Macroeconomic environment

In 2016 Polish economy remained on the growth path, but the pace of growth has decelerated. Gross Domestic Product in 2016 grew, in real terms, by 2.8% after growing by 3.9% in 2015, much slower as compared to the expectations from the beginning of 2016. Investment slump pushed GDP growth down while consumption accelerated fuelled by social spending as well as favourable labour market conditions. Private consumption increased by 3.6% after growing by 3.2% in 2015 and added 2.1 percentage points to the GDP growth. On the other hand investment in fixed assets declined by 5.5% in a year subtracting 1.1 percentage points from the GDP annual dynamic. Investment decline was caused by delays in the utilization of the EU funds from new financial perspective and growing uncertainty regarding business environment (including taxes and regulatory environment). The external balance added only 0.1 percentage point to the annual growth rate, while a year before the contribution was equal to 0.6 percentage point. The Bank assesses that macroeconomic data show no sign of the build-up of macroeconomic imbalances.

The preliminary estimate showed that in the fourth quarter 2016 GDP deceleration has stopped and growth equalled to 2.7% y/y as compared with 2.5% y/y in the third quarter. The estimated decline of investment was equal to 6.0% y/y vs 7.7% in the third quarter and seasonally adjusted monthly construction data points to positive momentum of investment outlays, suggesting that the economy has probably passed a turning point at the end of 2016 and growth acceleration is on the way.

After a good 2015 year, labour market conditions improved further in 2016 and unemployment rate has reached  new record low of 8.2% in October. In December registered unemployment rate was equal to 8.3% and was by 1.4 percentage point lower than in December 2015. Unemployment rate based on the Labour Force Study (BAEL) has also reached a new record low at 5.9% in the third quarter of 2016. The number of job offers registered in the labour offices was growing during a year and in December it was by 15.3% higher than at the end of the previous year. At the same time the number of persons removed from unemployment rolls declined by 20,1% y/y, as labour market flows are relatively low. The number of unemployed per one job offer bears growing problems with finding suitable employees. In June and September it amounted to just 9.5 and was the lowest on record. It may, with time, translate into intensifying wage pressure. Nonetheless the wage growth remains moderate and in December average earnings in the enterprise sector increased by a very modest 2.7% y/y. In the whole year average wage in the national economy increased by 3.8% in nominal and by 4.2% in a real terms.

In November 2016 a 28-month long period of deflation has finally ended. In December 2016 Consumer Price Index increased by 0.8% y/y but the whole-year average figure was still negative, equal to -0.6%. The persistence of negative inflation was the consequence of supply-side shocks on food and fuel markets as well as the very low demand pressure in the economy. At the turn of the year solid acceleration of inflation is observed, as a consequence of growing commodities prices and statistical base effects.

In the environment of lack of inflation pressures, the MPC kept loose monetary policy stance. The reference rate is record-low and currently stands at 1.50%. In the Bank’s assessment the NBP official interest rates will remain at current levels in nearest future.

Leading indicators suggest some improvement of the business sentiment, especially in the industrial sector, where the PMI index was at a 22-month high of 54.8 points in January 2017. The Bank assesses that in 2017 the economic growth might accelerate to 3.1%. The structure of the growth may improve as an build-up of public investment is expected. Private consumption will still be the main engine of growth, with additional support in the first half of the year from the social programme Rodzina 500+. The consumption acceleration translates into growing imports and some worsening of external balance. After a solid acceleration at the beginning of the year, the CPI inflation is expected to stabilize below the NBP target of 2.5% causing no need to adjust NBP interest rates.

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