Download - Inflation and economic growth projection of Narodowy Bank ... · Jan.20 Feb.20 Mar.20 Apr.20 May.20 Jun/20 Inflation and economic growth projection of the NBP 11 Source: Eurostat,

Economic Analysis Department

Warsaw / 17th July 2020

Inflation and economic growth projection

of Narodowy Bank Polski

based on the NECMOD model

Outline:

Inflation and economic growth projection of the NBP

Epidemic vs economy

Projection 2020 – 2022

▪ Economic condtions

abroad

▪ Foreign trade

▪ Labour market

▪ Consumption demand

▪ Investment demand

▪ GDP

▪ Inflation

Uncertainty

2

1 Epidemic vs economy

2 Projection 2020 - 2022

3 Uncertainty

Outline

Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

3

Epidemic vs economy


Epidemic results in the profound slowdown in economic activity.

4

Source: GUS, Polskie Sieci Elektroenergetycze data, Instytut Meteorologii i Gospodarki Wodnej, meteomodel.pl, Google LLC, StalExport Autostrady S.A, NBP calculations.

Change in annual electric energy consumption* (Monday – Friday, 8-16 o’clock, %)

-16-14-12-10-8-6-4-20

Feb

.20

Mar

.20

Apr

.20

May

.20

Jun.

20

30 M

ar-0

3 A

pr

06 A

pr-1

0 A

pr

13 A

pr-1

7 A

pr

20 A

pr-2

4 A

pr

27 A

pr-0

1 M

ay

04 M

ay-0

8 M

ay

11 M

ay-1

5 M

ay

18 M

ay-2

2 M

ay

25 M

ay-2

9 M

ay

01 J

un-0

5 Ju

n

08 J

un-1

2 Ju

n

15 J

un-1

9 Ju

n

22 J

un-2

6 Ju

n

29 J

un-0

3 Ju

l

* Data corrected for meteorological and callendar effects

Change in population traffic relative to typical values in selected locations

(moving average)

-80

-60

-40

-20

0

20

40

60

80

15 F

eb

22 F

eb

29 F

eb

07 M

ar

14 M

ar

21 M

ar

28 M

ar

04 A

pr

11 A

pr

18 A

pr

25 A

pr

02 M

ay

09 M

ay

16 M

ay

23 M

ay

30 M

ay

06 J

un

13 J

un

20 J

un

27 J

un

Trade and entertainment (shopping centers, restaurants, cinemas)

Grocery stores and pharmacies

-80

-60

-40

-20

0

20

03 F

eb-0

9 F

eb

10 F

eb-1

6 F

eb

17 F

eb-2

3 F

eb

24 F

eb-0

1 M

ar

02 M

ar-0

8 M

ar

09 M

ar-1

5 M

ar

16 M

ar-2

2 M

ar

23 M

ar-2

9 M

ar

30 M

ar-0

5 A

pr

06 A

pr-1

2 A

pr

13 A

pr-1

9 A

pr

20 A

pr-2

6 A

pr

27 A

pr-0

3 M

ay

04 M

ay-1

0 M

ay

11 M

ay-1

7 M

ay

18 M

ay-2

4 M

ay

25 M

ay-3

1 M

ay

01 J

un-0

7 Ju

n

08 J

un-1

4 Ju

n

15 J

un-2

1 Ju

n

22 J

un-2

8 Ju

n

29 J

un-0

5 Ju

l

cars trucks

Change in vehicle traffic on A4 highway Katowice – Kraków (%, y/y) Total retail sale and a sector with the deepest fall (constant prices, y/y)

-80

-60

-40

-20

0

20

40

60

80

-80

-60

-40

-20

0

20

40

60

80

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

total textiles, clothing


Substantial fall in foreign demand and supply network disruptions.

5

Source: OECD, Univercity of Oxford, GUS, IHS Markit, NBP calculations.

