Fitch Ratings revised upward its real GDP growth forecast for Poland to 4.4% for 2018 from the 3.9% given in March and to 3.4% for 2019 from 3.2% before, according to its latest Global Economic Outlook published Wed. The rating agency said that the dynamics of growth had changed, with investment taking over from consumption as the fastest growing sector from Q4 2017, based on higher EU fund absorption. Consumption has held up well, though, it added. Net exports are negative, it noted. But Fitch noted that the cyclical peak likely happened in Q1, when GDP growth hit 5.2% y/y. Going forward, investment would remain strong this year, but ease as the EU fund tally edges down. The high investment will undercut net exports, it said.
The labour market is tight, a fact Fitch said it expects to erode corporate margins and lead to tighter monetary policy that will slow consumption growth. Fast wage growth was not yet stoking CPI inflation, but Fitch said that it assumes wage growth will pick up further due to a reduction in the pace of Ukrainian migrant inflows. CPI will also be fanned by higher fuel prices and modest exchange rate weakness. This is likely to lead to Monetary Policy Council hikes in H2 2019, Fitch said.
Overall, Fitch’s upgraded forecast for 2018 makes it one of the more optimistic forecasters, though it is in the ballpark of nearly all forecasts. Its 2019 forecast, however, is a tad more pessimistic than others and, though not many institutions have yet released 2020 forecasts, it is the first to be below 3%. That is much lower than the 3.7% expected by the Law and Justice (PiS) government. Should growth slow to below 3%, that would come in below potential and could start putting some pressure on public finances. That said, the FinMin has had a pretty good recent track record in its forecasting and the NBP, which tends to be accurate took, sees growth at 3.6% in 2020.