Download - Inflation and economic growth projection of …...Inflation and economic growth projection of the NBP 7 External GDP growth will remain sluggish in the coming years Import dynamics

Economic Analysis Department

Warsaw / 9th March 2020

Inflation and economic growth projection

of Narodowy Bank Polski

based on the NECMOD model

Inflation and economic growth projection of the NBP

Projection 2020 – 2022

▪ Economic condtions

abroad

▪ Polish economy

▪ GDP

- Consumption demand

- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

2

1 Projection 2020 - 2022

2 Uncertainty

Outline

Inflation and economic growth projection of the NBP 3

March projection compared to November projection – main changes

Impact on GDP Impact on CPI

Weaker global economy outlook due to the outbreak of coronavirus epidemic

Signing Phase One deal between US and China

Lower than expected economic growth in Poland in 2019Q4

Households have become more cautious about spending

Stronger than expected in November increase in prices of waste disposal services

Higher than assumed in the budget bill excise tax on alcoholic beverages and tobacco

products from 1st January 2020 and planned introduction of additional fees on beverages

containing substances used for their sweetening properties, as well as additional fees on

sales of alcoholic beverages of up 300ml in volume

Higher pork prices growth in global markets in 2019-2020 due to the escalation of the ASF

epidemic and slower than expected process of rebuilding the pig herd in China

Higher than expected increases in tariffs on the sale and distribution of electrical energy


The impact of coronavirus outbreak on the global economy and Poland

▪ Assumptions in the baseline scenario of the projection: significant slowdown in GDP growth in China and the global economy,

however, concentrated mainly in the first and beginning of the second quarter of this year.

▪ The most important canals of coronavirus epidemic impacting global economy:

▪ Slump in global demand for transport, tourism and entertainment services - hence – lower oil prices leading to deterioration of

economic outlook in countries dependent on the income from sales of this commodity.

▪ Decrease in demand for non-food goods, so far mainly in China and north Italy, later probably also in other countries.

▪ Heightened volatility in financial markets, deterioration in business sentiment.

▪ In the immediate vicinity of Poland: slowdown in services sector in some big euro area economies and in manufacturing sector

in Germany.

▪ A risk of further reduction of manufacturing production and quarantine of more regions in China, difficulties in global value chains,

obstacles for producers worldwide dependent on Chinese subcomponents.

▪ In case of more severe coronavirus epidemic – deeper downward revision in the forecast for economic growth in Poland (pessimistic

scenario – see the balance of risks).

▪ Further spread of the coronavirus epidemic will most likely lead to lower inflation:

▪ lower inflation will be a result of decreasing demand for a large part of services and non-food goods, intensification of promotions

and extraordinary price reductions

▪ the supply effect, related to a reduction in the supply of some intermediate goods and an increase in demand for some food

products, may be conducive to rising inflation.


Impact of stronger demand and wage pressure on core inflation in line with expectations.

Core inflation projection in subsequent projection rounds (y/y, %)

-0.5

0

0.5

1

1.5

2

2.5

3

16q1 16q3 17q1 17q3 18q1 18q3 19q1 19q4

core inflation Nov 19 Jul 19 Mar 19 Nov 18

Jul 18 Mar 18 Nov 17 Jul 17 Mar 17

Source: NBP calculations




abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

6

Projection 2020-2022

Economic conditions abroad


External GDP growth will remain sluggish in the coming years

Import dynamics in the global economy (%, y/y, 3-m. average)

Source: Datastream, Markit Economics, OECD, CPB Netherlands, NBP calculations.

Global GDP (%, annualized q/q)

GDP y/y, % 2020 2021 2022

Euro area 0.9 (1.1) 1.3 (1.3) 1.3

Germany 0.6 (0.6) 1.3 (1.2) 1.2

Great Britain 1.1 (1.2) 1.0 (1.3) 1.3

US 1.9 (1.7) 1.8 (1.7) 1.9

China 5.1 (5.8) 6.5 (5.7) 5.7

NBP forecast (values from the November 2019 projection are given in brackets)

Signing trade agreement Phase One between China and United

States.

Monetary and fiscal loosening in the global economy.

Spread of coronavirus epidemic.

Prolonging period of slowdown in Germany.

Increase in trade barriers between Great Britain and European

Union from 2021.

-2

0

2

4

6

2017 2018 2019

US JapanEuro area ChinaAsian emerging markets Other economiesGlobal economy

0

1

2

3

4

5

2013 2014 2015 2016 2017 2018 2019 2020P 2021P

Indicators with values higher than in the November projection are marked green, and indicators with lower values are marked red.