GDP growth in 2020Q1 (%, q/q, Y axis) vs average OSI level

Industrial production

-30%-25%-20%-15%-10%-5%0%5%10%15%

90

100

110

120

130

140

2017

.06

2017

.08

2017

.10

2017

.12

2018

.02

2018

.04

2018

.06

2018

.08

2018

.10

2018

.12

2019

.02

2019

.04

2019

.06

2019

.08

2019

.10

2019

.12

2020

.02

2020

.04

growth y/y (RHS) index 2015=100 s.a.

Production in export and non-export sectors (01.2014 = 100, s.a.)

90

100

110

120

130

140

150

160

2014 2015 2016 2017 2018 2019 2020

Export Non-export

France

Germany

Italy

Korea

Poland

Slovakia

Spain

Sweden

USA

China

Hong Kong

-12

-10

-8

-6

-4

-2

0

2

0 10 20 30 40 50

30

35

40

45

50

55

Suppliers' Delivery Times Index

Stocks of Purchases Index

PMI components for Poland – suppliers’ delivery times index and stocks of

purchases index

Inflation and economic growth projection of the NBP 6

Economic growth in Poland plummeted in 2020Q2

20q1 20q2*

GDP (y/y) (%)2.0 (2.9) -10.6 (3.0)

Domestic demand (y/y) (%)1.7 (2.9) -11.1 (3.0)

Household consumption (y/y) (%)1.2 (3.7) -12.0 (3.8)

Public consumption (y/y) (%)4.3 (3.5) 7.0 (5.0)

Gross fixed capital form. (y/y) (%)0.9 (4.2) -18.5 (4.3)

Exports (y/y) (%)0.6 (2.9) -22.3 (4.4)

Imports (y/y) (%)-0.2 (2.8) -24.5 (4.4)

Net exports contribution (pp.)0.4 (0.1) 0.0 (0.1)

Values from the March projection are given in brackets (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.

30

35

40

45

50

55

60

-80

-70

-60

-50

-40

-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)

-16

-12

-8

-4

0

4

8

12

-16

-12

-8

-4

0

4

8

12

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

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

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

* Nowcasting for 2020Q2

* Forecast for 2020Q2

Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

7

Projection 2020-2022


Assumptions

■ Lack of explicit second wave of epidemic in Europe, although possible temporary

increases in the numer of newly infected.

■ Gradual lifting of restrictions – however part of them will be maintained untill the

widespread use of vaccine / effective medical treatment.

■ Sustained uncertainty and an increase in marginal propensity to save due to

precautionary motive.

■ Gradual phasing out of fiscal programs in 2020Q3.

8

Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

9

Projection 2020-2022

Economic conditions abroad


After marked slowdown in 1st half of 2020, slow rebound in the global economic activity.

Source: Bloomberg, IHS Markit, OECD, NBP calculations.

GDP in the global economy (%, q/q, sa)

GDP y/y, % 2020 2021 2022

Euro area -9.1 5.2 3.2

Germany -6.7 5.4 3.0

Great Britain -9.6 5.1 3.3

USA -5.7 3.4 2.7

China 1.1 7.0 5.0

GDP forecast in selected economies

Factors affecting the forecast:

Stabilisation of epidemic situation in Europe and gradual lifting of

restrictions.

Monetary and fiscal loosening worldwide.

High uncertainty related to the future pandemic development and

economic outlook

Weak outlook for emerging markets.

Brexit

PMI Manufacturing in selected economies

-5

-4

-3

-2

-1

1

2

3

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

World Developed economies Emerging economies

20

30

40

50

60

US

Eur

o ar

ea

Japa

n

Gre

at B

ritai

n

Chi

na

Indi

a

Bra

zil

Jan.20 Feb.20 Mar.20 Apr.20 May.20 Jun/20


Source: Eurostat, Google Mobility Reports, Ministry of Labour – France and Germany, NBP calculations.

Index of mobility in sale and recreation

Anti-crises measures in euro area countires (% of GDP)

Decomposition of changes in GDP in euro area (% and p.p.)

GDP dynamics in EA countries in 2020Q1 (% q/q)

Euro area: high disparity in economic consequences of pandemic in EA countires.

