Inflation projection of the National Bank of Poland based ...€¦ · in the November projection...

Inflation projection

of the National Bank of Poland

based on the NECMOD model

Economic Institute

Warsaw, 12 March 2012

Overview

1. March projection compared to November projection

Changes in the projection

External environment

Polish economy in 2011 Q4

2. Projection

Projection 2012-2014

3. Uncertainty

Risk factors

Fan charts

MARCH PROJECTION COMPARED TO NOVEMBER PROJECTION

Changes in the projection


Polish economy in 2011 Q4

PROJECTION

CHANGES IN THE SCENARIO

» Changes in the projection

UNCERTAINTY

» GDP and its components

» Labour market

» External environment

» Polish economy in 2011 Q4

» Exchange rate

» Inflation

» Risk factors

» Fan charts

March projection compared to November projection: CPI inflation

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7

08q1 08q3 09q1 09q3 10q1 10q3 11q1 11q3 12q1 12q3 13q1 13q4

90% 60% 30% inflation target III 2012 XI 2011

%

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Decomposition of deviations between March and November projections

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2011 2012 2013

Core inflation Food prices

Energy prices CPI inflation

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

March projection compared to November projection: GDP

-1

0

1

2

3

4

5

6

7

8

9

-1

0

1

2

3

4

5

6

7

8

9

08q1 09q1 10q1 11q1 12q1 13q1 13q4

90% 60% 30% III 2012 XI 2011

%

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Decomposition of deviations between March and November projections

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

2011 2012 2013

Private consumption Public consumption

Gross fixed capital formation Change in inventories

Net exports GDP

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Projection scenario

March projection:

Lower economic growth

A decline in GDP in the euro area

Appreciation of the zloty exchange rate against its 2011 Q4 level

Tightening of fiscal policy

Changes in the projection scenario:

The euro area again in a recession stage

A decline of energy and agricultural commodities’ prices on global

markets due to global economic slowdown

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts


GDP growth abroad

Price growth abroad

Interest rates abroad

Agricultural commodity price index

Energy commodity price index

EUR/USD exchange rate

Transfers from EU

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Economic growth abroad (lower)

-6

-4

-2

0

2

4

6

-6

-4

-2

0

2

4

6

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Inflation abroad (lower)

0

0.5

1

1.5

2

2.5

3

0

0.5

1

1.5

2

2.5

3

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

XI 2011 III 2012

y/y,%

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Interest rates abroad (lower)

0

1

2

3

4

5

6

0

1

2

3

4

5

6

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

XI 2011 III 2012

%

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Agricultural commodity price index* (lower)

*Global index of agricultural commodity prices consists of prices of: wheat, pork, beef, poultry, fish, rape oil, sugar, oranges, bananas, and the beverages index

0.8

0.9

1

1.1

1.2

1.3

1.4

0.8

0.9

1

1.1

1.2

1.3

1.4

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Energy commodity price index* (lower)

*Global index of energy commodity prices consists of: hard coal, crude oil, natural gas

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

USD/EUR exchange rate (weaker EUR against USD)

1.1

1.2

1.3

1.4

1.5

1.6

1.1

1.2

1.3

1.4

1.5

1.6

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Absorption of EU transfers aimed at public sector investments (mln euro)

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2009 2010 2011 2012 2013 2014

November 2011

March 2012

Polish Economy in 2011 Q4

GDP and its components

Labour market

Inflation

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

GDP and its components

11Q3 11Q4

GDP (y/y, %) 4,2 (4,0) 4,0 (3,5)

Domestic demand (y/y, %) 3,2 (4,0) 2,6 (2,6)

Individual consumption (y/y, %) 3,0 (3,5) 2,9 (3,1)

Public consumption (y/y, %) -3,1 (0,7) -3,5 (-0,3)

Gross fixed capital formation (y/y, %) 8,5 (7,2) 10,0 (9,0)

Exports (y/y, %) 7,7 (2,6) 7,4 (3,6)

Imports (y/y, %) 5,2 (2,9) 4,2 (1,5)

Net exports contribution (percentage points)

1,0 (-0,2) 1,3 (0,9)

* Seasonally adjusted data. Data for 2011 Q4 including expert judgment. Indicators with values higher than in the November projection are marked green, whereas indicators with lower values are marked red.

