Poland: Growth weakens to over-six year low in Q1 but economy shows resilience
May 29, 2020
In the first quarter, the economy grew 2.0% year-on-year in unadjusted terms, according to a second estimate released by Poland’s Statistical Institute (GUS). The print surpassed the preliminary estimate of a 1.9% increase, although it was down from Q4 2019’s 3.2% expansion and marked the softest reading since Q3 2013. On a quarter-on-quarter basis, the economy contracted a revised 0.4% in seasonally-adjusted terms (previously reported: -0.5% quarter-on-quarter seasonally-adjusted) after rising 0.2% in Q4, also marking the weakest performance of the economy since Q3 2013.
Unadjusted year-on-year figures show domestic demand excluding inventories weakened sharply in the quarter, as did external demand. Particularly, household spending eased (Q1: +1.2% year-on-year; Q4: +3.3% yoy) amid cooling wage growth, a rising unemployment rate and depressed consumer sentiment. Moreover, fixed investment growth slumped (Q1: +0.9% yoy; Q4: +6.1% yoy), as companies cut investment plans in the face of lockdown and soaring economic uncertainty. On the other hand, government spending growth gained pace in a bid to cushion the slowdown (Q1: +4.3% yoy; Q4: +3.2% yoy). Moreover, destocking had a neutral effect on economic growth after subtracting 2.5 percentage points in the previous quarter as companies had opted to lighten their warehouses amid weaker demand prospects.
On the external front, net exports contributed 0.4 percentage points to growth, notably down from Q4’s 2.0 percentage-point contribution. Export growth slowed to 0.6% (Q4: +2.0% yoy) amid widespread lockdowns and disrupted supply chains in the EU, while imports contracted 0.2% on downbeat domestic demand after falling 2.0% in Q4.
GDP is expected to plunge this year, with the downturn largely concentrated in Q2. Lockdown measures, which are being gradually lifted, will hit consumer spending, while vanishing European demand and disrupted supply chains will weigh on the industrial sector. The severity and longevity of the pandemic remains the key risk to the outlook.