Country Forecast Poland October 2017 Updater

Country Forecast Poland October 2017 Updater

  • October 2017 •
  • Report ID: 325730 •
  • Format: PDF


  • Since entering office in late 2015 the government, led by the national-conservative Law and Justice (PiS) party, has instigated a series of reforms that have undermined Poland's democratic institutions, contributing to increased polarisation of public opinion and creating considerable antagonism with the EU.
  • The PiS has firmly rejected the European Commission's criticism of it, which peaked in August following controversial reforms of the judiciary. Given the government's failure to address concerns relating to the rule of law, and tensions over asylum policy and the logging of the Bialowieza Forest, the Commission may seek to withhold EU funds or initiate Article 7 proceedings.
  • Owing to its difficult relationship with the EU and Russia, Poland is seeking to cement its diplomatic relationship with the US. The energy and military sectors seem to be likely areas where this relationship could develop. For the US, Poland is well positioned to become a priority contact in Europe.
  • In August 2017 the government stepped back from plans for a system-wide conversion of foreign-currency-denominated mortgages, which are held by a large number of Polish citizens. A new bill proposes an extension of Poland's system of mortgage relief funds, easing fears of investors and concerns over the banking sector.
  • The Economist Intelligence Unit forecasts that real GDP growth will rise to 4.3% in 2017, from 2.7% in 2016, amid robust private consumption, higher government spending and a rebound in investment (driven in part by a resumption of EU funding). Real GDP growth is projected to average 3.4% per year in 2018-22. However, there are external risks to this forecast, such as a managed slowdown in China and a business cycle downturn in the US.
  • After two years of persistent deflation, we expect that consumer prices will rise by 1.8% on average in 2017, mainly reflecting higher external cost-push factors and firmer domestic demand. We expect the National Bank of Poland (NBP, the central bank) to remain dovish against a backdrop of mild zloty appreciation in 2017-18, but we forecast that monetary policy will move gradually towards a tightening bias from 2019.
  • Having narrowed in recent years in US dollar terms, the current-account deficit will widen moderately from 2017 as stronger domestic demand and firmer global commodity markets support growth in import volumes and costs. Strong demand in European countries will fuel export growth in 2018-22.






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