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Labour market

11Q3 11Q4

ULC (y/y, %) 2,3 (2,5) 1,8 (2,6)

Labour productivity (y/y, %) 3,7 (3,4) 3,3 (2,9)

Gross wages (y/y, %) 6,6 (5,8) 4,8 (5,4)

Total employment LFS (y/y, %) 0,5 (0,6) 0,7 (0,6)

Unemployment LFS (%) 9,6 (9,6) 9,6 (9,5)

Participation rate (%) 56,0 (56,0) 56,1 (56,0)

* Values from the November projection are given in brackets (seasonally adjusted data). Indicators with values higher than in the November projection are marked green, whereas indicators with lower values are marked red.

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Inflation

11Q3 11Q4

CPI inflation (y/y, %) 4,1 (4,1) 4,6 (3,8)

Core inflation (y/y, %) 2,6 (2,6) 3,0 (2,9)

Food price inflation (y/y, %) 4,4 (4,3) 4,4 (3,0)

Energy price inflation (y/y, %) 8,9 (8,9) 10,3 (8,4)

* Values from the November projection are given in brackets (seasonally adjusted data). Indicators with values higher than in the November projection are marked green, whereas indicators with lower values are marked red.

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

GDP and components

Labour market

Exchange rate

Inflation

PROJECTION FOR 2012-2014 PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

GDP (similar in the short run, lower in the long run)

0

1

2

3

4

5

6

7

8

9

0

1

2

3

4

5

6

7

8

9

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

y/y,%

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

GDP: decomposition

-2

-1

0

1

2

3

4

5

6

7

-2

-1

0

1

2

3

4

5

6

7

11q1 11q3 12q1 12q3 13q1 13q3 14q1

Consumption Gross fixed capital formation

Change in inventories Net exports

GDP

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Gross fixed capital formation (similar)

-15

-10

-5

0

5

10

15

20

25

-15

-10

-5

0

5

10

15

20

25

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

y/y,%

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Gross fixed capital formation: decomposition

-10

-5

0

5

10

15

-10

-5

0

5

10

15

11q1 11q3 12q1 12q3 13q1 13q3 14q1

GFCF enterprises GFCF public sector GFCF housing GFCF

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Private consumption (lower)

0

1

2

3

4

5

6

7

8

0

1

2

3

4

5

6

7

8

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

y/y,%

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Trade with other countries

-4

-3

-2

-1

0

1

2

3

4

5

6

7

-20

-15

-10

-5

0

5

10

15

20

25

30

35

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

Net exports contribution (percentage points) Exports (y/y) (%) Imports (y/y) (%)

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Net exports contribution (lower)

-3

-2

-1

0

1

2

3

4

-3

-2

-1

0

1

2

3

4

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Employment (lower)

-2

-1

0

1

2

3

4

5

6

-2

-1

0

1

2

3

4

5

6

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

y/y,%

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Unemployment (higher)

6

8

10

12

14

16

18

20

6

8

10

12

14

16

18

20

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

%

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Gross wages (lower)

2

4

6

8

10

12

14

2

4

6

8

10

12

14

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

y/y,%

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Unit labour costs (higher in the short run, lower in the long run)

-2

0

2

4

6

8

10

12

-2

0

2

4

6

8

10

12

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

y/y,%

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Exchange rate (weaker)

3.5

4.0

4.5

5.0

5.5

6.0

6.5

3.5

4.0

4.5

5.0

5.5

6.0

6.5

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

Real effective exchange rate (REER)

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Import prices (excluding oil and natural gas)

-15

-10

-5

0

5

10

15

20

-15

-10

-5

0

5

10

15

20

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

y/y,%

XI 2011 III 2012

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Food and energy prices inflation

-2

0

2

4

6

8

10

12

-2

0

2

4

6

8

10

12

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

Food prices inflation (%) Energy prices inflation (%)

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Core inflation and CPI inflation*

* Core inflation does not include food, beverages and energy prices.

