Despite the high economic activity and rise in labour and production costs, inflationary pressures remained low. Core inflation measured as the CPI index excluding food and energy prices amounted in 2018 to an average of 0.7%, same as a year before. Consumer prices were driven to the greatest extent by supply factors – food prices as well as energy, which was related to oil prices growing significantly for most of the year on world markets. In 2018, however, the impact of these factors was slightly weaker than in the previous year – average annual CPI inflation dropped to 1.6% from 2.0% in 2017.
In the environment of relatively low inflationary pressure the Monetary Policy Council maintained a loose monetary policy stance in 2018. 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 2019 as well.
In 2019, economic growth will normalize, but it will still be one of the fastest in the European Union. Available data indicate a slowdown in economic growth in major economies, including the United States, Germany and China. The global environment will therefore be less favourable than in the previous year. However, internal demand should remain robust and its structure similar to last year’s. Private consumption will still be the main driver of the economy. However, along with the slightly weaker growth in the real wage bill the consumption growth rate will be lower than in 2018. GDP growth will also continue to be supported by public investments, mainly in the infrastructure, which will be bolstered by further use of EU funds. However, due to supply constraints in the construction sector their growth will gradually slow down. The increase in private investments, against the backdrop of the weakening economic situation in the country and abroad, gives no grounds for a clear acceleration. Despite a slowdown in global economic activity, the drop in exports’ growth should not be strong, as Polish enterprises are highly competitive in price terms and the zloty exchange rate will partially absorb the impact of the less favourable external environment. One factor potentially limiting the scale of the slowing economy in 2019 is fiscal policy in connection with this year’s election period in Poland.
Despite weaker economic growth inflation in Poland will accelerate this year. The cost pressure in the economy will increase because the still robust wage growth will be accompanied by a stronger decrease in productivity growth. CPI inflation may thus exceed the NBP’s inflation target of 2.5% YoY, but only at the end of the year. However, this forecast is subject to heightened uncertainty due to increases in energy prices on the wholesale market and its impact on prices for households. The expected relatively low CPI inflation will support the current scenario of the Monetary Policy Council, according to which interest rates will not change for at least a year.