Poland Macro Weekly: Slowdown just ahead

Slowdown just ahead: Monthly data for 2q22 confirm that the slowdown in economic growth is just ahead. The y/y GDP dynamics were still strong, but the carry-over effect masks the likely GDP decline in q/q terms.

In 1q22, the public debt-to-GDP ratio fell to 52.1% from 53.8% in 2021. At the beginning of 2022, the fiscal result was supported by solid nominal GDP growth and a growing tax base, which easily financed the y/y growth of expenditures. On Eurostat data, the debt-to-GDP ratio in Poland is lower than the EU average, and the decline in this ratio over the past year was deeper than the EU average.
Core inflation (less food and energy) rose in June to 9.1% y/y from 8.5% y/y in May. On the other hand, the 0.6% m/m monthly increase was the smallest in 2022 (0.8% m/m SA). It is of course only one observation, but in our view, it can be the beginning of core inflation deceleration resulting from the economic slowdown and some easing of supply-chain pressures.
R.Gawin (Energy Regulatory Office) said that the increase in energy tariffs for 2023 could be unprecedented and household bills could increase several dozen percent. In his view, the protective measures for households are justified, however, the state should not interfere in the wholesale market.
M3 money supply decelerated to 6.5% y/y in June from 7.6% y/y in May as cash in circulation and corporate deposits declined in m/m terms, pointing to the upcoming economic slowdown.
The consumer sentiment in July unexpectedly improved slightly, but still remains close to historical lows. Polish corporate sentiment trends worsened in July in almost all sectors surveyed by the Statistics Office.

July CPI inflation (flash) could show some signs of cooling and even fall for the first time since Jun 2021 (except Feb 2022 due to tax rate cuts effect). Unemployment rate in June will most likely be confirmed at 4.9%.