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 consumptionGross capital formation Net exportsGDP
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 2019US ChinaOther emerging markets Other advanced economiesOther 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
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
P
20
20
P
20
21
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 payroll employment (%, y/y, RHS)
Inflation and economic growth projection of the NBP 13
Downside risk to gentle downward trajectory of GDP growth in China due to trade dispute with the US
GDP growth in China (%, y/y)Industrial production and retail sales
(%, y/y, 3-month moving average)
Exports from China to selected countries (%, y/y, 3-month moving average)Selected subindices of PMI NBS
in manufacturing (p.)
5.5
6.0
6.5
7.0
7.5
I II III IV I II III IV I II III IV I II III IV I II III IV I II III
2015 2016 2017 2018 2019 2020
actual Bloomberg
4
5
6
7
8
9
10
11
2016 2017 2018 2019
Industrial production Retail sales
45
46
47
48
49
50
51
52
53
54
55
2016 2017 2018 2019New export orders Imports
New domestic orders Production
-20
-10
0
10
20
30
2016 2017 2018 2019
EU US ASEAN Japan
Source: Datastream, Markit Economics, EAD calculations.
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
14
Polish economy
Gross domestic product
Inflation and economic growth projection of the NBP 15
Still high economic growth in 19Q1
18q4 19q1
GDP (y/y) (%) 4.9 (4.9) 4.7 (4.2)
Domestic demand (y/y) (%) 4.8 (4.3) 4.2 (4.0)
Household consumption (y/y) (%) 4.2 (4.2) 3.9 (4.1)
Public consumption (y/y) (%) 4.7 (4.6) 6.4 (4.4)
Gross fixed capital form. (y/y) (%) 8.2 (6.9) 12.6 (5.9)
Exports (y/y) (%) 7.9 (7.2) 5.9 (5.3)
Imports (y/y) (%) 7.8 (6.1) 5.0 (4.9)
Net exports contribution (pp.) 0.3 (0.7) 0.7 (0.3)
Values from the March projection are given in brackets (19q1 seasonally adjusted). Indicators with values
higher than in the March projection are marked green, and indicators with lower values are marked red.
Source: GUS data, NBP calculations.
-8
-4
0
4
8
12
-8
-4
0
4
8
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
PMI Poland and business sentiment (GUS) – general expected economic conditions (s.a.)
industry construction trade PMI Poland (RHS)
Inflation and economic growth projection of the NBP 16
-3
-2
-1
0
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
4
5
6
7
18q1 19q1 20q1 21q1 21q4
Consumption Gross fixed capital formation
Change in inventories Net exports
GDP
… GDP growth will gradually moderate due to an ongoing lower economic activity in the euro area
and a slowdown in EU funds absorption growth.
Private consumption as the main driver of GDP growth in
projection horizon.
Significant acceleration of private investment in 2019 –
high growth rate of business investment, accompanied by
still relatively strong demand for housing.
Weakening of gross fixed capital formation growth in
2020-2021.
Slightly negative net exports’ contribution over the
projection horizon.
y/y, % 2018 2019 2020 2021
GDP 5.1 4.5 4.0 3.5
Source: GUS data, NBP calculations.
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
17
Consumption demand
Inflation and economic growth projection of the NBP 18
Private consumption:
Spread-out impact of already introduced or planned fiscal changes significantly
increasing expenditures on social benefits and lowering tax burden.
Favourable, from the point of view of employees, labour market conditions.
Low interest rates facilitate financing consumption through borrowing.
In the longer term:
Weakening of wage growth in 2020-2021.
Gradual fading-out of the fiscal stimulus in 2021.
Public consumption:
2019 Budget Act – increase in wages in the budget sector and selected
professional groups (i.a. teachers, academic teachers and employees of
uniformed services).
Approved by the government, an average annual increase in wages in the
budget sector of 6% in 2020.
Lack of detailed information on the public consumption expenditure in 2021.
Consumptiom demand remains the main driver of GDP growth over the projection horizon
y/y, % 2018 2019 2020 2021
Household consumption 4.5 4.4 4.4 3.8
Public consumption 4.7 5.4 4.4 3.4
Source: GUS data, NBP calculations.
