BRE: Poland is paying for lower inflation with slower GDP growth

BRE Bank is warning that its economic growth forecast of 4% could prove overly optimistic, even though at the time of its publication it was considered pessimistic. The bank believes that slower growth is the price Poland is paying to curb inflation, as according to its calculations when the inflation rate drops by 1 point, GDP growth is 0.3 points lower. BRE's chief economist, Janusz Jankowiak, named three key reasons why growth could turn out to be lower than 4%: lack of serious tightening of fiscal policy, drop in foreign demand and the Monetary Policy Council's (RPP) decision to maintain high interest rates. Jankowiak expects real interest rates to stay high this year. He said that the RPP would lower them by a maximum of 3.5 points this year, in three or four separate cuts. BRE now claims that 4% is the maximum growth Poland can hope for this year, with GDP increasing by no more than 2% in the first quarter. The budget draft forecasts GDP growth at 4.5%. (Gazeta Wyborcza, p.17) T.J.