Economic comment

The 2027 budget draft marks yet another year in which Poland is being pushed onto a less optimistic fiscal path, with both the deficit and public debt set to exceed previously expected levels by a significant margin. Poland is expected to remain Europe’s leader in both economic growth and fiscal imbalances, demonstrating that GDP growth alone is insufficient to stabilise public finances. (...)

In August, Polish manufacturing PMI fell to 48.3 pts from 49.0 pts. The market expected a rise to 49.8 pts, and we saw 49.5 pts. The August value is equal to the January-July average – note that actual industrial output rose by c. 4% y/y on average in this period, showing that in the case of Poland PMI may send misleading signals about activity

Polish CPI inflation rose to 3.4% y/y in August from 3.0% y/y in July according to the flash release by GUS. Market consensus was 3.1% y/y while our estimate was 3.3% y/y. Most of the consumer price acceleration came from fuel. Fuel prices were up 5.2% m/m – as we assumed, the reduction in VAT on petrol and diesel in force during the second half of August overlapped only partially with GUS price collection period. As a consequence, the largest declines in fuel prices were not captured in the flash release. The deflation in food prices deepened to -0.9% y/y from -0.4% y/y in July, while we had expected the previous pace to hold. Having seen the flash data we now estimate core inflation at 3.3-3.4% y/y (our forecast went up from 3.1% y/y), the highest in a year. The previous reading was 3.1% y/y. In our view, the new data on CPI should prevent the MPC from considering a discussion on rate cuts in the near future, and the rhetoric should be balanced, pointing to wait-and-see stance.