‘It is worth noting that for the first time since 2012, when Poland experienced a substantial economic slowdown, GDP has been lower than is the market consensus twice in a row (if the data published at the end of August confirms the flash reading – this data will be the most important). It may be a coincidence, but it may well reflect some unexpected weakness in the economy, which was not noticed by our analysts’, assesses Ignacy Morawski, Head of Research Public Policy and Governance in WiseEuropa.
The initial data on the economic growth in the second quarter indicates that it increased by 3.1% compared to the second quarter of 2015. This is the data flash, which is a fast reading on the basis of a limited data set. The biggest concern may be over investments, nevertheless it is not the whole picture of the economy.
Compared with the first quarter of this year, GDP – after deducting seasonal factors – grew by 0.9%. The economy behaves undoubtedly worse than it was expected a few months ago. In March, both the National Bank od Poland projection and the market consensus indicated that the first half of 2016 will witness a growth of 3.6%. That said, the result is more than half a percentage point worse, as the average growth will most likely amount to approx. 3%.
The difference is not substantial, but if it is an indicator of a permanent decline of the trend, it may have significant consequences for the State budget and the decision of the Monetary Policy Council (RPP), among others. The Government is preparing budget plans for the coming years based on the assumption that the potential growth of the economy will be around 4%. Meanwhile, Monetary Policy Council maintains stable interest rates in the belief that the economy will continue to grow at the pace of the previous years (i.e. around 3.5%). If these assumptions are not met, both the Ministry of Finance and RPP will have to consider changing their policy.
The text above is an excerpt from the article ‘It’s best not to judge the economy on the basis of the first reading’, by Ignacy Morawski. The full text of the article (PL) is available on www.financialobserver.eu.