-8
-4
0
4
8
12
-8
-4
0
4
8
12
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 21q4
Household consumption (y/y, %)
Public consumption (y/y, %)
Consumer confidence indicators
Consumption forecast
-50
-40
-30
-20
-10
0
10
20
2008 2010 2012 2014 2016 2018
current (BWUK) leading (WWUK)
Inflation and economic growth projection of the NBP 19
Very good financial situation of households. Gradual decline in disposable income growth in 2020-2021.
Values from the March projection are given in brackets (seasonally adjusted). Indicators with values higher
than in the March projection are marked green, whereas indicators with lower values are marked red.
Source: GUS data, NBP calculations.
18q4 19q1
ULC (y/y, %) 2.8 (3.3) 1.9 (3.5)
Labour productivity (y/y,%) 4.9 (3.9) 5.2 (3.6)
Gross wages (y/y, %) 7.7 (7.3) 7.1 (7.3)
Employment LFS (y/y, %) 0.0 (0.9) -0.4 (0.6)
Unemployment rate LFS (%) 3.8 (3.6) 3.8 (3.5)
Participation rate (%) 56.2 (56.4) 56.3 (56.6)
Financial situation of households and fear of being unemployed
-4
-2
0
2
4
6
8
-4
-2
0
2
4
6
8
18q1 19q1 20q1 21q1 21q4
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, %)
-40
-20
0
20
40
60
80
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Current financial situation of householdFinancial situation of household in the next 12 monthsFear of being unemployed
Inflation and economic growth projection of the NBP 20
Source: GUS data, NBP calculations.
Unemployment rate remains low – currently also due to negative demographic factors
Registered and LFS unemployment rate (%)
10.4%
7.0%
LFS unemplyment rate 3.8%
Registered unemployment
rate
5.4%
0%
5%
10%
15%
20%
25%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Unemployment rate changes – decomposition (y/y, p.p., LFS data)
-300
-200
-100
0
100
200
300
400
500
-300
-200
-100
0
100
200
300
400
500
18q1 19q1 20q1 21q1 21q4
Demographic structurePopulationParticipation rate (population 60/65+ years of age)Participation rate (population 45-59/64 years of age)Participation rate (population 25-44 years of age)Participation rate (population 15-24 years of age)Labour force
Changes in labour force, thous. y/y
53
54
55
56
57
96
98
100
102
104
106
108
05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q121q4
LFS population (2005q1=100%)
Economically active (s.a., 2005q1=100%)
Participation rate (s.a., RHS)
-6
-5
-4
-3
-2
-1
0
1
2
3
2007 2009 2011 2013 2015 2017 2019
Change in participation rate
Change in employment
Change in population
Change in unemployment rate (y/y, pp)
Inflation and economic growth projection of the NBP 21
Source: GUS data, NBP calculations.
Supply constraints translate into lower employment growth
Employment in the corporate sector LFS employment by sectors (s.a., y/y, %)
-2%
-1%
0%
1%
2%
3%
4%
5%
5,000
5,200
5,400
5,600
5,800
6,000
6,200
6,400
2012 2013 2014 2015 2016 2017 2018 2019
y/y, LHS s.a., RHS
-4.5%
-0.7%
1.0%
-9%
-6%
-3%
0%
3%
6%
9%
12%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Agriculture Industry and construction Services
39.0
39.5
40.0
40.5
41.0
41.5
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Temporary work contract, ppPermanent work contract, ppEmployees, % y/y, s.a.Weekly number of hours worked, s.a., RHS
Employees by type of contract and number of hours worked (LFS)
-2%
0%
2%
4%
6%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Employees, ppSelf-employed in agriculture, ppSelf-employed excl. agriculture, ppContributing family workers, ppTotal employment, % y/y, s.a.
Employed persons by employment status (% and pp, y/y)
Inflation and economic growth projection of the NBP 22
Source: GUS data, NBP Quick Monitoring, NBP Annual Survey, NBP calculations.
