Poland's GDP growth to reach 4.3 percent in 2019 - central bank

Poland's GDP growth is expected to reach 4.3 percent in 2019, 3.6 percent in 2020 and 3.3 percent in 2021, according to the November projection by the National Bank of Poland published on Tuesday.

In tune with the released figures, inflation is to remain at 2.3 percent in 2019 and grow to 2.8 percent in 2020, and fall to 2.6 percent in 2021.

In the Monetary Policy Council's assessment, the outlook for economic conditions in Poland remains favourable, and GDP growth, despite the expected decline, will continue at a relatively high level in the coming quarters. At the same time, there remains uncertainty about the scale and persistence of the slowdown abroad and its impact on domestic economic activity.

Authors of the report note that so far, domestic economic activity has shown strong resilience to negative impulses from abroad, yet GDP growth in the 3rd quarter of 2019 has most probably declined and is running slightly below the level assumed in the July forecasting round.

In the horizon of the current projection, GDP dynamics is expected to continue on a gradual downward trend, which will be driven by an ongoing downturn in countries being Poland’s main trading partners. Slower growth in the absorption of EU funds in the last phase of the EU financial framework 2014-2020 will act in the same direction. The scale of the slowdown in domestic demand will be mitigated by the fiscal changes already introduced by the government and those planned ahead, reads the bank's report on inflation.

Authors of the report add that these changes include an increase in social benefits and a decrease in the tax burden, thus boosting private consumption. Domestic demand will also be stimulated by low interest rates and the resulting low cost of credit.

In the coming months CPI inflation will, according to the projection, increase reaching a peak in the first quarter of 2020. The consumer price inflation, especially core inflation, will be driven up by the elevated dynamics of labour costs in the projection horizon and in the quarters to come still relatively strong demand pressure as well as high growth of food prices. The beginning of 2020 is expected to bring an increase in energy price inflation in line with the projection’s assumption that the period of freezing of electricity prices for households will end.

In the longer-term projection horizon consumer price inflation will decline, running close to 2.5 percent until the end of 2021.

Whether the projection scenario will materialise largely depends on future activity in the global economy, authors of the report conclude.

The November projection takes into account data and information published up to 18 October 2019.