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Thursday, December 2, 2021

Economic growth forecasts are starting to decline. Economists point out the reasons

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Banks are lowering Poland’s economic growth forecasts for 2022. The reasons for the reductions are mainly high inflation and an increase in interest rates. According to economists, these factors can limit consumption.

Inflation data, which in recent months has been regularly higher than expected, made the economists’ forecasts for 2022 worsen. It will result in lower consumption than previously expected. An additional factor is the already implemented interest rate hikes and expectations that the NBP interest rate will continue to grow at a rapid pace – according to economists’ forecasts interviewed by PAP.

GDP growth in 2022. Banks are lowering forecasts

– We have lowered our GDP growth forecast for 2022 from 5 percent. up to 4 percent We have high inflation, which will lower consumption, besides, higher interest rates will also lower the consumption growth rate due to higher costs of loan servicing – Bank Pekao economist Adam Antoniak told PAP.

The global situation may also have a negative impact on the slowdown in the Polish economy, i.e. problems with the supply of raw materials and components.

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– We included external factors in our export forecast, which we slightly lowered. Supply disruptions are visible, international trade is not functioning as it was before the pandemic. There are also signs that these problems are resolving, because the freight prices for bulk goods are not so high anymore, although the high costs of transporting goods in containers remain high. We hope that these problems will gradually disappear over the course of 2022. In addition, the German economy is important to us, which, although this year is doing poorly, the forecasts for next year are already better, especially when compared to Europe, added Adam Antoniak.

Alior Bank’s economists have also lowered their GDP growth forecast for next year.

– We currently forecast economic growth next year at 4.9%, previously our forecast was 5.5%. growth. Several factors contributed to the revision, including the revision of the data from previous quarters carried out by the Central Statistical Office. But we also took into account the increased inflation, which has recently surprised from month to month, and with it a different than expected, steeper path of interest rate increases. We expect that in December the MPC will raise rates by 50 basis points, and by the end of next year the main NBP rate will reach 2.5%. – Agata Filipowicz-Rybicka, chief economist of Alior Bank told PAP.

She made a reservation that there was a risk that inflation, and hence interest rates, could rise even more. According to the chief economist of Alior Bank, a lot depends on how the prices of raw materials and energy, as well as how the new Monetary Policy Council will react to the data.

– Consumption has been the engine of growth for a long time, but higher inflation and interest rates translating into increased costs of servicing loans may cause some consumers to decide to postpone some purchases. But the reason for the slowdown in demand may also be problems with the availability of goods, an example may be the automotive industry, where problems with the availability of components or semiconductors inhibit the sale of new cars – added Agata Filipowicz-Rybicka.

PKBO BP leaves its forecasts unchanged

The economists of the PKO BP bank left their forecasts of economic growth for 2022 unchanged.

– For the time being, we are not changing our forecast for 2022, which is 5.1%. growth. We are waiting for detailed data for Q3 this year, we will see in which areas the data were weaker. But so far our forecasts have come true – for example, we have a low investment forecast, which is true, we have high assumptions about wage growth, so today we are still looking at consumption quite optimistic. We also assumed a fairly moderate inflow of EU funds next year, so there is some risk to the forecast, but it does not require a revision yet, PKO BP economist Marta Petka-Zagajewska told PAP.

In her opinion, one should not be afraid of a decrease in consumption resulting from an increase in interest rates.

– The interest rate channel affects consumption, but according to our estimates, assuming an increase in NBP rates to 2%, the costs of servicing debt by households in relation to their disposable income will not be greater than before the pandemic. In turn, the increase in inflation will be compensated by a strong increase in wages – explained Matka Petka-Zagajewska.

Economy. Forecasts of the Ministry of Finance, the World Bank and the European Commission

In the draft budget act for 2022, the Ministry of Finance forecasts next year’s economic growth at the level of 4.6%. The European Commission, which presented its forecasts of economic growth in the Member States, expects Polish GDP to grow by 5.2% next year, which means that the estimates for the summer will be maintained. In turn, according to the October estimates of the World Bank, the Polish economy should grow by 4.7 percent next year. (the previous forecast spoke of an increase of 4.5%).

Main photo source: Shutterstock



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