Polish GDP growth will slow to around 0.5% y/y in Q1 2023 from 1.8% y/y estimated for Q4 2022

by   CIJ News iDesk III
2023-01-31   10:00
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The Polish economy is likely to avoid recession, with GDP growth in Q1 2023 expected to be close to 0.5% y/y, the Polish Economic Institute (PIE) forecasts. PIE estimates growth for last year's Q4 at 1.8% y/y.

The Q4 economic activity data were better than expected - we estimate that GDP growth reached 1.8%. This is almost twice as much as we expected at the beginning of December. Also, the outlook for the current quarter is decidedly more optimistic - due to the mild course of the winter, we do not observe restrictions on industrial activity. As a result, the Polish economy is likely to avoid recession. In Q1, growth will be close to 0.5%, according to the PIE's Macroeconomic Monthly.

The Central Statistical Office (CSO) reported yesterday that Gross Domestic Product (GDP) grew by 4.9% y/y in 2022, compared to 6.8% growth in the previous year. The market consensus predicted growth of 4.8% y/y in 2022.

The industry's slowdown is weaker than previous forecasts, according to PIE. The industry is likely to stagnate - the average growth rate in the coming months will be around 0.5-1%.

Nevertheless, we will avoid a slump in activity, which was the base scenario for most economists just a quarter ago. In December, industrial production rose by 1% on the back of strong performance in the machinery and automotive sectors. Detailed data from the Central Statistical Office (CSO) indicate that this is the result of strong engine production. Such increases are likely due to the expansion of factory operations at one of the leading concerns and are unsustainable over the long term. January will still bring a high result, but we will see a definite weakening in February, according to the report.

Weak growth in consumer spending will weigh on GDP, however. In Q4 2022, consumption is likely to have grown by about 1%, while Q1 2023 will see a result close to zero. Retail sales data clearly indicate a decline in demand for durable goods - sales of furniture, consumer electronics and household appliances in December were more than 10% weaker than in the same month of 2021, and cars by 3%. We expect similar trends in the following months. Business surveys also indicate that we are likely to see much lower activity in services, especially leisure. Growth in these sectors will be meager, with results in individual months weaker than last year, the Institute also pointed out.

According to PIE, the main source of uncertainty remains the condition of the construction industry. Weaker performance in this sector will primarily affect investment, and may also reduce activity in industry.

We will already see a contraction in the sector in Q1, but the winter period is a time when the industry has relatively little impact on GDP. The problems will become more apparent, however, starting in Q2. The biggest drop in activity will be in the housing market due to a freeze in mortgage sales. At the same time, companies will delay or cancel some investment projects. So far, building construction has had the greatest impact on capital expenditures of large and medium-sized companies, and will be the weakest segment in 2023, the report announced.

Source: PE and ISBnews