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Interest rates, inflation, Poland’s GDP 2023. Goldman Sachs has published new forecasts

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Goldman Sachs does not expect a reduction in interest rates in Poland in 2023. Analysts forecast that the average annual inflation in our country this year will amount to 12.1 percent, and in 2024 it will slow down to 4.8 percent.

Goldman Sachs analysts cited market expectations that by the end of 2023 or early 2024 central banks will decide to cut interest rates by 100 basis points in Poland, 160 basis points in the Czech Republic60 basis points in Romania and 900 basis points on Hungary.

However, analysts believe that although, contrary to previous analyses, there will be no increase in interest rates to the level of 8 percent, a reduction in interest rates in Poland, the Czech Republic and Romania in 2023 should not be expected.

PAP/Maciej Zielinski

Hungary is in a different situation, due to higher interest rates than the rest of the CEE-4 countries (Poland, Hungary, the Czech Republic and Romania). The reference rate in this country is 13.0 percent, and overnight deposits 18.0 percent. Due to this, despite maintaining a hawkish policy, experts expect an interest rate cut in the fourth quarter of 2023 from the Hungarian National Bank.

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Read also: Proposal of a large increase in interest rates. The results of the MPC vote are in

The economy will slow down in 2023

According to the latest forecasts by Goldman Sachs, the gross domestic product (GDP) in the CEE-4 countries will increase by 0.9 percent in 2023. in Poland, 0.6 percent. in Hungary, 0.7 percent. in the Czech Republic and 1.9 percent. in Romania. The bank’s analysts expect greater growth in 2024, where the GDP dynamics is to amount to 4.7% and 4.7% respectively. in Poland, 4.3 percent. in Hungary, 4.1 percent. in the Czech Republic and 4.5 percent. in Romania.

As experts pointed out, the inflation dynamics in the group of CEE-4 countries in 2022 remained very unfavorable. In December 2022, compared to the situation a year ago, it increased from 8.6 percent. to 16.6 percent in Poland, with 7.4 percent. up to 24.5 percent in Hungary, with 6.6 percent. to 15.8 percent in the Czech Republic and from 8.2 percent. to 16.4 percent in Romania – noted.

In 2023 and 2024, according to the bank’s forecasts, inflation is to amount to 12.1 percent respectively. and 4.8 percent in Poland, 17.9 percent. and 5.5 percent in Hungary, 11.5 percent. and 4.1 percent in the Czech Republic and 11.3 percent. and 5.3 percent in Romania. According to Goldman Sachs estimates, inflation in the CEE-4 countries is either at or close to its peak. Analysts predict that due to the end of state subsidies and price caps, they may increase at the beginning of 2023, but in the long run, inflation dynamics will decrease.

They forecast that oil and food prices, which are the most important pro-inflationary factors from the end of 2020, will have less and less impact on price growth. On average, they expect their impact on inflation to decline by 4 percentage points by the end of this year.

However, it was noted that core inflation remains high in all CEE-4 countries. This is due – according to experts – to the price shock caused war in Ukraine and a “tight labor market”, which increases employees’ wage expectations and, consequently, inflation. Weaker economic growth and tighter fiscal policy will result in an increase in unemployment, which will allow to reduce the pressure on wage growth, but it will not be a significant decrease, it was stated.

Main photo source: Shutterstock

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