Poland: Growth cools through last year-end
Poland’s economy grew 4.9% year-on-year in unadjusted terms in the fourth quarter of last year, according to a preliminary estimate released by the Statistical Office (GUS) on 28 February. Although the fourth-quarter outturn beat analysts’ expectations, it confirmed a once-averted and long-anticipated slowdown of the economy (Q3 2018: +5.1% year-on-year). On a quarter-on-quarter basis, growth slowed to 0.5% in seasonally-adjusted terms (Q3 2018: +1.6% quarter-on-quarter s.a.).
Unadjusted year-on-year figures confirmed that domestic demand remained a force to be reckoned with. Household spending was upbeat despite decelerating somewhat (Q4: +4.3% yoy; Q3: +4.5% yoy) amid slower employment gains, while government spending sped up (Q4: +4.0% yoy; Q3: +3.6% yoy) in the approach to this year’s parliamentary elections. Fixed investment, meanwhile, cooled from a blazing third-quarter outturn (Q4: +6.7% yoy; Q3: +9.9% yoy) but continued to impress on the strong absorption of EU-linked structural funds.
On the external front, net exports contributed marginally to growth in the fourth quarter (Q4: plus 0.2 percentage points; Q3: minus 0.9 percentage points). Export growth jumped (Q4: +8.9% yoy; Q3: +4.9% yoy) despite a slowdown across the Eurozone as regional supply chains appeared to remain intact. Import growth, moreover, also shot up (Q4: +9.0% yoy; Q3: +6.9% yoy).
Ahead of this autumn’s vote, on 23 February, the ruling Law and Justice (PiS) government unveiled a major spending plan intended to whip up support. Solid fiscal metrics in recent years left lawmakers with plenty of room to boost spending in an effort to drum up votes; and the program, which is set to bump up social-support spending, appears designed to do just that.
Commenting on the fiscal package in the context of an increasingly challenging economic backdrop, Marcin Kujawski, an economist at Nomura, noted:
“The overall cost of the stimulus package endorsed by the PiS is estimated at around PLN 40 billion. […] If the slowdown in the global economy turns out to be deeper, the fiscal stimulus in the latter half of the year and in 2020 may turn out to be an effective counter-cyclical measure. If, however, the economy proves to be fairly resilient, which is our baseline view, we think the ‘bang for the buck’ from the stimulus will be small in real terms and there may be more impact through increased imports, a higher household savings rate (rising propensity to save) and/or faster inflation.”