Poland

Lower rates support growth but outlook remains challenging

Real GDP rose by 0.2% on the quarter in Q4 2012, on a seasonally and working-day adjusted basis, in line with our forecast. Growth was again underpinned by net trade, with domestic demand still very weak as both consumption and fixed investment contracted further.

Since our last edition, we have marginally downgraded our forecast for 2013 real GDP growth to 1.5% (previously 1.6%). The move reflects slightly weaker base effects following revisions to the national accounts, with the quarterly growth profile this year unchanged. Recent data releases suggest that activity is beginning to pick up. But we expect the recovery this year to be gradual, reflecting both the very modest rebound in Eurozone growth and structural factors that will undermine domestic demand.

In the medium term, we expect growth to gradually pick up to just over 3.5%. This reflects a combination of sound fundamentals, particularly in the banking sector, and the existence of spare capacity following the recent slowdown. In contrast to the pre-2008 period, persistent deleveraging by foreign parent banks will drag on the availability of credit. However, the scope for domestic deposit growth remains significant.

Contributions to GDP growth