In the euro area the GDP growth remains sluggish, however economic conditions in various sectors

differ.

Source: Eurostat, European Commission, Markit Economics, Datastream, NBP calculations

Business climate in the euro area (PMI, p.) Wages and employment in the euro area

Investment in machinary and equipment vs Eurozone exports of goods

(index, 2015=100) GDP growth in the euro area (% and p.p., y/y)

Note: The chart does not include Ireland.

-0.5

0.0

0.5

1.0

2017 2018 2019Private consumption Public consumption GFCF

Change in inventories Net exports GDP

45

48

50

53

55

58

60

2018 2019 2020

Manufacturing Services Construction

6

7

8

9

10

11

12

13

-3

-2

-1

0

1

2

3

4

2005 2007 2009 2011 2013 2015 2017 2019

Employment (%, y/y) - LHS Wages (%, y/y) - LHS Unemployment rate (%) - RHS

-20

-15

-10

-5

0

5

10

15

2007 2009 2011 2013 2015 2017 2019

Investment in machinery and equipment Export of goods


Economic growth in the United States will be lower than in recent years.

Source: BEA, BLS, US Census, NAHB, CBO, ISM, NBER, NBP calculations.

GDP dynamics in US

(% and p.p, q/q saar)

ISM Index for manufacturing and services (points, sa)Private investment outlays dynamics (%, and p.p. q/q, saar)

Rate of unemployment and its natural level according to CBO (%, sa)

-3-2-10123456

2017 2018 2019Private consumption GFCF

Changes in inventories Net exports

Public investment GDP

3

4

5

6

7

8

9

10

11

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Rate of unemployment Natural rate of unemployment

30

35

40

45

50

55

60

65

2007 2009 2011 2013 2015 2017 2019

Manufacturing Services

-9

-6

-3

0

3

6

9

12

15

2014 2015 2016 2017 2018 2019

Residential construction Intellectual propertyMachinery and equipment Non-residential investmentTotal private investment


Trade agreement betweeen China and US as well as ratification of USMCA trade deal reduce

uncertainty related to trade policy.China’s exports to the United States (%, 3m-average y/y)

Source: US Census, USTR, NBP calculations.

Share of US exports to Canada and Mexico (% of total exports from US) and share of

imports from Canada nad Mexico to US

(% of total US imports) in 2019

Duties imposed by US on China*

Value of additional Chinese imports from the United States according to

the first stage of agreement (mld USD)

0

5

10

15

0

2

4

6

Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19

Value of duties imposed by US (bn USD, LHS)

Share of duties value in the value of Chinese export toUS (%, RHS)

*) Duties imposed from July 2018 (the beginning of „trade war”)

-0.4

-0.2

0

0.2

0.4

2017 2018 2019

Dynamics of exports on which tariffes have been imposed since 2018

Dynamics of exports on which tariffes have not been imposed since 2018

0

25

50

75

100

125

2020 2021

Manufacturing Agriculture Energy Services0

5

10

15

20

Canada MexicoExports Imports


However the spread of coronavirus remains the risk factor.

11

Source: WHO, CDC, ECDC, NHC, DXY, JHU CCSE, WEO, Capital Economics, NBP calculations.

Share of China in the global GDP

(%, according to purchasing power parity)

Coal consumption in Chinese power plants against the data

for recent years

Confirmed COVID-19 cases (number) Assumptions of the impact of coronavirus on GDP growth in selected

economies (%)

0

2

4

6

8

10

12

14

16

18

20

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

0

1 000

2 000

3 000

0

30 000

60 000

90 000

22.01.2020 30.01.2020 07.02.2020 15.02.2020 23.02.2020

China (LHS)

Rest of the world (RHS)

-2.0

-1.5

-1.0

-0.5

0.0

2020q1 2020q2 2020q3 2020q4

Germany Other EA countries China




abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

12

Polish economy

Gross domestic product


Marked decline in GDP growth in Poland at the end of 2019

Values from the November projection are given in

brackets (19Q4 seasonally adjusted).

Indicators with values higher than in the

November projection are marked green, and

indicators with lower values are marked red.

19q3 19q4

March proj.

