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Inflation and economic growth projection of Narodowy Bank ... · PDF file Inflation and...

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  • Economic Analysis Department

    Warsaw / 8 July 2019

    Inflation and economic growth projection

    of Narodowy Bank Polski

    based on the NECMOD model

  • Outline:

    Inflation and economic growth projection of the NBP

    Changes between rounds

    Projection 2019 – 2021

    ▪ Economic condtions

    abroad

    ▪ Polish economy

    ▪ GDP

    - Consumption demand

    - Investment demand

    - Foreign trade

    ▪ Inflation

    Uncertainty

    2

    1 Changes between projection rounds

    2 Projection 2019 – 2021

    3 Uncertainty

    Outline

  • Outline:

    Inflation and economic growth projection of the NBP

    Changes between rounds

    Projection 2019 – 2021

    ▪ Economic condtions

    abroad

    ▪ Polish economy

    ▪ GDP

    - Consumption demand

    - Investment demand

    - Foreign trade

    ▪ Inflation

    Uncertainty

    3

    Changes between projection rounds

  • Inflation and economic growth projection of the NBP 4

    July projection compared to March projection – main changes

    Impact on GDP Impact on CPI

    Weaker outlook for global growth and trade

    Higher resilience of the Polish economy to a slowdown abroad

    Higher private investment growth

    Stronger złoty appreciation

    Higher prices of meat and cold meats in 2019-2020 as a result of the ASF epidemic

    in China

    Higher vegetables prices due to underestimation of the effects of last year’s

    drought and losses in storage

    Higher wage growth in the public sector in 2020

  • Inflation and economic growth projection of the NBP 5

    July GDP projection compared to March projection

    Source: GUS data, NBP calculations.

    pp.

    -1

    0

    1

    2

    3

    4

    5

    6

    7

    8

    -1

    0

    1

    2

    3

    4

    5

    6

    7

    8

    16q1 17q1 18q1 19q1 20q1 21q1 21q4

    y/y, %

    90% 60% 30% Mar 19 Jul 19

    -0.4

    -0.2

    0.0

    0.2

    0.4

    0.6

    -0.4

    -0.2

    0.0

    0.2

    0.4

    0.6

    2019 2020 2021

    Private consumption Public consumption Gross capital formation Net exports GDP

    GDP y/y, % 2019 2020 2021

    March 2019 4.0 3.7 3.5

    July 2019 4.5 4.0 3.5

  • Inflation and economic growth projection of the NBP 6

    July CPI projection compared to March projection

    Source: GUS data, NBP calculations.

    pp.

    -2

    -1

    0

    1

    2

    3

    4

    5

    6

    -2

    -1

    0

    1

    2

    3

    4

    5

    6

    16q1 17q1 18q1 19q1 20q1 21q1 21q4

    90% 60% 30% Mar 19 Jul 19 inflation target

    y/y,%

    CPI y/y, % 2019 2020 2021

    March 2019 1.7 2.7 2.5

    July 2019 2.0 2.9 2.6

    -0.2

    -0.1

    0.0

    0.1

    0.2

    0.3

    0.4

    0.5

    2019 2020 2021

    -0.2

    -0.1

    0.0

    0.1

    0.2

    0.3

    0.4

    0.5

    Core inflation Food prices

    Energy prices CPI inflation

  • Outline:

    Inflation and economic growth projection of the NBP

    Changes between rounds

    Projection 2019 – 2021

    ▪ Economic condtions

    abroad

    ▪ Polish economy

    ▪ GDP

    - Consumption demand

    - Investment demand

    - Foreign trade

    ▪ Inflation

    Uncertainty

    7

    Projection 2019-2021

    ▪ Economic conditions abroad

    ▪ Polish economy

  • Outline:

    Inflation and economic growth projection of the NBP

    Changes between rounds

    Projection 2019 – 2021

    ▪ Economic condtions

    abroad

    ▪ Polish economy

    ▪ GDP

    - Consumption demand

    - Investment demand

    - Foreign trade

    ▪ Inflation

    Uncertainty

    8

    Economic conditions abroad

  • Inflation and economic growth projection of the NBP 9

    Despite stronger 19Q1, forecast for GDP growth outside Poland was revised downward

    NBP forecasts

    (March 2019 projection in brackets)

    PMI Global (p.)

