TOP MACRO THEME(S):
- Another 100bps (p.2): We believe the MPC will deliver another 100bps at its meeting on May 5. Another spike in April, strong current trend in economic activity (GDP growth of ca. 10% y/y in 1q22), no signs of a deterioration in labour market conditions and more expansionary fiscal policy all encourage central bankers to continue rate hikes at accelerated pace.
WHAT ELSE CAUGHT OUR EYE:
- Russia halted gas supplies to Poland. As indicated in our previous weekly, thanks additional supply (mainly LNG), relatively high inventories and high transmission capacity the Polish economy could deal without the Russian gas already in 2022.
- CPI inflation in April surprised to the upside (again) and went up to 12.3% y/y from 11% in March. Soaring food prices were the main driver of the inflation rise. Estimated core inflation increased as well, to 7.5-7.6% y/y from 6.8%. The CPI inflation is likely to keep growing until summer months and to reach ca. 13% y/y.
- State budget recorded PLN 270m deficit after March vs. a PLN 11.3bn surplus after Feb. Revenues were hampered by regulatory changes – in March alone VAT revenues were down by 16.8% y/y on lower rates on food, fuels and fertilizers, while PIT revenues declined by 70.6% y/y on the revised rules regarding the share of local governments in this revenues. Higher war related outlays, as well as the costs of anti-inflationary shields were the main drivers of expenditure growth. For now, we do not see a significant risk to the planned annual gap of PLN 30bn.
- M3 money supply rose 7.9% y/y in March vs. 8% y/y in Feb. The amount of cash in circulation rose for the second month in a row, but compared to the pandemic episode of strong growth (March-April 2020), the rise was PLN 12bn lower. The real M1 growth rate has entered the negative territory in 1q22, which usually signalled a significant downward correction in GDP growth rate. Total loans growth (FX adj) accelerated to 5.8% y/y from 4.9% y/y in February, while deposits growth (FX adj) slowed to 7.2% y/y from 8.9% y/y.
- Registered unemployment went down to 5.4% in March from 5.5% in April, in line with earlier estimates. According to government’s estimates, around 100k of refugees has already taken up jobs in Poland based on the simplified procedures.
THE WEEK AHEAD:
- Poland’s manufacturing PMI has likely regained some strength in April, following similar patterns in German Ifo and GUS business climate indicator.
NUMBER OF THE WEEK:
- 4.2% m/m – monthly rise in food prices in Poland, the strongest since Jan 1995.