(GUS 27 Nov)

November

projection

March

projection

November

projection

GUS (28

Feb)

GDP (y/y) (%) 3,9 (4,0) 3,1 (3,9) 3,2

Domestic demand (y/y) (%) 3,3 (4,1) 3,5 (4,4) 2,2

Household consumption (y/y) (%) 3,9 (4,3) 3,6 (4,4) 3,3

Public consumption (y/y) (%) 4,7 (5,6) 4,2 (6,1) 3,1

Gross fixed capital form. (y/y) (%) 4,7 (5,8) 7,1 (4,1) 4,9

Exports (y/y) (%) 5,0 (3,5) 3,4 (2,4) 1,4

Imports (y/y) (%) 3,9 (3,6) 4,3 (3,2) -0,7

Net exports contribution (pp.) 0,8 (-0,1) -0,4 (-0,4) 1,1

Source: GUS data, NBP calculations.

-6

-4

-2

0

2

4

6

8

10

12

-6

-4

-2

0

2

4

6

8

10

12

09q1 10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1

Industrial and constr. production y/y Retail sales y/y

Real wage fund in corporate sector y/y GDP y/y

38

42

46

50

54

58

-30

-20

-10

0

10

20

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

pkt

Bal

ance

betw

een

the

perc

enta

ges

of

posi

tive

and

nega

tive

answ

ers

PMI Poland and general business climate indicators (GUS) in manufacturing, construction and trade (s.a.)

manufacturing construction trade PMI Poland (RHS)


-3

-2

-1

0

1

2

3

4

5

6

7

-3

-2

-1

0

1

2

3

4

5

6

7

19q1 20q1 21q1 22q1 22q4

Consumption Gross fixed capital formation

Change in inventories Net exports

GDP

In the quarters to come, GDP growth will remain subdued due to weak economic conditions abroad

and a slowdown in EU funds absorption dynamics.

Private consumption, supported by legislative and fiscal

changes to be the main growth factor in the forecast horizon.

Slowdown in gross fixed capital formation dynamics as the

result of:

curbing general government investment

decrease in private investment growth due to

weakening demand, external in particular and a

decline in EU funds absorption growth

Decrease in net exports’ contribution to GDP growth in the

forecasting horizon.

y/y, % 2019 2020 2021 2022

GDP 4.0 3.2 3.1 3.0





abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

15

Consumption demand


Household consumption :

Spread-out effect of fiscal changes, which increase expenditures

on social benefits and lower tax burden – the highest impact on

consumption in 2020.

Still favourable, from the point of view of employees, labour market

conditions – relatively fast wage growth, increase in minimum

wage. In the longer term the wage fund growth is expected to

slow down due to the weakening demand for labour.

Smoothing the path of consumption in longer projection horizon,

in line with lower households’ propensity to consumption in

recent quarters.

Public consumption :

Teachers’ wage hikes of 9,6% in September 2019.

Average annual increase in wages in the public sector of 6% in

2020.

In 2021 a rise in contributions paid from the salaries of public sector

employees due to their accession to PPK.

Neutral fiscal policy assumed in the longer projection horizon.

Consumption demand remains the main driver of GDP growth over the projection horizon

y/y, % 2019 2020 2021 2022

Household

consumption3.9 3.7 3.7 3.6

Public consumption 4.5 4.4 3.8 2.4

-4

-2

0

2

4

6

8

-4

-2

0

2

4

6

8

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q1 22q4

Household consumption (y/y, %)

Public consumption (y/y, %)

Consumption forecast



Good financial situation of households, however consumers has been cautious about spending.

Increased fear of being unemployed.

Values from the November projection are given in brackets (19Q4 seasonally adjusted).

Indicators with values higher than in the November projection are marked green, and indicators

with lower values are marked red.

Financial situation of households and fear of being unemployed

-40

-20

0

20

40

60

80

100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

current financial situation of households

financial situation of households in the next 12 months

fear of being unemployed

-50

-40

-30

-20

-10

0

10

20

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

current (BWUK, s.a.) leading (WWUK, s.a.)

Consumer confidence indicators

19q3 19q4

ULC (r/r, %) 3.7 (2.8) 4.1 (3.2)

Labour productivity (y/y,%) 3.9 (4.4) 2.8 (3.8)

Gross wages (y/y, %) 7.7 (7.1) 6.9 (6.9)

Real wages (y/y, %) 4.7 (4.2) 3.9 (4.0)

Employment LFS (y/y, %) 0.0 (-0.3) 0.3 (0.1)

Unemployment rate LFS (%) 3.2 (3.5) 3.0 (3.6)

Participation rate (%) 56.2 (56.3) 56.1 (56.3)



Decline in households real disposable income dynamics in 2020-2022 along with smoothing

consumption path.