-6

-5

-4

-3

-2

-1

0

0

10

20

30

40

50

Direct measures Indirect measures

-100

-80

-60

-40

-20

0

20

7 Mar 21 Mar 4 Apr 18 Apr 2 May 16 May 30 May 13 Jun 27 Jun

France Italy Germany Spain

-15

-10

-5

0

5

10

2020 F 2021 F 2022 F

GFCF Individual consumption

Collective consumption Net export

Changes in inventories GDP


United States: gradual rebound in economic growth and marked support from fiscal and monetary policy.

Source: BAE, BLS, Homebase, OpenTable, Transportation Security Administration, NBP calculations.

Changes in non-agricultural employment (mln of workplaces, y/y sa)

Disposible income in US (USD, per capita)

Indexes of economic conditions for US economy (points, sa)

Decomposition of average annual real GDP growth (%)

30

35

40

45

50

55

60

65

2007 2011 2015 2019

Manufacturing Services

-25

-20

-15

-10

-5

0

5

-25

-20

-15

-10

-5

0

5

2018 2019 2020

Government sector Services sector

Goods producing sector Non-agricultural sector

-10.0

-5.0

0.0

5.0

2020 F 2021 F 2022 F

Individual consumption Private GFCF Change in inventories

Net exports Collective consumption GDP

0

5

10

15

20

25

30

35

40

0

2

4

6

8

10

12

14

16

2018 2019 2020

Transfers (% of disp.income, RHS) Disposible income (%, y/y, LHS)

Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

13

Polish economy

Foreign trade


-50

-40

-30

-20

-10

0

10

20

IT RU CZ FR ES GB DE BE NL CN US KR

14

Slump in foreign trade turnover due to COVID-19

Dynamics of exports of goods (y/y, %, April 2020)

Dynamics of imports of goods (y/y, %, April 2020)

Dynamics of imports and exports to main trading partners, April 2020

Exports’ dynamics by manufacturing sectors, April 2020

Source: GUS, WIOD, NBP calculations.

NOLT

TR

DK

RO

UAATHU

SK SE

BEES

US

GB

CN

NL

RUCZFR

IT

DE

-50

-40

-30

-20

-10

0

10

-60 -50 -40 -30 -20 -10 0 10

Import

dynam

ics, y/y

, %

Exports dynamics, y/y, %

*the marker size corresponds to the share in the Polish foreign trade-60

-50

-40

-30

-20

-10

0

IT ES FR SK HU CZ GB NL DE RU SE US

-80

-60

-40

-20

0

20

40investment and durable consumer goods other goods


-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

55

60

65

70

75

80

85

90

95

100

105

110

115

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

Net exports contribution (p.p., RHS)

Exports (index: Q4 2019 = 100, sa, left axis)

Imports (index: Q4 2019 = 100, sa, left axis)

Downturn in exports and imports, sustained decrease in trade dynamics.

y/y pp. 2019 2020 2021 2022

Net exports

contribution to growth1.2 0.4 0.3 -0.1

Net exports’ contribution to GDP growth

-6

-4

-2

0

2

4

6

8

10

-6

-4

-2

0

2

4

6

8

10

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.

Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

16

Labour market


The government has undertaken extensive anti-crisis measures financed with domestic funds

and EU funds

Impact of anti-crises measures on the GG balance (ESA 2010) in

2020 (bn PLN)EU funds absorption under cohesion policy,

highliting amounts allocated for anti-crisis measures (bn PLN)

Source: ZUS, MRPiPS, MR, PFR, GUS, MFiPR, NBP calculations.

