Poland: Growth eases to near three-year low in Q3 but remains upbeat nonetheless
November 29, 2019
The economy grew 3.9% year-on-year in unadjusted terms in the third quarter of this year, according to a second estimate released by Poland’s Statistical Institute (GUS) on 29 November. The third-quarter print matched the preliminary estimate, although it was down from Q2’s 4.6% increase and marked the softest print since Q4 2016. Meanwhile, on a quarter-on-quarter basis, growth accelerated to 1.3% in seasonally-adjusted terms (Q2: +0.8% quarter-on-quarter seasonally-adjusted).
Unadjusted year-on-year figures show domestic demand weakened markedly in the quarter. Particularly, fixed investment growth almost halved (Q3: +4.7% year-on-year; Q2: +9.1% yoy), as public investment weakened amid fiscal constraints and business investment cooled due to the uncertain external and domestic growth environment. Meanwhile, household spending eased but remained resilient nonetheless (Q3: +3.9% yoy; Q2: +4.4% yoy), supported by strong wage growth and a tight labor market. On the other hand, government spending picked up pace in the run-up to October’s parliamentary elections (Q3: +4.7% yoy; Q2: +3.1% yoy). Lastly, destocking subtracted 0.7 percentage points from growth, more severely than Q2’s 0.2 percentage-point subtraction as companies opted to lighten their warehouses amid weaker demand prospects.
On the external front, net exports contributed 0.8 percentage points to growth, up from Q2’s 0.2 point-contribution. Export growth strengthened (Q3: +5.0% yoy; Q2: +3.2% yoy), as did import growth (Q3: +3.9% yoy; Q2: +3.1% yoy).
Commenting upon the positive performance of the country’s external sector, Rafal Benecki and Jacub Rybacki, economists at ING, noted:
“Typically during economic slowdowns in Germany, Polish exports outpace imports, which is likely because Polish products are more price-competitive. Moreover, internal demand in the euro area remains strong in this cycle, helping central and eastern European exporters. In addition, imports have been capped by only moderate internal demand in Poland”.
Economic activity will likely soften next year. A less supportive external environment and a diminished contribution to growth from EU-driven fixed investment will weigh on the economy, which already seems to entering the mature phase of the current business cycle. That said, consumer spending should stay resilient, spurred by a tight labor market and sizable wage growth, and thus will continue to power the economy.