-2

0

2

4

6

8

-2

0

2

4

6

8

19q1 20q1 21q1 22q1 22q4

Net transfers and taxes excl. 500 plus

500 plus

Wage fund

Property income

Operating surplus

Disposable income (y/y, %)

Disposable income decomposition (constant prices) (y/y, %)

-2

0

2

4

6

8

-2

0

2

4

6

8

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q1 22q4

Household consumption (y/y, %)

Disposible income (constant prices) (y/y) (%)

Consumption and households’ disposable income

Economic Sentiment Index (s.a.)

60

70

80

90

100

110

120

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Euro Area Germany Poland



Hitherto strong labour demand is weakening due to lowering economic growth.

Vacancies and a share of surveyed companies reporting difficulties in finding

new employees as a barrier for expansion

LFS employment by sectors (s.a., y/y, %)

The demand for labour - GUS research (levels in thousands s.a. and trend)

0%

2%

4%

6%

8%

10%

12%

0

50 000

100 000

150 000

200 000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

number of vacancies within a month, s.a., LFS

number of non-subsidised vacancies within a month,s.a., LFS

scarce human resources - RHS

Employment in the corporate sector

0

50 000

100 000

150 000

200 000

250 000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

net job creation vacancies newly created jobs liquidated jobs

-1%

0%

1%

2%

3%

4%

5%

5,400

5,600

5,800

6,000

6,200

6,400

6,600

2012 2013 2014 2015 2016 2017 2018 2019 2020

y/y - LHS level - RHS

-4.3%

1.3%

-0.2%

-8%

-4%

0%

4%

8%

12%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

AgricultureManufacturing and constructionServicesSectors other than agriculture

Source: GUS data, NBP Quick Monitoring Survey, NBP Annual Survey, NBP calculations.


Slump in unemployment rate in 2019 mainly due to negative demographic tendencies.

Weakening labour demand will result in lowering employment and gradual increase in unemployment rate.

Factors contributing to the change of unemployment rateRegistered and LFS unemployment rate (s.a.)

Forecasted numer of employed immigrants in Poland (thousands

54

55

56

57

58

-1

0

1

2

3

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q1 22q4

Employment (y/y, %) Participation rate (%, RHS)

Employment and participation rate forecast

7.0%

5.2%

0%

3%

6%

9%

12%

15%

18%

21%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

LFS unemployment rate

LFS unemployment rate forecast

registered unemployment rate

3,2%

-6.0

-3.0

0.0

3.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Changes in participation rate

LFS employment

LFS population

LFS unemployment rate changes (y/y, p.p.)

178 196 281379

568792

8911 010 984 973 967

7 54

6

21

5164

77 87 96 104

62 6673

79

88

102

121

136 145 152 159

0

500

1000

1500

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Th

ousands

Effective number of immigrants excl. UA and BY

Effective number of employed immigrants from BY

Effective number of employed immigrants from UA

Number of employed immigrants in PL

Source: GUS data, NBP calculations, NBP estimates based on data from Ministry of Foreign Affairs, ZUS and the Office for Foreigners.


Unfavourable demographic changes on the labour market mitigated by migration.

306

248616 687

237327

349

1 032 626706

1 824

1 582

1 769

0

500

1000

1500

2000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Tho

us.

agriculture

industry

construction

services

Total

190 240

110

-40-55

-15

45

12 5

43 35

68

5

-98

-100

-50

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Tho

us.

2018: 695 thous. Poles

staying in Great Britain

(temporary stay)

Estimation of temporary emigration from Poland to Great Britain – changes in thous. y/y

Structure of statements on employing a foreigner (in thous.)

Source: data from Ministry of Foreign Affairs , Office for Foreigners ,GUS, Ministry of Family, Labour and Social Policy, NBP calculations.

*) estimates based on the report for the first half of the year 2019.

Note: Changes in visa regulations and statement system since 2018, data for 2010-2017

not comparable.

0.0%-0.2%

-0.5%-0.3%

-1.5%

-0.8%

-1.1%

-0.5%

0.1%-0.1% 0.0%

0.3%

-0.4%

0.5%

-0.5%

0.2%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

2012 2013 2014 2015 2016 2017 2018 2019

Population LFS 25-60/65 y/y

Population LFS 25-60/65 + UA immigrants y/y

1.9%1.4%

0.7%

1.4%

0.4%

-0.2%

0.3%

0.0%

2.4%2.0%

1.8%

2.7%

0.9%

0.4%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2012 2013 2014 2015 2016 2017 2018 2019

Employment LFS y/y

Employment LFS + UA workers y/y


Source: GUS, NBP Quick Monitoring Survey, MF, NBP calulations.