We assumed total cost of direct support which bear an

impact on GG balance in 2020 to equel 115 bn PLN

Additional 12,1 bn zł financed with EU funds (thus not

changing GG balance in ESA 2010 terms)

F – NBP forecast

0 10 20 30 40 50 60

Other(incl. healthcare system, tourist

voucher)

Work suspension benefits

Loans to micro-enterprises (5000 PLN)

Wage subsidies

Child care allowance

Exemption from social securitycontributions

Loans from the Polish DevelopmentFund

(the non-repayable component)

0.000

10.000

20.000

30.000

40.000

50.000

60.000

70.000

data

data

data

data

Ma

rch

data

Ma

rch

July

Ma

rch

July

Ma

rch

July

2015 2016 2017 2018 2019 2020F 2021F 2022F

anti-crisis measures



Negative impact of epidemic on the labour market, partly adjusted by reducing working time.

Vacancies and a share of surveyed companies reporting difficulties in

finding new employees as a barrier for expansion

Employment dynamics’ decomposition in enterprise sector y/y

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

05.2017 05.2018 05.2019 05.2020

Mining Manufacturing

Construction Market services

Energetics + water supply Other

average employment

Wages growth contribution by enterprise sectors (y/y, p.p.)

-2%

0%

2%

4%

6%

8%

10%

05.2017 09.2017 01.2018 05.2018 09.2018 01.2019 05.2019 09.2019 01.2020 05.2020

Manufacturing Construction

Market services Energetics and water supply

Others Mining

Average employment and the numer of employees in enterprise sector y/y

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

05.2017 05.2018 05.2019 05.2020

Average employment Number of employees

0

20

40

60

0

50

100

150

200

250

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

Tho

usan

ds

Number of vacancies within a month, s.a. LHS

Number of non-subsidised vacancies within a month, s.a., LHS

Scarce human resources, RHS


0%

2%

4%

6%

8%

10%

12%

14%

16%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

LFS unemployment rate

LFS unemployment rate forecast

Registered unemployment rate

6,1%

19

Source: GoogleTrends, average data, NBP calculations

Only a limited increase in unemployment rate.

Decomposition of changes in number of unemployed people registered in labour

offices (thous.)Registered and LFS unemployment rate (s.a.)

Interest in unemployment benefit based on internet data (index, max = 100)

55

56

57

-6

-5

-4

-3

-2

-1

0

1

2

3

4

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

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

Employment and participation rate forecast

0

20

40

60

80

100

01.2018 05.2018 09.2018 01.2019 05.2019 09.2019 01.2020 05.2020

Intensity of searching a phrase "unemployment benefit" Trend

-200

-150

-100

-50

0

50

100

150

200

250

01.2018 05.2018 09.2018 01.2019 05.2019 09.2019 01.2020 05.2020

Unregistered due to employment Unregistered due to other cause Newly registered


Labour market adjustments curbed by Anti-crises Shield.

Share of enterprises anticipating employment reduction in the coming 3 months

(business tendency GUS)

Number of employees supported by work suspansion benefits, wage subsidies related

to reduced working time and economic lockdown

(mln, as of 19.06.2020)

Source: Ministry of Development, GUS

-70

-50

-30

-10

10

30

2005 2007 2009 2011 2013 2015 2017 2019

Non-trade services wholesale trade retail trade

manufacturing construction

Number of employees supported by Anti-crises Shield (cumulative, mln;

as of 19.06.2020)

00.20.40.60.8

11.21.41.61.8

work suspension benefitsfor self-employed and persons

employed under a civil-lawcontracts

wage subsidies - EuropeanSocial Fund

wage subsidies - GuaranteedEmployment Benefit Fund

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

8 May 15 May 22 May 29 May 5 Jun 12 Jun 19 Jun

economic lockdown reduced working time work suspension benefits

Changes in average employment and numer of employees in the enterprise

sector by sections (Mar-May 2020, thous.)

* As of 10.06.2020

-120

-100

-80

-60

-40

-20

0

Employed as of the end of month Average monthly employment


Coronavirus pandemic contributes to lower effective labour supply, including decreasing

numer of imigrants.

Source: GUS, ZUS.

Passanger border traffic of foreigners on Polish borders (thous.)

