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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
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