Labour demand stabilised at a high level
Vacancies
Share of companies reporting difficulties with finding new
employees as a barrier for expansion
54
55
56
57
-2
-1
0
1
2
3
4
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 21q4
Employment (y/y, %) Participation rate (%, RHS)
Employment forecast indicator (NBP Annual Survey) and net balance of
companies increasing and decreasing employment (GUS) [in pp.]
Employment and participation rate forecast
0%
2%
4%
6%
8%
10%
12%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
70
80
90
100
110
120
130
140
150
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
180 000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Number of vacancies within a month, s.a., LHS
Number of non-subsidized vacancies within a month, s.a., LHS
Inverse of labour market indicator, RHS
-30
-20
-10
0
10
20
30
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
GUS employment indicator, s.a.
Inflation and economic growth projection of the NBP 23
Wage growth will decline over the projection horizon
Nominal wages
(% y/y, s.a., last data point 18Q4)
Source: GUS, NBP Quick Monitoring, MoF, NBP calculations.
Increase in wage pressure and wage growth exceeding labour productivity
(share of enterprises) Wage growth forecast (y/y, %)
-2
0
2
4
6
8
-2
0
2
4
6
8
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 21q4
Nominal wages (y/y, %) Real wages (y/y, %)
Wage fund* in the public sector (current prices, y/y, w %)
* Wage fund including social insurance contributions paid by employer
0
4
8
12
16
20
24
28
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
firms with wage growth faster than productivity growth
firms with increasing wage pressure
0
1
2
3
4
5
6
7
8
0
1
2
3
4
5
6
7
8
9
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
6.3%
7.3%
0%
2%
4%
6%
8%
10%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
public sector private sector
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
24
Investment demand
Inflation and economic growth projection of the NBP 25
Public investment:
Still positive, but lower than last year, growth in EU funds absorption in
2019.
Decrease in EU funds absorption in 2020-2021.
Private investment:
Currently favorable demand conditions.
High level of capacity utilisation, accompanied by a low investment rate.
Low interest rates.
Good financial situation of households.
Difficulties with finding employees.
Delayed effects of a slowdown in foreign demand growth.
Decreasing contribution of EU funds absorption for the private sector.
Gradual reduction in housing expenditure growth.
Marked acceleration of private investment in 2019, accompanied by lower public investment growth
y/y, % 2018 2019 2020 2021
Gross fixed capital formation 8.7 8.6 4.8 2.6
Source: GUS data, NBP calculations.
-2
0
2
4
6
8
10
12
14
-2
0
2
4
6
8
10
12
14
18q1 19q1 20q1 21q1 21q4
Public sectorPrivate sectorGross fixed capital formation (y/y, %)
Inflation and economic growth projection of the NBP 26
Public investments growth, including those financed with EU funds, will decline,
mainly due to local governments
Investment expenditures of local governments (y/y, %, current prices) Contributions to public investment growth (% y/y , current prices)
Public investment expenditures (bn PLN, current prices) Absorption of EU funds for public investment, % GDP
Source: GUS, Eurostat, MF, MIiR, NBP calculations. F – EAD forecast
-60
-40
-20
0
20
40
60
80
100
08q1 09q1 10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1
Election year
Post-election year
0
20
40
60
80
100
120
ou
ttu
rn
ou
ttu
rn
ou
ttu
rn
ou
ttu
rn
ou
ttu
rn
VII 2
01
9
III
20
19
VII 2
01
9
III
20
19
VII 2
01
9
III
20
19
2014 2015 2016 2017 2018 2019F 2020F 2021F
National EU
0.0
0.4
0.8
1.2
1.6
2.0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019F
2020F
2021F
Framework 2007-2013 Framework 2014-2020
-30
-20
-10
0
10
20
30
40
2013 2014 2015 2016 2017 2018 2019P 2020P 2021P
Local governments
Other
Total
Inflation and economic growth projection of the NBP 27
Decomposition of NFC’s investment growth by firms’ share of revenues
from export (pp, y/y, current prices)
Source: GUS data, NBP calculations.