LFS participation rate (y/y)People employed but not working in the week in question as the share

of the total numer of employed (%)

19.0%

8.1%6.6%

1.3%

4.6%

0.9%

0%

5%

10%

15%

20%

2020Q1 - last 2 weeks 2020Q1 - total

Total

Due to the break in company's activity

For "other reasons" (including childcare)

Crossing the border, thousands.: Balance of border

traffic, thous.to Poland from Poland

Foreigners (total) 714.8 938.0 -223.2

including citizens from:

Ukraine 407.8 567.8 -160.0

Belarus 162.7 196.7 -34.0

Russia 41.8 51.3 -9.5

Moldavia 2.6 5.2 -2.5

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

12q1 12q3 13q1 13q3 14q1 14q3 15q1 15q3 16q1 16q3 17q1 17q3 18q1 18q3 19q1 19q3 20q1

15-24 25-34 35-44 45-60/65 60/65+ Active people (LFS)

Estimated change in the numer of foreigners working in Poland (thous.)

178 196 281379

568

792891

1 001 920 904 899

7 54

6

21

5164

7469 70 71

62 6673

79

88

102

121

136130 129 133

0

500

1000

1500

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

hous

ands Effective no. of foreign workers excl. UA and BY

Effective no. of Balarusian workers in Poland

Effective no. of Ukrainian workers in Poland

Effective no. of foreign workers in Poland


Source: GUS, NBP calculations.

Falling employment in the enterprise sector in April 2020 along with a slump in wages dynamics.

Annual wage growth (%, raw monthly data, data for National Economy till 2020Q1

and for enterprise sector till May 2020)

-12

-8

-4

0

4

8

12

16

-12

-8

-4

0

4

8

12

16

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, %)

Employment and participation rate forecast (y/y, %)Dynamics of wages and labour productivity in industry (y/y, %, monthly data

till May 2020)

1.2%

0%

2%

4%

6%

8%

10%

2010 2012 2014 2016 2018 2020

Nominal wages in National Economy y/y

Nominal wages in enterprise sector y/y

-0.3%

-10.6%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2010 2012 2014 2016 2018 2020

Wages in industry y/y s.a. Labour productivity in industry y/y s.a.

20q1 20q2*

Gross wages (y/y, %) 7.7 (7.3) 1.2 (7.0)

Real wages (y/y, %) 3.0 (2.8) -2.0 (3.3)

Employment LFS (y/y, %) 0.9 (0.1) -1.9 (0.1)

ULC (y/y, %) 6.6 (4.5) 10.9 (4.1)

Labour productivity (y/y,%) 1.1 (2.8) -8.8 (2.9)

Unemployment rate LFS (%) 3.0 (3.0) 4.9 (3.0)

Participation rate (%) 56.2 (56.1) 55.8 (56.1)

Values from the March projection are given in brackets. Indicators with values higher than in the March

projection are marked green, and indicators with lower values are marked red.

* Forecast for 2020Q2

Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

23

Consumption demand


Deterioration of financial situation of households. Increased fear of being unemployed.

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 householdsfinancial situation of households in the next 12 monthsfear of being unemployed

-60

-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

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

19q1 20q1 21q1 22q1 22q4

Operating surplus Property income

Wage fund 500 plus

Net transfers and taxes excl. 500 plus Disposable income (y/y, %)

Decomposition of disposible income (constant prices) (y/y, %)



Household consumption :

Heightened uncertainty – rising savings rate.

After initial slump in employment and wages, in the longer projection

horizon only a limited improvement in labour market situation is

foreseen.

Change in the behaviour of the population due to fear of being

infected by COVID-19.

Anti-crisis Shield.

Expansive monetary policy – reducing reference rate to 0.1 p.p. and

asset purchase programme run by NBP.

Public consumption :

In 2020 increase in expenditure for healh care.

Neutral fiscal policy assumed in the longer projection horizon.

