Top macro theme(s):
- The economic whirlwinds of war: Given the negative impact of the war on the economy, we have decided to take a conservative approach and revised our Poland's GDP growth forecast for 2022 down, to 3.3%.
What else caught our eye:
- CPI inflation jumped to 10.9% y/y in March from 8.5% in February and was the highest since 1998. During the month, prices increased by 3.2%, the most since 1996. Incomplete flash data show that the CPI was boosted by the war in Ukraine (shock in commodities prices and PLN depreciation). Fuel prices surged 28% m/m, energy prices rose 4.4% m/m while food prices grew 2.2% m/m. Core inflation likely remained below 7% y/y (on our estimate based on incomplete data). Inflation is set to keep growing, but at a clearly slower pace. We expect the CPI inflation to peak around mid-2022, probably below 12% y/y.
- Manufacturing PMI in March fell to 52.7 from 54.7 February. The war in Ukraine caused higher uncertainty and boosted cost pressures hindering the business climate in the sector.
- The ECB and NBP have agreed to set up a precautionary swap line to provide euro liquidity. The NBP will be able to borrow up to EUR 10 billion from the ECB in exchange for Polish zlotys. The maximum maturity is three months, and the line will remain in place until Jan.15th 2023.
- PM M.Morawiecki announced a plan to abandon use of Russian hydrocarbons. Poland is to abandon Russian coal imports by May 2022 at the latest, and to give up imports of Russian gas and oil by the end of 2022.
The week ahead:
- We expect that the MPC will stick to its medium term tightening path and hike rates by 50bps on Wednesday. The accelerating inflation and tighter monetary policy abroad makes it necessary to continue the cycle in Poland, while high uncertainty regarding economic growth in 2022 warrants a cautious approach.
Number of the week:
- 1.8% – general government deficit to GDP ratio in 2021, down from 6.9% in 2020. At the same time public debt to GDP declined to 53.8% from 57.1%.