S&P assumes Poland-EU compromise, lowers 2021 GDP growth forecast

The S&P Global Ratings agency assumes that Poland and the EU will reach a compromise over funds in the next EU budget being tied to observance of the rule of law and has also lowered its 2021 GDP growth forecast from 4.5 pct to 3.8 pct, S&P has reported.

A report from the agency dated December 2 says Poland may be one of the main beneficiaries of Europe's rebuilding plan (Next Generation Fund) and the SURE programme with support also available from other EU mechanisms.

Bearing in mind the importance of EU funding to Poland's development model, the agency's base scenario assumes that Warsaw and Brussels (and also Budapest) find a compromise concerning the potential linkage of funding with observance of the rule of law, S&P wrote in the report.

Following a solid rebound in the third quarter of 2020, S&P expects the Polish economy to shrink in the fourth quarter due to COVID-19 restrictions and a rise in risk aversion among households and companies. In S&P's opinion, the epidemiological restrictions on business will be gradually relaxed in the first quarter of 2021 with a muted economic rebound. This has led to the agency lowering Poland's GDP growth forecast for 2021 from 4.5 percent to 3.8 percent following a 3-percent drop in 2020.

A consumption-driven recovery should accelerate in the second quarter of 2021 and in the third quarter S&P expects investment to be an important driver of growth, the agency said.

For 2022, S&P forecast Polish GDP growth at 4.2 percent.

According to the agency's calculations, Poland's CPI inflation in 2021 will reach an annual average of 1.6 percent rising to 2.1 percent in 2022.