Consumption demand will gradually increase, however it will reach the level of 2019Q4 only in

the 2nd half of 2021.

y/y, % 2019 2020 2021 2022

Household

consumption3.9 -4.2 5.3 2.4

Public consumption 4.9 5.5 3.1 3.4

75

80

85

90

95

100

105

110

115

75

80

85

90

95

100

105

110

115

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

Household consumption (index: Q4 2019 = 100, sa)

Public consumption (index: Q4 2019 = 100, sa)

Consumption forecast


Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

26

Investment demand


The scale of cutting planned investment higher than in 2009.

Source: GUS, NBP.

Expected change in investment spending

(balance of changes, p.p.)

Cutting current investment (companies cutting investment as the

share of investors, %)

Expected change in investment spending and export activity

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

0

5

10

15

20

25

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

-25

-15

-5

5

15

2014 2015 2016 2017 2018 2019 2020

quarterly - no exports quarterly - exporter

annual - no exports annual - exporter

-20

-15

-10

-5

0

5

10

15

-20

-15

-10

-5

0

5

10

15

2012 2013 2014 2015 2016 2017 2018 2019 2020

annual plans quarterly plans

Investment optimism index OPTIN and investment dynamics (F01)

-10

-8

-6

-4

-2

0

2

4

6

-30

-20

-10

0

10

20

30

03.2

012

08.2

012

01.2

013

06.2

013

11.2

013

04.2

014

09.2

014

02.2

015

07.2

015

12.2

015

05.2

016

10.2

016

03.2

017

08.2

017

01.2

018

06.2

018

11.2

018

04.2

019

09.2

019

02.2

020

07.2

020

Investment (c.p., y/y, F-01)

OPTIN (y/y, s.a., RHS)


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

Source: GUS, Eurostat, Ministry of Finance, NBP calculations. All data presented in nominal terms.

F – NBP forecast

In 2020 expected increase in public investment dynamics after its slowdown in 2019.

-30

-20

-10

0

10

20

30

40

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0 F

202

1 F

202

2 F

local governments other total

-60

-40

-20

0

20

40

60

80

100

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

election year

post-election year


Private investment :

High uncertainty lowering economic agents’ propensity for long-term

commitment.

Unfavourable financial situation of large share of agents.

Low domestic and foreign demand.

Expansive monetary policy – reducing reference rate to 0.1 p.p. and

asset purchase programme run by NBP.

Public investment :

In 2020 increase in public investment related in particular to planned

construction of highways and railway, as well as government anti-

crisis measures.

Marked decrease in EU funds absorption in 2022.

Sustained drop in investment rate due to heightened uncertainty and only a slight rebound in

demand.

y/y, % 2019 2020 2021 2022

Gross fixed capital formation 7.2 -13.5 -2.0 7.9

-30

-25

-20

-15

-10

-5

0

5

10

15

20

-30

-25

-20

-15

-10

-5

0

5

10

15

20

19q4 20q1 21q1 22q1 22q4

GFCF public sector GFCF private sector GFCF

Changes in the level of investment and its decomposition

(%, reference period 2019Q4)


Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

30

Gross Domestic Product


Only a limited rebound in economic activity in the quarters to come.

Private consumption will grow gradually, however due to the

increase in uncertainty, worse labour market situation and

changes in the consumers’ preferences, the level of 2019Q4

will be reached only in the 2nd half of 2021.

Sustained drop in investment rate due to highten uncertainty,

unfavourable financial situation of companies and decrease in

EU funds absorption in 2022 to the level close to that of 2019

(in 2020-21 increase in capital transfers).

Sustained lowering of exports’ dynamics (disruptions in

global value chains, slowdown or reversal of the globalisation

process).

Anti-crisis measures run by government and Narodowy Bank

Polski.

y/y, % 2019 2020 2021 2022

GDP 4.1 -5.4 4.9 3.7

-15

-12

-9

-6

-3

0

3

6

9

-15

-12

-9

-6

-3

0

3

6

9

19q4 20q1 21q1 22q1 22q4

Private consumption Public consumption

Gross capital formation Net exports

GDP

Changes in GDP level and its decomposition

(%, reference period 2019Q4)


Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

32

Inflation


In 2020Q2 a drop in inflation due to lower food and energy prices dynamics while core inflation is

rising.