Decreasing wages dynamics due to weaker labour demand, in 2020-2021 this proces will be curbed by

the increase in minimum wage growth.

Wages growth y/y vs labour market index

(%, last data for 2019Q4)

0

2

4

6

8

10

0

2

4

6

8

10

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q1 22q4

Nominal wages (y/y, %)Real wages (y/y, %)Labour productivity (y/y, %)ULC (y/y, %)

Wage growth and unit labour cost forecast (y/y, %)Share of companies planning wage increases

0.00

0.02

0.04

0.06

0.08

0.10

0.12

-0.02

0

0.02

0.04

0.06

0.08

0.1

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nominal wages in enterprise sector (y/y, LHS)

Nominal wages (y/y, LHS)

Real wages (y/y, LHS)

Labour market index RHS

0%

2%

4%

6%

8%

10%

0%

10%

20%

30%

40%

50%

2007 2008 2009 2010 2011 2012 2013S

etk

i

percentage of enterprises planning increases (left axis)percentage of employees s.a. (left axis)percentage of enterprises planning significant increases (left a.)

growth of avarage wage (right axis)

7.1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2014

2015

2015

2015

2016

2016

2016

2017

2017

2017

2018

2018

2018

2019

2019

2019

Nominal wages in enterprise sector - y/y

4-month moving average

Jan 20

Nominal wages in the enterprise sector (current prices, y/y, %)




abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

23

Investment demand


Public investment :

Lower capital expenditure of local government units in the coming years.

Construction of highways and railway planned for 2020.

A peak in EU funds absorption for public investment in 2020, marked

decrease in the following years.

Private investment :

Still weak growth of external demand.

Diminishing contribution of EU funds absorption for private sector

investment to growth (negative in 2022).

Gradual lowering of residential investment growth.

Low degree of automation and robotization of manufacturing in Poland as

well as growing labour costs due to planned legislative changes –

incentives to faster automation of production and services along with

decreasing employment in the longer horizon.

Low interest rates.

Gross fixed capital formation growth will slow down due to lower EU funds absorption growth, as

well as the deceleration of private investment growth.

-4

-2

0

2

4

6

8

10

12

14

-4

-2

0

2

4

6

8

10

12

14

19q1 20q1 21q1 22q1 22q4

GFCF private sector

GFCF public sector

GFCF

y/y, % 2019 2020 2021 2022

Gross fixed capital formation 7.8 4.1 1.7 0.4



Investment spending of local government units (y/y, %) Contributions to public investment growth (current prices, y/y, %)

Public investment expenditures (bn PLN) Use of EU funds – for public investment and for businesses (bn PLN)

After a slump of nominal public investment growth to close to zero in 2019, in 2020 slight rebound is

expected.

-60

-40

-20

0

20

40

60

80

100

2008q1

2009q1

2010q1

2011q1

2012q1

2013q1

2014q1

2015q1

2016q1

2017q1

2018q1

2019q1

lata wyborcze

rok po wyborach

* - initial data (NBP estimate)

F – NBP forecastSource: GUS, Eurostat, MF, MIiR, NBP calculations.

0

20

40

60

80

100

120

outturn

outturn

outturn

outturn

outturn

outturn

*X

I 2019

III 2020

XI 2019

III 2020

XI 2019

III 2020

2014 2015 2016 2017 2018 2019 2020F 2021F 2022F

national EU

election year

post-election year

0

5

10

15

20

25

30

35

2016 2017 2018 2019* 2020F 2021F 2022F

Public investmentIII 2020

XI 2019

Funds forenterprises III 2020

XI 2019

-30

-20

-10

0

10

20

30

40

2013 2014 2015 2016 2017 2018 2019* 2020F 2021F 2022F

local governments other total


Decomposition of NFC’s investment growth by firms’ share of revenues

from export (p.p, y/y, current prices)

Source: GUS F-01, NBP Quick Monitoring Survay, NBP calculations.

Deteriorating private investment outlook in 2020-2022 due to still low external demand dynamics.

Expected change in investment spending and export activity

(balance of changes, p.p., s.a.)