Expected increase in business investment growth in 2019, and then its gruadual decline
Absorption of EU funds for businesses, % GDP
Investment expenditure of medium and large non-financial corporations
(NFC) by ownership (pp. y/y, current prices)
NFC’s investments expenditures by assets (% y/y, current prices)
-25
-15
-5
5
15
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
private domestic public foreign other
-60
-40
-20
0
20
40
60
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
buildings and structures
machinery, technical equipment and tools
transport equipment
-25
-15
-5
5
15
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
no exports 1-49% 50%+
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019F
2020F
2021F
Framework 2007-2013 Framework 2014-2020
F – EAD forecast
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
28
Foreign trade
Inflation and economic growth projection of the NBP 29
-4
-3
-2
-1
0
1
2
3
4
5
-20
-15
-10
-5
0
5
10
15
20
25
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 21q4
Net exports contribution (pp, RHS)
Exports (y/y) (%)
Imports (y/y) (%)
Source: GUS data, NBP calculations.
Relatively high net exports’ contribution to growth in 19Q1 despite an ongoing slowdown in the euro area
Net exports:
Still relatively high competitiveness of the Polish economy.
High share of consumption goods in Polish exports,
compared to other countries in the region.
Slowdown in global trade and weaker economic growth in
the euro area in 2019-2021.
Continued high domestic demand growth.
y/y pp 2018 2019 2020 2021
Net exports
contribution to growth-0.2 -0.2 -0.3 -0.1
Inflation and economic growth projection of the NBP 30
Source: GUS data, OECD, Eurostat, NBP calculations.
Structural conditions of the Polish exports cushioned a slowdown in global trade
■ Consumption demand exhibits lower sensitivity to business cycle than investment demand – higher share of consumption in exports
may be considered a structural condition, partly mitigating weakening in global trade.
■ Price and cost competitiveness of the Polish economy remains high.
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
consumption investment
Share of consumption and investment final demand
in the exported value added in 2014 (%)
0
5
10
15
20
25
30
35
40
45
Poland Hungary Slovakia Czech Rep. Germany
Private sector Manufacturing
Hourly labour costs in the private sector and manufacturing in 2018 (EUR)
Inflation and economic growth projection of the NBP 31
Still high positive current and capital account balance in 2019 and its small decrease afterwards
Current and capital account balance (% GDP)
Source: GUS data, NBP calculations.
Polish exports of services (current prices, % and pp, y/y)
Share of services in exports and GDP (current prices, %)
-5
0
5
10
15
20
2012 2013 2014 2015 2016 2017 2018
Transport Other business services IT services
Foreign travel Processing Other
Total
0
5
10
15
20
25
2012 2013 2014 2015 2016 2017 2018
share of services' exports in GDP (%) share of services in exports (%)
-6
-4
-2
0
2
4
6
-6
-4
-2
0
2
4
6
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Remittances
Primary income
Secondary income
Goods and services
Current and capital account (% GDP)
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
32
Inflation
Polish economy
Inflation and economic growth projection of the NBP 33
Slight decrease in CPI inflation in 19Q1 due to lower energy prices inflation.
Increase in core inflation, caused mainly by higher prices of services.
Source: GUS data, NBP.
CPI and core inflation (y/y, %) Main core inflation components (y/y, %)
Decomposition of services prices inflation (pp)
Values from the March projection are given in brackets
(seasonally adjusted).
Indicators with values higher than in the March projection
are marked green, whereas indicators with lower values are
marked red
-2
-1
0
1
2
3
4
2013 2014 2015 2016 2017 2018 2019
Core inflation Services Goods
-2
0
2
4
6
-2
0
2
4
6
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CPI Inflation target Core inflation
y/y, % 18q4 19q1
CPI inflation 1.4 1.2 (1.3)
Core inflation 0.7 1.1 (1.2)
Food prices 1.1 1.8 (1.5)
Energy prices 4.1 0.8 (1.4)
-1.5
-0.5
0.5
1.5
2.5
3.5
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
2018 2019
Other services Transport services Restaurants and hotels
Communication Insurance services Recreational and cultural services
Healthcare services Housing services Services
Inflation and economic growth projection of the NBP 34
Source: GUS data, NBP calculations.
