Poland: macro economics review and preview 2014

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  • 1. Poland – macroeconomic situation Brusseles, September 2013 Jarosław Antonik, Tomasz Kowalski KBC TFI S.A. KBC Autumn Economic Seminar
  • 2. 2 GDP  Poland went smoothly trough the first phase of the global/European economic slowdown but then …  Consumption – „0” contribution to GDP growth recently (deteriorating situation on labour market, postponed private consumption).  Investments – dragging on, Euro 2012 hangover, public finance tensions.  Counter cyclical character of net export, driven by import – weakness of domestic consumption. 0,8 -6 -4 -2 0 2 4 6 8 10 12 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2005 2006 2007 2008 2009 2010 2011 2012 2013 Individual final consumption expenditure Public final consumption expenditure Gross fixed capital formation Changes in inventories Net exports GDP GDP by expenditure Contribution %, YoY Source: Central Statistical Office 2012 UEFA European Football Championship
  • 3. 3 Labour market and retail sales  Expected labour market improvement at lower GDP growth rates – demographics, efficiency improvement, declining potential GDP growth rate.  Postponed durable goods spending. -0,7 13,1 -5 0 5 10 15 20 jan/07 apr/07 jul/07 okt/07 jan/08 apr/08 jul/08 okt/08 jan/09 apr/09 jul/09 okt/09 jan/10 apr/10 jul/10 okt/10 jan/11 apr/11 jul/11 okt/11 jan/12 apr/12 jul/12 okt/12 jan/13 apr/13 jul/13 Employement in enterprise sector (%, YoY) Unemployment rate (%) Employment and unemployment Employment %, YoY; Unemployment rate % 3,5 4,3 -5 0 5 10 15 20 25 jan/07 apr/07 jul/07 okt/07 jan/08 apr/08 jul/08 okt/08 jan/09 apr/09 jul/09 okt/09 jan/10 apr/10 jul/10 okt/10 jan/11 apr/11 jul/11 okt/11 jan/12 apr/12 jul/12 okt/12 jan/13 apr/13 jul/13 Gross monthly wages in manufacturing (%, YoY) Retail sales (%, YoY) Wages and retail sales Gross monthly wages in manufacturing %, YoY; Retail sale %, YoY Source: Central Statistical Office
  • 4. 4 Current account  Positive trade balance – weak domestic demand – import, favourable FX rate for exporters, increasing economic openness (export share in GDP 49% in 2013 vs. 39% in 2009 and 45% in 2011).  Strong current account data likely to support PLN.  In case of rapid PLN drop CB intervention possible – precedence intervention 7th of Jun, NBP’s comment: ”action as an attempt to prevent excessive currency moves”. Current account and trade balance bn EUR -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2 2005 2006 2007 2008 2009 2010 2011 2012 2013 Current account balance Trade balance Source: NBP (National Bank of Poland) 0 1 2 3 4 5 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2 2005 2006 2007 2008 2009 2010 2011 2012 2013 EUR/PLN USD/PLN PLN exchange rates Quarterly averages
  • 5. 5 PMI  PMI Manufacturing at 52.6 pointing out for economic expansion 30 35 40 45 50 55 60 65 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 PMI Manufacturing (52,6) PMI New Export Orders (54,8) Source: Thomson Reuters PMI PMI Manufacturing, PMI New Export Orders
  • 6. 6 EU money  New UE budget for 2014-2020, Poland will receive EUR 105.8bn (EUR 4.5bn more vs. years 2007-13), including EUR 73bn EU of cohesion funds or around PLN 44bn a year (c.a. 3% of GDP) vs. EUR 67bn in 2007- 13.  2013 and 2014 sound recovery – w/o EU funds support. EU money impact on GDP growth in Poland GDP %; EU money impact on GDP growth % Source: Central Statistical Office, Instytut Badań Strukturalnych KBC forecasts
  • 7. 7 Inflation  Lack of inflation pressure due to weak labour market situation, positive impact of regulated prices (electricity, gas tariffs).  Negative output gap to 2015 – Central Bank forecasts. 0 1 2 3 4 5 6 7 jan/07 apr/07 jul/07 okt/07 jan/08 apr/08 jul/08 okt/08 jan/09 apr/09 jul/09 okt/09 jan/10 apr/10 jul/10 okt/10 jan/11 apr/11 jul/11 okt/11 jan/12 apr/12 jul/12 okt/12 jan/13 apr/13 jul/13 CPI (%, YoY) Core CPI (%, YoY) Reference rate Inflation and interest rates CPI, Core CPI, Reference rate Source: Central Statistical Office, NBP (National Bank of Poland)
  • 8. 8 Summary of our forecasts vs. consensus KBC forecasts Source: Bloomberg, KBC TFI S.A., other mentioned sources BB annual consensus forecasts BB quarterly consensus forecasts 2013 2014 GDP 1.1 2.2 CPI 0.9 1.8 10Y GOVERNMENT BONDS YIELD (EOP) 3.80 4.40 2013 2014 Data Bloomberg 1.3 2.5 Aug 13 European Commission 1.1 2.2 May 13 IMF 1.3 2.2 Apr 13 NBP (Central Bank) 1.1 2.4 Jul 13 Ministry of Finance 2.2 2.5 Oct 12 OECD 0.9 2.2 May 13 World Bank 1.5 Jan 13 Selected GDP forecasts
  • 9. 9 Central Bank forecasts GDP Contribution, % YoY Source: Polish Central Bank (NBP)  50% probability range:  CPI in 2013 0,6-1,1% (vs. March forecasts 1,3-1,9%), and 0,4-2,0% in 2014 r. (vs. 0,8-2,4%)  real GDP growth 0,5-1,7% in 2013 (vs. March forecast 0,6-2,0%), 1,2-3,5% in 2014 (vs. 1,4-3,7%). CPI inflation % YoY
  • 10. 10 Central Bank forecasts Potential output Contribution, % YoY Source: Polish Central Bank (NBP) Output gap Contribution, % YoY
  • 11. 11 Summary  Macroeconomic situation :  stronger consumption growth on the back of improving labour market situation – sustainable, and postponed durable goods spending – non sustainable,  fixed investments – recent data from large companies suggest some improvement is under way but we do not expect an increase in investment demand before 2014,  positive net export contribution will gradually decline as the recovery will progress,  lack of inflation preassure in the mid run.  Monetary policy  we expect interest rates to remain on hold at least until mid-2014 and we see a risk that the beginning of the tightening cycle could be delayed even further.  Other:  public finance: some fiscal discipline despite slowdown (fiscal balance: our forecast -4.5% vs. -3.5 planned), quasi nationalization of the pension funds assets (bonds’ part of the portfolio),  new EU budget for 2014-2020: Poland will receive EUR 105.8bn (EUR 4.5bn more vs. years 2007-13), including EUR 73bn EU of cohesion funds or around PLN 44bn a year (c.a. 3% of GDP) vs. EUR 67bn in 2007- 13.
  • 12. 12 Appendices
  • 13. 13 PL bond market 2 3 4 5 6 7 jun-10 aug-10 okt-10 dec-10 feb-11 apr-11 jun-11 aug-11 okt-11 dec-11 feb-12 apr-12 jun-12 aug-12 okt-12 dec-12 feb-13 apr-13 jun-13 Yield curve 3M-10Y Monthly average yields 3M, 6M,1Y, 2Y, 3Y, 5Y, 10Y Source: Thomson Reuters 2,5 3,0 3,5 4,0 4,5 5,0 5,5 6,0 6,5 5Y 10Y Bonds’ yields Daily 5Y, 10Y yields; %