-1

0

1

2

3

4

5

6

-1

0

1

2

3

4

5

6

05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 14q4

CPI inflation (%) Core inflation (%)

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

UNCERTAINTY OF THE PROJECTION PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Risk factors PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

The scale of impact: *** high ** medium * low

Risk area Description Impact Scale of impact

External environment and exchange

rate

An increase in uncertainty due to worsening growth prospects in developed countries, especially in EU members. The situation on the global financial markets – including impact of rising soveregin debt of some euro area countries and liquidity constraints of a few european banks. The zloty exchange rate path, highly dependent on the future situation in the euro area. The reaction of governments and central banks of developed countries , i.e. the scale of a possible resumption of fiscal and monetary stimulus. The agricultural and energy commodities’ prices on the global markets.

inflation GDP

***

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Risk area Description Impact Scale of impact

Domestic demand

Historically stable growth of individual consumption, high financial liquidity of enterprises, rising capacity utilization – possible higher private investment and consumption.

Probable more optimistic assessment of Poland’s credit standing and higher inflow of capital.

inflation GDP

**

Food and energy prices

in Poland

Uncertain impact of European regulations on prices in Poland, particularly those concerning climate and energy package (unknown amount and price of carbon emission allowances for the Polish economy, lack of decision regarding derogation of the Polish energy sector).

Future tariff policy of the Energy Regulatory Office.

Regulatory activities on the food market

inflation GDP

**

Conclusions inflation

GDP ** *

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Inflation projection – March 2012

-1

0

1

2

3

4

5

6

7

-1

0

1

2

3

4

5

6

7

09q1 09q3 10q1 10q3 11q1 11q3 12q1 12q3 13q1 13q3 14q1 14q4

90% 60% 30% central path inflation target

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Probability distribution for inflation

(%) below

1,5%

below

2,5%

below

3.5%

below the

central path

in the range

(1,5%; 3,5%)

12q1 0,00 0,00 0,03 0,51 0,03

12q2 0,00 0,02 0,30 0,52 0,30

12q3 0,00 0,02 0,18 0,52 0,18

12q4 0,02 0,13 0,44 0,51 0,42

13q1 0,06 0,26 0,60 0,49 0,54

13q2 0,12 0,37 0,69 0,48 0,57

13q3 0,15 0,41 0,70 0,48 0,55

13q4 0,18 0,42 0,70 0,48 0,52

14q1 0,28 0,55 0,79 0,49 0,51

14q2 0,34 0,61 0,83 0,49 0,48

14q3 0,37 0,63 0,84 0,48 0,47

14q4 0,37 0,63 0,84 0,48 0,46

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

GDP projection – March 2012

-2

-1

0

1

2

3

4

5

6

7

8

9

-2

-1

0

1

2

3

4

5

6

7

8

9

09q1 09q3 10q1 10q3 11q1 11q3 12q1 12q3 13q1 13q3 14q1 14q4

90% 60% 30% central path

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

Data after cut-off date (24.01.2012)

Lower than expected CPI inflation index in January 2012

Zloty appreciation in February 2012

An increase in oil and gas prices on global markets in February 2012

These data increase the probability of the inflation running in the

short run below the central path (assuming unchanged GDP path,

they lower the forecast of CPI y/y by 0.3-0.4 p. points in 2012 and by

0.2-0.3 p. points in 2013)

PROJECTION



UNCERTAINTY


» Labour market



» Exchange rate

» Inflation

» Risk factors

» Fan charts

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Inflation projection of the National Bank of Poland based ...€¦ · in the November projection...

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