S&P Global Ratings raises its forecast for GDP growth in Poland

According to the latest Economic Outlook EMEA Emerging Markets Q3 2021 by S&P Global Ratings, emerging market economies in EMEA are recovering faster than previously expected from the Covid-19 related downturn. 

“We have raised our forecasts for GDP growth in 2021 in the key emerging markets of Poland (to 4.5 percent), Russia (3.7 percent), and South Africa (4.2 percent), and we maintain our forecast 6.1 percent growth for Turkey. This surprise upside stems chiefly from stronger-than-expected domestic demand, with consumption proving more resilient to lockdown restrictions this year than in 2020, although consumption and mobility are still highly correlated,” the report reads.

S&P stated that Polish GDP increased by a quarterly 1.1 percent in Q1, and now stands 1.7 percent below its pre-pandemic level. With a record quarterly growth rate of 18.2 percent, fixed investment was the main driver of Q1 economic growth. Exports declined slightly over the quarter, following buoyant growth over the second half of 2020, and the drop in industrial production in April points to supply chain bottlenecks that might weigh on export growth in the second quarter. 

“Headline consumer price inflation (Eurostat data) stood at an annual 4.6 percent in May, from 5.1 percent in the previous month. The national inflation reading stood at 4.8 percent in May, that is 1.3 ppts over the upper bound of the Polish central bank’s inflation target range. While the increase in energy prices is an important driver of inflation this year, core inflation has also been above the target, averaging nearly 4 percent over the first five months of the year. Elevated inflation is here to stay given the tight labor market and consequently strong upward wage pressures, a generous fiscal policy stance set to remain at least until elections in 2023, and further stimulus from the Next Generation EU fund. In this context, the central bank is likely to raise rates earlier than we expected in our last forecast, probably in mid-2022,” the report reads.

Experts from S&P warn that though Poland is set to be one of the main beneficiaries of the Next Generation EU plan, receiving €23.9 billion (4.6 percent of 2020 GDP) in grants and at least €12 billion in loans from the Recovery and Resilience Facility alone, yet any delays in the implementation of the national recovery plan, or a lower fiscal multiplier constitute the main risks to their economic growth forecast.

(WBJ)