-20-15-10

-505

1015202530

2014 2015 2016 2017 2018 2019

no exports 1-49% 50%+

-5

0

5

10

15

2014 2015 2016 2017 2018 2019 2020

quarterly - no exports quarterly - exporterannual - no exports annual - exporter

24.2

24.6

20.5

15.8

17.9

17.1

13.1

9.3

12.4

29.5

29.7

31.1

0 10 20 30 40 50 60 70 80 90 100

2018

2019

2020

production capacity modernization cost reduction renovation, replacement other

Purpose of new investment (% enterprises)

-5

0

5

10

15

20

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

non-exporters non-specialized exporters specialized exporters

Indicators of demand forecast (p.p.)




abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

27

Foreign trade


-4

-3

-2

-1

0

1

2

3

4

5

-20

-15

-10

-5

0

5

10

15

20

25

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q122q4

Net exports contribution(p.p., RHS)

Exports (y/y) (%)

Imports (y/y) (%)

In 2020-2022 current and capital account will deteriorate.

y/y p.p. 2019 2020 2021 2022

Net exports

contribution to growth0.4 0.2 -0.2 0.0

Net exports’ contribution to GDP growth

-6

-4

-2

0

2

4

6

8

-6

-4

-2

0

2

4

6

8

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Compensation of employees & Remittances

Primary income (excl. Compensation of employees)

Capital account & Secondary income (excl. Remittances)

Goods and services

Current and capital account (% GDP)

Current and capital account (% GDP)

Source: GUS data, WIOD, NBP calculations.


Marked increase in the significance of export of services in recent years.

Source: GUS data, NBP data, WTO data, NBP calculations.

Share of Poland in the global trade (%)

Structure of export of services in Poland, % GDP

0.4

0.6

0.8

1.0

1.2

1.4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Export of goods Import of goods

Export of services Import of services

0

2

4

6

8

10

12

2010

2011

2012

2013

2014

2015

2016

2017

2018

cha

nge 2

01

0-2

018

Other

Construction services

Repair

Refinement

Telecom., information and computer services

Other business services

Foreign travel

Transport services

-7

-5

-3

-1

1

3

5

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Goods Services Primary income

Secondary income Current account

Current account deficit ( % GDP, 4 quarters moving sum)




abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

30

Gross Domestic Product – changes between projection

rounds


March GDP projection compared to November projection

Stronger than expected slowdown in households’ consumption

growth in the 2nd half of 2019 – households have become more

cautious about purchasing.

Lower path of inventories due to weeker than expected domestic

economic growth.

Downward revision of global economic growth in 2020, in particular

in the euro area.

Lower imports dynamics due to weeker than expected domestic

demand.

Higher resistance of Polish exports to persisting slowdown in the

euro area.

GDP y/y, % 2019 2020 2021

November 2019 4.3 3.6 3.3

March 2020 4.0 3.2 3.1

p. p.

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

2019 2020 2021

Private consumption Public consumption

Gross capital formation Net exports

GDP

-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% Nov 19 Mar 20





abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

32

Inflation

Polish economy


In 2019Q4 higher inflation mainly due to the increase in food prices dynamics and core inflation

driven by a hike in services prices.

Source: GUS, NBP data.

CPI and core infaltion (y/y, % monthly data)

Food and energy prices growth (y/y, %)

Values from the November projection are given in brackets (seasonally adjusted).

Indicators with values higher than in the November projection are marked green, whereas indicators with lower

values are marked red.

y/y, % 19q4

CPI inflation 2.8 (2.8)

Core inflation 2.7 (2.7)

Food prices 6.5 (6.4)

Energy prices -2.3 (-2.0)

7.7

3.7

-8

-4

0

4

8

12

2013 2014 2015 2016 2017 2018 2019 2020

Food and non-alcoholic beverages Energy

4.4

3.2

-2

0

2

4

6

2013 2014 2015 2016 2017 2018 2019 2020

CPI Inflation target Core inflation

Main core inflation components dynamics (y/y, %)

*

*

*

*) Data for January 2020 based on flash estimates of GUS.

0.8

11.4

4.3

-2

0

2

4

6

8

10

12

2016 2017 2018 2019 2020

Core inflation Non-food goods Administered services

Market services Supercore inflation

*

*

*


Food prices increased in 2019Q4 due to supply factors, whereas in case of services’ prices –

demand-cost effects were strengthen by strong administered prices changes.

Source: GUS data, NBP data.

