What will the Polish economy be like in 2019?

Macroeconomic ratios 2017 2018 2019F
GDP growth (YoY) 4.80% 5.10% 4.50%
Domestic demand (YoY) 4.90% 5.30% 4.60%
Private consumption (YoY) 4.90% 4.50% 4.40%
Investments (YoY) 3.90% 7.30% 4.30%
Inflation (eop) 2.10% 1.10% 2.20%
NBP reference rate (eop) 1.50% 1.50% 1.50%
CHF/PLN (eop) 3.57 3.81 3.73
EUR/PLN (eop) 4.18 4.29 4.25

Source: mBank estimates as at 9 April 2019, YoY – year on year, eop – end of period.

According to our current projections, GDP will grow in 2019 at a rate slightly lower than in 2018 (4.5% year on year vs 5.1% year on year in 2018). The slow-down will be really a correction, hardly affecting the vast majority of companies and consumers. How is the sentiment about economic growth in 2019 so strong?

First, Polish exports and, largely speaking, Polish industry is very resilient to the weaker conditions in the eurozone (including Germany). A solid single-digit growth in exports combined with a highly diversified customer base make the contribution of exports to GDP relatively high and resistant to external shocks.

Second, the growth of consumption will remain strong. It will be boosted by the fiscal package, announced in February, which supports household income by means of PIT reductions and additional transfers (pension benefits, additional Family 500+ benefits). According to our estimates, the package is worth ca. 1% of GDP in 2019 and 2% of GDP in 2020. Given the high potential of rebuilding the savings rate of households and the possibility that the additional spending will in part boost imports, the impact of the fiscal package on economic growth will be ca. 0.5 percentage points in 2019 and 2020.

Third, after a very good year in 2018, public investments will continue to grow in 2019. However, considering the timeline of EU spending and the recent contracting of EU funds, the growth of public investments will diminish. Nevertheless it will remain positive and the investment cycle will be distributed more evenly in time. Although 2018 was as good for public investments as 2011, 2019 will not be as bad as 2012. Private investments are unlikely to step up: we expect the low positive growth to continue. In total, investments will grow by approximately 5% year on year in 2019.

Inflation will accelerate in 2019, driven among others by rising prices of processed food and motor fuel, the secondary effect of rising prices of energy and salaries, as well as the reference base effect in some categories. As a result, inflation will step up from 0.7% early in the year to approximately 2.0-2.5% year on year at the year’s end. The expected inflation trajectory is subject to change as more figures come in.

A combination of solid GDP growth and accelerating inflation, still remaining close to the target, will not be a hard nut to crack for the Monetary Policy Council. In our opinion, under those circumstances, the Council will decide to keep the rates low and unchanged throughout the year. The rise of inflation will probably be considered to be temporary; remaining within the acceptable band of deviation from the target, it will not be seen as a threat to the target. The Monetary Policy Council is likely to continue its declarations that the rates will remain unchanged until the end of the current mandate.

We expect that the PLN exchange rates will remain stable. The Polish currency is likely to close the year similarly to where it started – slightly under 4.30 to the EUR. In addition, the internal and external balance of the Polish economy makes the currency less vulnerable to external factors and less likely to be used in order to stabilise macroeconomic shocks.

Banking sector – monetary aggregates 2017 2018 2019F
Corporate loans 5.9% 7.5% 8.8%
Mortgage loans -0.1% 7.0% 5.4%
Non-mortgage loans 5.3% 6.8% 5.7%
Corporate deposits 2.4% 4.3% 9.6%
Household deposits 4.2% 10.1% 10.8%

Source: mBank estimates as at 2 April 2019.

The loan/deposit ratio in the banking sector will drop in 2019 due to continued high growth of deposits, in particular household deposits, combined with declining growth of loans. The former is due to the conversion of household savings from investment funds and financial assets to bank deposits, as well as a high nominal increase of household incomes. Moreover, the growth of corporate deposits is not likely to drop significantly in 2019. Demand for mortgage loans will remain high due to a solid consumer sentiment and rising household income. Growth of consumer lending will slow down modestly as loans will be substituted by dynamically rising income. We expect corporate loans to grow at a higher rate, with continued predominance of overdraft facilities and working capital loans.

Outlook for mBank


Net interest income & NIM (slightly positive)
  • Continued gradual increase of margin driven by changing structure of loan portfolio (more higher-yielding products)
  • No room for further reduction of funding costs
Net Fee & Commission income (neutral)
  • Constantly rising client transactionality and strong acquisition in both retail and corporate segment
  • Adjustment of fees difficult due to fierce competition in the sector and regulatory limitations
Total costs (slightly negative)
  • Expenses dependent from the bank’s management to be kept under control
  • Rising depreciation due to ongoing investments in IT
Loan Loss Provisions (slightly negative)
  • Small downside risk due to changing loan book mix
  • Potential increase in provisioning due to IFRS 9
  • Resilient asset quality supported by good macroeconomic situation and low unemployment

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