The 2% advance in Polish gross domestic product (GDP) for
the full 2012 was in line with expectations, but the fact that
household spending growth slumped to the slowest rate since the
early 1990s sparked comments that the central bank of Poland
will take a dovish approach to monetary policy.
Data for the fourth quarter will be released on March 1, but
analysts have made their own calculations as to how bad the
Neil Shearing, chief emerging markets at Capital Economics,
points out that the economy started the year by advancing 3.5%
year-on-year in the first quarter and that in the first three
quarters of the year, growth averaged just under 2.5%
Accordingly, in order for GDP to have increased by2%
over 2012 as a whole, growth must have slowed to around 0.8%
year-on-year in the fourth quarter, Shearing said.
On a quarter-on-quarter basis, he believes GDP may have even
Strategists at Societe Generale expect the economy to have
advanced by between 0.7% and 0.8% year-on-year in the last
quarter of 2012 and to have grown by up to 0.2% on a quarterly
They note the negative contribution of total consumption and
investment to growth, which could be supportive for the
continuation of monetary policy easing.
Most analysts expect the Polish central bank to cut the
interest rate by a quarter of a percentage point to 3.75% at
its next Monetary Policy Committee (MPC) meeting in February.
But forecasts of future interest rate cuts diverge.
The much weaker fourth-quarter activity will likely
strengthen a dovish bias at the MPC, in our view, said
Mai Doan, an analyst with Bank of America Merrill Lynch.
We continue to expect a 25 basis points rate cut at
the 6 February meeting and the policy rate to fall to 3% by the
third quarter, with risks still biased on the
The preliminary Polish GDP data mostly point to risks to
private consumption, and thus are supportive for the
doves, Marcin Mrowiec, head of macroeconomic research at
Bank Pekao, said.
But, Mrowiec added, the data stress the risks for the state
budget for this year, as weak investments and consumption mean
weak tax revenue, and value-added tax on exports the
only engine of growth in the fourth quarter is zero.
He said the market seems to have taken this into account, as
gains in T-bonds before the central banks news release
moderated afterwards, as though the budgetary risks
outweighed the increased probability of rate cuts.
Shearing expects interest rates to be cut by a total of 75
basis points to 3.25% by the end of the year.
GROWTH PROSPECTS UNDERESTIMATED?
Polish authorities are more inclined to look at historical
data than at leading indicators and they will probably look at
last years slowdown and argue in favour of more rate
cuts, Charles Robertson, global chief economist at Renaissance
But if we look forwards, we may be surprised on the
upside by Polish growth in 2013, Robertson added.
He considers Germanys business climate index IFO
which pointed to improved sentiment in January - a
helpful guide on the future and predicts that
exports from Central and Eastern European countries will
be picking up well in early 2013 after weak data towards
the end of last year.
In addition, Poland has shifted from its pro-austerity
German stance of 2011 to a more pro-expansion attitude,
He forecasts growth of 2% or even 2.5% for Poland for this
year, compared to market consensus estimates of around 1.6%.
However, the Polish central bank will not agree
with this bullish forecast and it will keep cutting, he
We see no reason to disagree with 75 basis points rate
cuts in coming months and a 25 basis points hike by
year-end, Robertson predicted.
Societe Generales strategist Benoit Anne also believes
that expectations about Polish interest rate cuts are
In Poland we believe the local curve has overshot the
magnitude of rate cuts in the pipeline in a significant
way, he said.
There are still 88 basis points of cuts priced in one the
curve, against the 50 basis points of cuts expected under out