Monthly growth of meat prices (incl. pork and cured meat) in 2019

against 2005-2018

Food prices decomposition in 2019

(as compared to the previous quarter, p.p., y/y)

Decomposition of the growth of services prices in 2019

(as compared to the previous quarter, p.p., y/y)Administered services growth (December of the last year = 100)

0

1

2

3

4

5

6

7

8

9

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

20152016201720182019

-3

-2

-1

0

1

2

3

4

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2005-2017

2018

2019

0.0

0.5

1.0

1.5

19q1 19q2 19q3 19q4

Administered services Communication

Recreation and culture Restaurants and hotels

Other services Total services

-2

-1

0

1

2

3

4

19q1 19q2 19q3 19q4

Meat Fruit Vegetables Other Food and non-alcoholic beverages


After marked increase in 2020, in the following years CPI inflation will decrease to slightly below 2,5% at

the end of the projection horizon.

In 2020 delayed impact of elevated labour costs dynamics and

positive output gap, afterwards a decline in demand and cost

pressure along with a slowdown in GDP growth.

Temporary increase in food prices due to supply constraints (growth

of meat and cured meat as a consequence of ASF epidemy in

China, higher fruit and vegetables prices in the 1st half of 2020 due

to last year unfavourable meteorological conditions).

Hike in electricity prices from 2020 (higher tariffs for households as

well as introduction of capacity charge, in 2021-2022 significantly

lower scale of electricity prices’ hikes).

Waste disposal charges hikes, which are planned or already

implemented by local governments lead to higher services prices

dynamics in 2020 and the 1st half of 2021.

Higher excise duty on alcohol and tabacco products from January

2020.

Relatively low level of energy commodity prices on the global

markets and decreasing prices of agricultural commodities.

Low level of inflation in the main trading partners countries.

y/y, % 2019 2020 2021 2022

CPI inflation 2.3 3.7 2.7 2.4

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q122q4

Core inflation Food prices

Energy prices CPI inflation



Source: GUS data, Bloomberg data, NBP

calculations.

CPI inflation in 2020 affected by regulatory changes and supply constraints.

0

50

100

150

200

250

300

350

WA

RS

ZA

WA

PŁO

CK

GD

YN

IA

RY

BN

IK

SK

IER

NIE

WIC

E

BY

TO

M

GD

AŃ

SK

PR

ZE

MY

ŚL

RZ

ES

ZÓ

W

KIE

LCE

KA

TO

WIC

E

PIŁ

A

ZA

MO

ŚĆ

BY

DG

OS

ZC

Z

SO

SN

OW

IEC

OP

OLE

BIA

ŁYS

TO

K

SA

NO

K

PIO

TR

KÓ

W T

RY

B.

SZ

CZ

EC

IN

KR

OS

NO

SIE

DLC

E

GLI

WIC

E

Hike in waste disposal charge in selected cities in the first half of 2020 (%)

Note: Only cities with an increase in the waste disposal charge in 2020H1 are

included in the chart.

Energy prices and its forecast

Note: In the chart CPI electrical energy is a single-base index of ecectrical

energy prices (January 2015 = 100, data for 2020 is a forecast).

88

93

98

103

108

113

0

50

100

150

200

250

300

2015 2016 2017 2018 2019 2020

RDN index (PLN/MWh)

Electricity prices CPI (RHS)


Expected drop in domestic demand and cost pressure in 2021-2022.

-3

-2

-1

0

1

2

3

4

5

6

-3

-2

-1

0

1

2

3

4

5

6

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q122q4

Output gap (% potential output)

GDP (y/y, %)

Potential output (y/y, %)

-1

0

1

2

3

4

5

6

-1

0

1

2

3

4

5

6

TFP Capital

NAWRU Economically active pop.

Potential output (y/y, %)

-2

0

2

4

6

8

-2

0

2

4

6

8

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q1 22q4

Nominal wages (y/y, %) Labour productivity (y/y, %)

ULC (y/y, %)

-6

-4

-2

0

2

4

6

8

-6

-4

-2

0

2

4

6

8

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q122q4

r/r, %Import prices excl. oil and gas prices (y/y, %)Import prices (y/y, %)



Expected lower demand for energy commodities due to coronavirus epidemic.

Global oil production, consumption and change in stocks (milion b/d)

Market crude oil inventories in the US (mln b/d)

Prices of energy and agricultural commodities in the projection – Energy

commodity prices index (USD, 2011=1), agricultural commodity prices index

(EUR, 2011=1) and crude oil prices (USD/b) in the projection

Changes in production of crude oil and liquid fuels in the world (mln b/d)

20

40

60

80

100

120

140

0.2

0.4

0.6

0.8

1.0

1.2

1.4

13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 22q1 22q4

Energy commodities (LHS) Agricultural commodities (LHS)

Brent oil (RHS)

-2

-1

0

1

2

3

4

5

6

92

96

100

104

108

2015 2016 2017 2018 2019 2020 2021 2022

Implied global change in stocks (million b/d)

Global oil production (million b/d)

Global oil consumption (million b/d)

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2019 2020 2021

OPEC North America

Eurasia Latin America

Other Non-OPEC

350

400

450

500

550

600

2015 2016 2017 2018 2019 2020 2021

US inventories

Source: data - GUS, Bloomberg, Reuters, EIA, NBP calculations.

