Poland's Q3 GDP growth slows to 2.7 from 3.2 per cent y/y. Forecasts called for a reading of 3 per cent y/y. The economy contracted by 0.2 per cent q/q. The CSO's preliminary reading does not include information on the structure of growth. These will not be published until the end of the month. Nevertheless, the worsening situation of the hitherto strong Polish consumer and the weakening situation of Polish exports may be behind the downturn.
Table of contents:
- Problems faced by the Polish consumer
- Earnings in Poland continue to rise rapidly
- Problems with export
- Forecasts for USD/PLN and EUR/PLN
- Forecasts for the WIG
Source: Tradingeconomics
Problems faced by the Polish consumer
We could see the first signs of the breathlessness of the Polish consumer indirectly through the decline in shopping centre activity. In the third quarter of 2024, the number of customers in galleries fell by 12.4 per cent compared to last year. This translated into a 3 per cent year-on-year decline in retail sales in September, although an increase of 2.1 per cent was previously forecast. Despite this, we are still at the forefront of European GDP growth.
Source: Tradingeconomics
Earnings in Poland continue to rise rapidly
We are still able to maintain growth to a large extent through consumption supported by loose fiscal policy, but above all the good health of the labour market, which, after the fall in inflation, resulted in a temporary increase in real wage growth to double-digit figures. The extreme favourable situation for household budgets could not last for long, but in the coming quarters, unlike most of 2023, wages would grow at a rate of around 10 per cent, which is definitely faster than prices - the last CPI inflation reading was 5 per cent - and this is a result of the fact that the economy would continue to grow.
Source: Tradingeconomics
Problems with export
For the whole of 2024, in an unfavourable external environment, the Polish economy may grow by around 3 per cent year-on-year. Under current conditions, this would be a good result, but the most optimistic forecasts of a few months ago will clearly not materialise. In the next year, the situation of Polish GDP will largely depend on the economic situation in Western Europe. Its improvement could change the situation of the balance of payments, which started to be strongly negative in the third quarter of this year.
Source: Tradingeconomics
Forecasts for USD/PLN and EUR/PLN
The MPC's stance underpins the zloty's attractiveness and contrasts sharply with the global wave of monetary easing, which was also joined in September by the US Federal Reserve, which has already cut interest rates twice.
The zloty remains stable against the euro, with the EUR/PLN exchange rate oscillating around 4.35.
Source: Conotoxia MT5, EURPLN, Daily
Following the publication of disappointing Polish GDP data, the dollar continues to strengthen, reaching its highest levels in 2024, with USD/PLN breaking through key resistance at PLN 4.12, which could trigger a further rally in the weakening of the domestic currency.
Source: Conotoxia MT5, USDPLN, Daily
It is worth remembering that the USD/PLN exchange rate is largely dependent on the EUR/USD relationship, with a high correlation of the two pairs at as high as 0.81!
The latest US CPI inflation data, which rose to 2.6 per cent in October from 2.4 per cent, supported the US dollar, pushing EUR/USD below 1.06, its lowest value since the spring. This also reached a key support level at 1.05. Investors anticipate that Donald Trump's victory could contribute to economic growth and higher inflation in the US as a result of the tariff policy, supporting the short-term strengthening of the dollar.
Nevertheless, Invest.Cinkciarz analysts view these market expectations as overstated and forecast that the dollar will weaken in 2025, which would allow the zloty to recover some of its losses and the USD/PLN exchange rate could fall towards 4.0.The EUR/USD exchange rate is likely to return to the
Forecasts for the WIG
The broad WIG index has been on a downward trend for the past six months, losing 11 per cent from its peaks, after earlier spectacular gains in 2023, when it gained as much as 40 per cent. Recall that the stock market often anticipates future economic events, which is why falls on indices often precede crises. However, the current decline can hardly be seen as a harbinger of economic collapse. Rather, investors seem to be pricing in a slower pace of economic growth, as confirmed by the latest GDP reading.
Source: Tradingview
The thawing of food and energy prices has brought inflation back to Poland, which is already being felt by consumers, who are cutting back on spending and visiting shopping centres less frequently. As a result, sectors dependent on individual consumption, such as the automotive, media and retail sectors, may be facing challenges.
However, Invest.Cinkciarz analysts emphasise that Poland is still among the top European countries in terms of growth rates and, with valuations at extremely low levels, they remain optimistic about the future of the price of Polish equities; the WIG index may even break through its historical highs in the first half of next year.
Grzegorz Dróżdż, CIIA, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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