The central path of the NBP projection assumes that inflation in 2024 will be 4.6 percent and in 2025 it will amount to 3.7 percent – according to the November projection of the NBP. The central GDP path assumes growth in 2024 at the level of 2.9 percent and in 2025 at 2.5 percent. The latest forecast differs from the report published in July.
Inflation According to the National Bank of Poland, the base rate is to amount to 5.2% in 2024 and 4.0% in 2025.
In the previous round, the National Bank of Poland forecasted headline CPI in 2024 at 5.2%. and 3.6 percent on average in 2025, a GDP respectively at the level of 2.4 percent and 3.3 percent
New NBP projection
“The information and data that arrived after the closing of the July projection contributed to a reduction in the forecast economic growth this year and its increase in 2024-2025. In the case of CPI inflation, in 2023-2024 it was revised downwards, with its slightly higher level in 2025.” – stated in the latest projection.
The lower forecast of domestic economic growth this year results from a stronger than expected adjustment of inventories, in conditions of low demand and expectations of a decline in the prices of intermediate goods.
The downward revision of GDP dynamics is also caused by the worse-than-expected economic climate in euro zoneincluding in Germany, delaying the recovery in Polish industry.
“On the other hand, economic growth is positively influenced by the greater resistance of enterprise investments to weakening demand, related to the need to rebuild productive capital resources after the pandemic and rapidly rising labor costs. At the same time, public investments are more favorable this year due to the greater use of by local government units funds under the Polish Order Government Fund: Strategic Investment Program,” NBP wrote.
An important factor
An important factor for the upward revision of GDP growth in 2024-2025 compared to the expectations from the previous forecasting round is interest rate reduction NBP in September and October this year, by a total of 100 basis points.
“It contributed to an increase in the forecast dynamics of accumulation and private consumption. The recovery of economic activity in 2024 will be additionally supported by a higher increase in public consumption than previously expected, as indicated by the provisions of the draft Budget Act for 2024 regarding an increase in current expenditure of budgetary units by 11 .9% compared to the plan for 2023. The increase in imports caused by higher domestic demand partially neutralizes its impact on GDP dynamics,” it was written.
“CPI inflation in 2023-2024 is influenced by the downward revision of core inflation and the dynamics of food prices. A factor lowering the price path of many goods and services compared to previous expectations is the weakening of demand reflected in a lower output gap. This reduces consumer acceptance of price increases, “which is reflected in the recently observed intensification of price competition between retail chains. The easing of cost pressure, reflected in the stronger than expected decline in industrial production prices in recent months, also contributes to lower consumer price dynamics,” it added.
The lower increase in prices of medical and pharmaceutical products, resulting from the inclusion from September 1 of this year, also contributes to the downward revision of core inflation in the coming quarters. subsequent age groups with a program of free reimbursed medicines.
In 2024, CPI inflation is increased by an upward revision of the dynamics energy pricesunder the influence of higher oil prices than in the previous forecasting round (the impact of this factor on energy prices this year is offset by the statutory increase in consumption limits guaranteeing lower electricity bills for households).
Disinflation will slow down in 2025
In 2025, the disinflation process is expected to slow down and price dynamics will be slightly higher than in the previous projection. This is due to the translation of higher prices of energy and agricultural raw materials into food prices, with core inflation close to the path of the July projection.
“The return of core inflation to the scenario from the previous projection results from the fact that after a period of weaker economic conditions this year, in the following years the negative output gap will close faster and return to the value from the July projection, which means that demand will be a factor limiting price growth. to a similar extent as expected in the previous forecasting round,” it added.
The projection of inflation and GDP was prepared taking into account data available until October 23, 2023.
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