Monthly range from January 2015 to December 2019




abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

39

Inflation – changes between projection rounds


March CPI projection compared to November projection

CPI y/y, % 2019 2020 2021

November 2019 2.3 2.8 2.6

March 2020 2.3 3.7 2.7

p.p.

Stronger than expected in November increase in prices of waste

disposal services.

Higher than assumed in the budget bill excise tax on alcoholic beverages

and tobacco products as of 1 January 2020.

Higher pork prices growth at the turn of 2019-2020 due to the escalation

of the ASF epidemic and slower than expected process of rebuilding the

pig herd in China.

Planned introduction of the so-called „sugar tax” as of 1 July 2020.

Higher than expected increases in tariffs on the sale and distribution of

electrical Energy.

Weaker demand pressure in the economy due to slower than expected

in the previous projection GDP growth in 2020-2021.y/y, %

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

2019 2020 2021

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Core inflation Food prices

Energy prices CPI inflation

-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%

Nov 19 Mar 20 inflation target





abroad

▪ Polish economy

▪ GDP


- Investment demand

- Foreign trade

- Changes between

rounds

▪ Inflation

- Changes between

rounds

Uncertainty

Outline:

41

Uncertainty

▪ Risk factors

▪ Fan charts


Risk area Description ImpactScale of

impact

Deterioration in the

global economic

outlook

▪ Longer and possibly more dramatic course of the coronavirus epidemic in China and its outbreak in other

countries (disruption in global value chains, problems with the supply of many technologically advanced

products, slowdown in manufacturing sector in China and its main trading partners, declining confidence of

foreign investors, stronger outflow of capital from China and a downward pressure on the Chinese juan, a

sustained slowdown in global trade and marked deterioration in business sentiment). In the extreme case

disruption in production, restrictions in the flow of people and goods transport.

▪ Escalation of current trade disputes leading to larger disturbances in the global trade, deterioration of

global economic conditions, elevated uncertainty and tensions in the financial markets (still some crucial

issues to be resolved between the United States and the European Union: subsidies for the manufacture of

large passenger airplanes, digital tax, automobile industry).

▪ Lack of a Brexit deal regulating future mutual trade relations between UE and UK (increase in uncertainty

and lower economic growth both in the UK and the EU).

▪ Large susceptibility of developing countries to global shocks and debt crises in some of these countries.

▪ Decrease in oil and other energy commodities prices.

Inflation

GDP **

Better global

economic conditions

▪ Faster control of the coronovirus outbreak.

▪ Lack of further escalation of trade disputes and a gradual rebound of global trade could bring about faster

growth in the global economy than assumed in the central scenario of the projection.

▪ More expansionary fiscal policy in some european countries.

▪ Higehr oil and other energy commodities prices.

Inflation

GDP *

Lower natural gas

prices in Poland

▪ Possible finalization in 2020 of negotiations between PGNiG and Gazprom regarding lowering of contract

prices of natural gasInflation

GDP *

Summary Inflation GDP


GDP

y/y, %

central

path

50% probability

interval

2020 3.2 2.5 3.9

2021 3.1 2.1 4.0

2022 3.0 1.9 3.8

CPI

y/y, %

below

1.5%

below

2.5%

below

3.5%

below

centr.

path

within

1.5-3.5%

range

2020 0% 7% 43% 51% 42%

2021 20% 45% 72% 51% 52%

2022 31% 55% 78% 53% 47%

CPI

y/y, %

central

path

50% probability

interval

2020 3.7 3.1 4.2

2021 2.7 1.8 3.6

2022 2.4 1.3 3.4

CPI inflation y/y, % GDP y/y, %

-2

-1

0

1

2

3

4

5

6

7

-2

-1

0

1

2

3

4

5

6

7

17q1 18q1 19q1 20q1 21q1 22q1 22q4

90% 60% 30% Central path Inflation target

-1

0

1

2

3

4

5

6

7

8

-1

0

1

2

3

4

5

6

7

8

17q1 18q1 19q1 20q1 21q1 22q1 22q4

90% 60% 30% Central path