Source: GUS data, NBP.

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

3.3

4.1

-2

0

2

4

6

2013 2014 2015 2016 2017 2018 2019 2020

CPI Inflation target Core inflation

y/y, % 20q1 20q2*

CPI inflation 4.5 (4.3) 3.2 (3.6)

Core inflation 3.4 (3.3) 3.7 (3.4)

Food prices 7.7 (7.1) 6.4 (5.2)

Energy prices 3.6 (3.6) -4.3 (2.0)

CPI decomposition (p.p., y/y)

-3

-2

-1

0

1

2

3

4

5

2015 2016 2017 2018 2019 2020

Energy

Fuel

Services

Goods

Food and non-alcoholic beverages

CPI

Drop in fuel prices (slump in the global oil prices)

* NBP calculations based on GUS flash estimate for June 2020.

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.

-19.3

-25

-20

-15

-10

-5

0

5

10

15

Jan-

19

Feb

-19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-1

9

Aug

-19

Sep

-19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb

-20

Mar

-20

Apr

-20

May

-20

Jun-

20

m/m y/ydynamics


Core inflation (%, y/y)

Core inflation decomposition – data till May 2020 (y/y, p.p.) Increase in medical services prices in May 2020 (mainly dental,

hospitals and sanatoriums)

Increase in financial services prices in May 2020 (provided by

banks – higher fees for using personal account)

In 2020Q2, the increase in core inflation driven by rising prices of services, mainly market services (including

so-called COVID fee)

Source: NBP, GUS, NBP calculations.

-2

-1

0

1

2

3

4

2015 2016 2017 2018 2019 2020

Excise goods Non-food goods

Administered services Market services

Core inflation

39.3

-20

-10

0

10

20

30

40

50

Jan-

19

Feb

-19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-1

9

Aug

-19

Sep

-19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb

-20

Mar

-20

Apr

-20

May

-20

m/m y/y

9.4

-2

0

2

4

6

8

10

Jan-

19

Feb

-19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-1

9

Aug

-19

Sep

-19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb

-20

Mar

-20

Apr

-20

May

-20

m/m y/y

-2

0

2

4

6

8

2015 2016 2017 2018 2019 2020

Core inflation Services Goods

34


Low demand pressure and moderate cost pressure in the projection horizon.

-12

-9

-6

-3

0

3

6

9

12

70

75

80

85

90

95

100

105

110

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

Output gap (% potential output)

GDP (index: Q4 2019 = 100, sa, left axis)

Potential output (index: Q4 2019 = 100, sa, left axis)


-2

-1

0

1

2

3

4

5

6

-2

-1

0

1

2

3

4

5

6

TFP Capital

NAWRU Economically active pop.

Potential output (y/y, %)

-12

-8

-4

0

4

8

12

16

-12

-8

-4

0

4

8

12

16

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

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


Source: Datastream, OECD, NBP calculations.

Inflation worldwide (%, y/y) Core inflation in selected economies (%, y/y)

Brent and WTI oil prices (USD/b) VA deflator in US and euro area (%, y/y)

Demand shock related to COVID-19 pandemics markedly curb global inflation

0

1

2

3

4

5

6

2012 2014 2016 2018 2020

Global economy Developed economies Emerging economies

-2

-1

0

1

2

3

2012 2014 2016 2018 2020

Japan Euro area Great Britain United States

-60

-40

-20

0

20

40

60

80

01.2020 02.2020 03.2020 04.2020 05.2020 06.2020

Brent WTI

0.0

0.5

1.0

1.5

2.0

United States Euro area Germany

2019 2020 F 2021 F 2022 F


Low prices of energy commodities due to weak global demand.

