters, with an expansion averaging about 3.1% over 2014.

The strong figures occurred during a time period when the Ukrainian crisis was worsening, suggesting that the economic impact on Poland has still been fairly limited.

The growth numbers are going to put the central bank’s rate-setting Monetary Policy Council in a quandary, as there is very little possibility of a rate increase. A day earlier, inflation for April came in at an annual 0.3%, the lowest rate in 10 months and well below the 0.7% median estimate of economists polled by Bloomberg. 

Inflation that low implies that the central bank will come under growing pressure to cut its record low benchmark rate of 2.5%, particularly with the prospect of deflation looming in Hungary and with signs that the European Central Bank may again loosen monetary policy. 

“The combination of low inflation and increasing economic growth does not demand intervention, according to the Council. However, the risk of deflation is going to be difficult to ignore,” says a report by Poland’s Mbank.

Jan Cienski is a Senior Fellow at DemosEuropa, a Warsaw-based public policy think-tank

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