CPI inflation will accelerate from last year’s low level (of 1.6%), staying within a permissible fluctuation
band of the inflation target over the projection horizon
Delayed effect of a current increase in cost pressure, stemming from
the labour market, and in demand pressure.
Stabilisation and decrease in cost and demand pressure over the
longer projection horizon.
Low inflation outside the Polish economy.
Złoty appreciation.
Increase in meat and cold meats prices due to the ASF epidemic in
China.
Low energy commodity prices.
Freezing of electricity prices for end-users in 2019 at the 2018 level,
permanent reduction in excise duty and interim fee, and
compensations paid to power companies in 2019.
Increase in electricity prices in 2020-2021 (phased effect of higher
production costs due to an increase in coal and CO2 emission
allowances prices).
y/y, % 2018 2019 2020 2021
CPI inflation 1.6 2.0 2.9 2.6
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q121q4
Core inflation Food prices
Energy prices CPI inflation
Inflation and economic growth projection of the NBP 35
Further increase in core inflation in the coming quarters due to rising labour costs and high demand
-3
-2
-1
0
1
2
3
4
5
6
-3
-2
-1
0
1
2
3
4
5
6
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q121q4
Output gap (% potential output)
GDP (y/y, %)
Potential output (y/y, %)
Source: GUS data, NBP calculations.
-1
0
1
2
3
4
5
6
-1
0
1
2
3
4
5
6
TFP Capital
NAWRU Economically active pop.
Potential output
-2
0
2
4
6
8
-2
0
2
4
6
8
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 21q4
Nominal wages (y/y, %) Labour productivity (y/y, %)
ULC (y/y, %)
-6
-4
-2
0
2
4
6
8
10
12
-6
-4
-2
0
2
4
6
8
10
12
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q121q4
y/y, % Import prices excl. oil and gas prices (y/y) (%)Import prices (y/y) (%)
Inflation and economic growth projection of the NBP 36
Inflation outside the Polish economy will remain moderate
Source: BEA, CBO, EAD calculations, Eurostat, OECD, Datastream, ONS.
Inflation (%, y/y) Core inflation in selected economies (%, y/y)
United States: output gap (%) and GDP deflator (%, y/y) Euro area: output gap (%) and value added deflator (%, y/y)
-2
-1
0
1
2
3
2015 2016 2017 2018 2019P 2020P 2021P
Output gap GDP deflator Output gap (forecast) GDP deflator (forecast)
-2
-1
0
1
2
3
2015 2016 2017 2018 2019P 2020P 2021P
Output gap VA deflator
Output gap (forecast) VA deflator (forecast)
0
1
2
3
4
5
6
2012 2013 2014 2015 2016 2017 2018 2019
Global economy Advanced economies Emerging markets
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2012 2013 2014 2015 2016 2017 2018 2019
Japan Euro area UK US
Inflation and economic growth projection of the NBP 37
After temporary increase in 19H1, oil price is expected to gradually decline due to increasing
production in the US and weakening demand
Source: GUS data, Bloomberg, Reuters, EIA, NBP calculations.
Global production, consumption, and changes in crude oil inventories (mln b/d)
Market crude oil inventories in the US (mln b/d)Energy commodity prices index (USD, 2011=1) and crude oil prices (USD/b)
in the projection
0
20
40
60
80
100
120
140
0.2
0.4
0.6
0.8
1.0
1.2
1.4
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 21q4
Energy commodity price index (LHS) Brent oil (RHS)
300
350
400
450
500
550
600
2014 2015 2016 2017 2018 2019 2020
Inventories
-2
-1
0
1
2
3
4
5
6
85
90
95
100
105
2014 2015 2016 2017 2018 2019 2020 2021
Change in global crude oil inventories (implied, RHS)
Global crude oil production
Global crude oil consumption
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2018 2019 2020
OPEC North America Eurasia South America Other non-OPEC countries
Changes in production of crude oil and liquid fuels in the world (mln b/d)
Inflation and economic growth projection of the NBP 38
Expected increase in meat and cold meats prices due to the ASF epidemic in China
Source: USDA,FAS, European Commission, GUS data, NBP calculations.