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

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

Energy commodities’ prices index (USD, 2011=1) and crude oil prices

(USD/b) in the projection

Changes in consumption of crude oil and liquid fuels worldwide (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 index (LHS) Brent oil (RHS)

-5

0

5

10

80

85

90

95

100

105

110

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)

-4

-3

-2

-1

0

1

2

2018 2019 2020 2021

China USA India Middle East Other OECD Non-OECD

300

400

500

600

2015 2016 2017 2018 2019 2020 2021

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


Lowest CPI dynamics in 2021, in 2022 gradual growth of inflation, however lower than 2.5%.

Increase in excise duty in January 2020.

Temporary upturn in food prices inflation in the short projection

horizon due to supply constraints.

Low level of energy commodities’ prices on the global markets.

In the short-term horizon increase in costs of enterprises related to

economic restrictions.

Disruptions in global supply chains.

Dwindling demand in the middle-term horizon and its gradual

rebound in the subsequent years.

Low inflation in our main trading partners’ economies, limited

increase in 2022.

In 2021 drop in unit labour costs, moderate increase afterwards.

y/y, % 2019 2020 2021 2022

CPI inflation 2.3 3.3 1.5 2.1

-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


Outline:


Epidemic vs economy



abroad

▪ Foreign trade

▪ Labour market



▪ GDP

▪ Inflation

Uncertainty

39

Uncertainty

▪ Risk factors

▪ Fan charts

Risk area Description ImpactScale of

impact

More severe

course of the

pandemic

▪ Poland and other countries easing restrictions run the risk of the second wave of infections and the return of some

of the administrative restrictions, in other parts of the world where the numer of active cases is still increasing (e.g.

India, South America) further strong growth in the numer of newly infected.

▪ Disruptions in the global value chains.

▪ Permanent change in economic behaviour of the population (the principle of increased social distancing) – drop in

demand for some services.

▪ High uncertainty and pessimistic business sentiment – increased financial market tensions and investment

reduction.

▪ Slowdown or reversal of the globalisation process, intensification of trade disputes between the United States, the

European Union and China.

▪ Intensification of fiscal problems in the euro area countries most affected by the crisis.

▪ In consequence sustained loss of potential output (reduction in corporate investment, increase in equilibrium

unemployment rate, lower participation rate, slower growth of total factor productivity).

Inflation

GDP **

Milder course of

the pandemic

▪ In Poland and abroad no second wave of infections, discovery of effective medical treatment, faster lifting of

restrictions.

▪ Increase in optimism of economic agents, the behaviour of households and enterprises would return to a state

similar to that before the pandemic.

▪ Improvement of the global sentiment (gradual easing of tensions in world trade and an increase in international

trade volume).

▪ Possible introduction of the EU new stimulus package, the so-called Next Generation EU.

▪ Only temporary fall of potential output.

Inflation

GDP *

Prices of energy

and agricultural

commodities

▪ Volatily of the global prices of energy commodities due to changes in demand and actions taken by the major

producers.

▪ Risk of a significant deviation of meteorological conditions compared to the long-term average in countries that are

important food producers and in Poland.

Inflation

GDP *

Summary Inflation GDP


GDP

y/y, %

central

path

50% probability

interval

2020 -5.4 -7.2 -4.2

2021 4.9 2.1 6.6

2022 3.7 1.9 6.0

CPI

y/y, %

below

1.5%

below

2.5%

below

3.5%

below

centr.

path

within

1.5-3.5%

range

2020 0% 7% 71% 55% 71%

2021 65% 90% 99% 66% 34%

2022 50% 73% 91% 63% 41%

CPI

y/y, %

central

path

50% probability

interval

2020 3.3 2.9 3.6

2021 1.5 0.3 2.2

2022 2.1 0.6 2.9

CPI inflation (y/y, %) GDP level (2019Q4 = 100)

-4

-3

-2

-1

0

1

2

3

4

5

6

7

-4

-3

-2

-1

0

1

2

3

4

5

6

7

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

90% 60% 30% central path inflation target

80

85

90

95

100

105

110

115

80

85

90

95

100

105

110

115

19q4 20q2 20q4 21q2 21q4 22q2 22q4

90% 60% 30% central path
