Seasonally-adjusted data reported by ING show an increase of 1.3% quarter-on-quarter GDP growth in Poland, following a 0.3% increase in the second quarter of this year.

Analysts estimate that the third quarter of 2023 brought a shallower decline in private consumption than in the first half of the year. Investment continued to grow, concentrated in large companies. The change in inventories had a less negative impact on the annual GDP growth rate than in previous quarters, but the process of reducing inventories continued. Balance of payments data suggests that foreign trade continued to positively impact the annual change in GDP.

ING forecasts GDP growth to be close to 2% YoY in 4Q23 and around 0.4% for the whole year. In 2024, economic growth is expected to accelerate to 2.5-3.0%. However, given the pro-inflationary structure of GDP growth next year dominated by consumption, the Monetary Policy Committee should be cautious about further interest rate cuts.

Food and non-alcoholic beverage price growth in Poland was revised from 0.4% MoM to 0.5%. Commodity prices rose 5.7% YoY, while service prices increased 9.3% YoY, compared to 7.6% and 9.7%, respectively, in September. The deceleration of services price inflation is noticeably slower than that of goods prices.

The biggest contributors to last month’s decline in the annual inflation rate, relative to September, were a slowdown in food price growth (7.6%), a deeper decline in fuel prices than a month ago (-14.4%) and slower growth in energy prices (8.3%). Analysts estimate that core inflation, excluding food and energy prices, declined to around 8.0%. Every month, however, a high increase in core prices persists (about 0.6% MoM).

The inflation outlook is exceptionally uncertain due to the lack of any final decision on the zero VAT rate on food and support measures in the energy market, as well as a decision on electricity and gas prices for households in 2024. Based on past declarations by representatives of the future government coalition, the VAT rate on food will be raised from January 1, 2024, and electricity prices will be frozen until the middle of next year.

In such a scenario, average annual CPI inflation in 2024 could be as high as 6%, leaving no room for interest rate cuts. ING forecasts them to remain unchanged until the end of next year (the main NBP rate at 5.75%).