Food prices inflation (%, y/y) and index of agricultural commodity prices
-5.0
-3.0
-1.0
1.0
3.0
5.0
7.0
0.6
0.7
0.8
0.9
1.0
1.1
1.2
12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 20q1 21q1 21q4
Index of agricultural commodity prices (EUR, 2011=1)
Food price inflation (RHS)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
-20
-15
-10
-5
0
5
10
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019F
China EU
Change in pig population in China and European Union (%, y/y)
-20%
-10%
0%
10%
20%
30%
40%
50%
China Japan South Korea Philippines Hong Kong US Other
Change in pork exports from EU (Jan-Mar 2019, y/y)
Share of major trading partners in extra-EU pork exports(Jan-Mar 2019)
Pork exports from the EU in 19Q1 (%, y/y)
and major trading partners’ shares (%)
Decomposition of food prices inflation (pp y/y)
-2
0
2
4
6
8
2017 2018 2019
Oil and fats Milk, cheese and eggsFruit, vegetables MeatOther (fish, bread, confectionary, beverages) Food and non-alcoholic beverages
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
39
Uncertainty
▪ Risk factors
▪ Fan charts
Inflation and economic growth projection of the NBP 40
Risk area Description ImpactScale of
impact
Deterioration in the
global economic
outlook
▪ Escalation of current trade disputes and further spreading of protectionism, leading to larger disturbances in
the global trade, deterioration of economic conditions, elevated uncertainty and tensions in the financial
markets.
▪ Lower economic growth in the United States due to trade disputes and bigger drop in equity prices on
american stock exchange.
▪ Significant decline in economic growth in the euro area as a consequence of the imposition by the US of
duties on cars produced in the EU (crisis in the automotive industy and deterioration of economic activity in
other export-oriented industries).
▪ The United Kingdom's withdrawal from the European Union without prior agreement on the terms of future
cooperation – so called no-deal brexit (increase in uncertainty and lower economic growth both in the UK
and the EU)
Inflation
GDP
**
Impact of the energy
sector on inflation in
Poland
▪ Demand and supply shocks on global markets of oil and other energy commodities.
▪ Regulatory changes on the domestic electricity market.
▪ Scale and timing of the impact of the increase in wholesale electricity prices on the tariffs for end users.
Inflation
GDP *
Labour supply in
Poland
▪ Uncertainty related to the scale of reemigration of Ukrainian workers from Poland due to changes in law in
other EU countries, which will make it easier to employ the citizens of non-EU countries.Inflation
GDP *
Better economic
conditions abroad
and fiscal policy
▪ Higher economic growth abroad translating into higher domestic activity and into an increase in fiscal
revenues which results in more fiscal space and more expansionary fiscal policy than assumed in the
baseline scenario (which is based on the estimates contained in the April’s Convergence Programme).
Inflation
GDP *
Summary Inflation GDP
Inflation and economic growth projection of the NBP 41
GDP
y/y, %
central
path
50% probability
interval
2019 4.5 3.9 5.1
2020 4.0 3.0 4.8
2021 3.5 2.4 4.3
Source: GUS data, NBP calculations.
CPI
y/y, %
below
1.5%
below
2.5%
below
3.5%
below
centr.
path
within
1.5-3.5%
range
2019 14% 85% 100% 51% 86%
2020 18% 42% 70% 53% 53%
2021 31% 54% 77% 55% 46%
CPI
y/y, %
central
path
50% probability
interval
2019 2.0 1.7 2.3
2020 2.9 1.9 3.7
2021 2.6 1.3 3.5
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
16q1 17q1 18q1 19q1 20q1 21q1 21q4
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
16q1 17q1 18q1 19q1 20q1 21q1 21q4
90% 60% 30% central path