    Import growth (%, y/y)

    GDP y/y, % 2019 2020 2021

    Euro area 1.2 (1.2) 1.4 (1.5) 1.4 (1.4)

    Germany 0.7 (0.9) 1.2 (1.4) 1.4 (1.4)

    US 2.5 (2.5) 1.8 (2.0) 1.8 (1.8)

    China 6.3 (6.1) 6.0 (6.0) 5.9 (-)

    19Q1 GDP growth forecast vs actual (%, q/q)

    Source: Markit Economics, CPB Netherlands, EAD calculations

    -2

    0

    2

    4

    6

    2017 2018 2019

    United States Japan Euro area

    Asian emerging markets Other economies Global economy

    48

    49

    50

    51

    52

    53

    54

    55

    56

    2017 2018 2019

    PMI composite PMI manufacturing PMI services

    0.0

    0.1

    0.2

    0.3

    0.4

    0.5

    0.6

    0.7

    0.8

    United States Euro Area Germany United Kingdom

    forecast (March 2019 projection) actual

  • Inflation and economic growth projection of the NBP 10

    Unfavourable signals from foreign demand contributed to a lower GDP growth forecast

    for the euro area

    Source: Eurostat, European Commission, Markit Economics, EAD calculations.

    Forecast for GDP growth in the euro area (%, pp., y/y) Exports from the euro area by destination (%, y/y, 3-month moving average)

    45

    50

    55

    60

    65

    2017 2018 2019

    Manufacturing Services Construction

    -1.0

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    2.5

    3.0

    2015 2016 2017 2018 2019p 2020p 2021p

    Private consumption Public consumption Investment

    Change in inventories Net exports GDP

    -4

    -2

    0

    2

    4

    6

    8

    10

    12

    14

    2017 2018 2019 US China Other emerging markets Other advanced economies Other Exports from EA

    -15

    -10

    -5

    0

    5

    10

    15

    2017 2018 2019

    Euro area Germany

    Assessment of export orders (3-month moving average) Business confidence (PMI, p.)

  • Inflation and economic growth projection of the NBP 11

    Growth in the euro area is supported by domestic demand

    Gross disposable income per capita and its decomposition

    (% and pp., q/q)

    Consumer confidence in the euro area (CCI, p.)

    -0.5

    0.0

    0.5

    1.0

    1.5

    2014 2015 2016 2017 2018

    Wages Other income Taxes Gross disposable income

    -25

    -20

    -15

    -10

    -5

    0

    5

    2017 2018 2019

    Euro area Germany France Spain Italy

    Source: Eurostat, European Commission, EAD calculations.

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    2014 2015 2016 2017 2018 2019

    Agriculture Industry Construction Services Economy

    Employment in the euro area (%, y/y and pp.)

    General government structural balance, excluding interest income and

    payments (% potential GDP)

    -1.5

    -1.0

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    2.5

    3.0

    2017 2018 2019 2020

    Euro area Germany Spain France Italy

  • Inflation and economic growth projection of the NBP 12

    Growth in the United States will gradually slow down

    20

    25

    30

    35

    40

    45

    50

    55

    60

    65

    70

    75

    -30

    -25

    -20

    -15

    -10

    -5

    0

    5

    10

    15

    20

    25

    2000 2003 2006 2009 2012 2015 2018

    Business investment

    Real business investment (% q/q SAAR, LHS) ISM Manufacturing (p., RHS)

    10

    15

    20

    25

    30

    35

    40

    45

    50

    75

    80

    85

    90

    95

    100

    105

    110

    115

    2007 2009 2011 2013 2015 2017 2019

    Confidence and firms’ investment plans

    Business confidence (p., LHS) Investment plans (%, RHS)

    -5

    -4

    -3

    -2

    -1

    0

    1

    2

    3

    4

    2 0

    0 7

    2 0

    0 8

    2 0

    0 9

    2 0

    1 0

    2 0

    1 1

    2 0

    1 2

    2 0

    1 3

    2 0

    1 4

    2 0

    1 5

    2 0

    1 6

    2 0

    1 7

    2 0

    1 8

    2 0

    1 9

    P

    2 0

    2 0

    P

    2 0

    2 1

    P

    %

    Real GDP growth

    Private consumption Private investment Change in inventories

    Net exports Public consumption GDP

    Source: BEA, ISM, NFIB, FRB, Economic Policy Uncertainty, NBER, EAD calculations.

    -6

    -5

    -4

    -3

    -2

    -1

    0

    1

    2

    3

    1.2

    1.5

    1.8

    2.1

    2.4

    2.7

    3.0

    3.3

    3.6

    3.9

    2007 2009 2011 2013 2015 2017 2019

    Nominal wages and employment

    Average hourly wage (%, y/y, LHS) Non-farm payrol