Poland’s biggest bank slashes 2020 GDP growth projection

Poland’s biggest bank slashes 2020 GDP growth projection
By Wojciech Kosc in Warsaw February 27, 2020

The Polish economy will grow just 3.5% in 2020, Poland’s biggest lender, the state-controlled PKO BP, said in its latest projection on February 25.

The bank thus trimmed its previous forecast of 3.7%. The new projection points to weaker consumption – so far the key growth driver – that will suffer because of growing inflation. Households are also expected to save more rather than spend in 2020, PKO BP said, pointing to the weakening consumer sentiment in Poland.

Investment should also weaken in 2020 although PKO BP expects that to be only temporary, as suggested by the value of planned investments and the growing money supply.

The impact of the coronavirus epidemic remains unclear. “The effects of the epidemic are unpredictable yet potentially profound,” the bank said.

What will likely reduce the risk to growth in 2020 is the government’s handouts to households – primarily the universal child benefit – as well as four more working days and a huge drop in real interest rates. 

The latter will be an effect of high inflation in an environment of record low interest rates, which have remained at 1.5% for nearly five years now.