The latest national account figures underline the loss of momentum in the Polish economy. Real GDP rose only 0.1% (q-o-q) in Q1, after stalling in Q4 2012, constrained by waning domestic demand and euro zone headwinds. Consumer spending has been impeded by double-digit unemployment, which totalled 14.3% of the labour force in March. Retail sales advanced by a mere 0.1% (y-o-y) during the same period, after a 0.8% contraction in February. Industrial production increased 2.7% (y-o-y) in April, largely due to an additional working day. Recovery prospects for the manufacturing sector dimmed as its PMI fell to a 45-month low of 46.9 in April, due to a sharp decline in new orders. The consensus forecast for 2013 GDP has subsequently been downgraded from last month.
The domestic economic slowdown, coupled with a sharp drop in price risks, supports the case for further monetary easing, even though the Polish central bank cut its reference rate by 25bp to a new record-low of 3.0% on May 8. Inflation eased from 1.0% (y-o-y) in March to 0.8% in April, its lowest rate since June 2006 and well below the targeted 2.5%. Our panel is predicting that inflation will average less than half the 3.7% recorded in 2012 this year, before rising in 2014.
You can download a sample of Eastern Europe Consensus Forecasts at www.consensuseconomics.com.