The abrupt outbreak of SARS-CoV-2 pandemics at the beginning of 2020 changed the economic picture dramatically and caused our macroeconomic outlook published in the Management Board Report on Performance of mBank S.A. Group in 2019 to be outdated.

The non-precedent, dynamic situation allows only to make conditional assumptions, which may change depending on the containment of the virus and governments’ response to counteracting economic shock caused by the pandemics. The outlook presented below represents our best predictions as at the beginning of April 2020.

In our view, current recession is carrying substantial structural change in global economics. It is forecast that the peak in the numbers of infected is to come in May/June.

It is yet to be seen how fast various restrictions will be lifted and how the economies are going to be affected. No matter the trajectory, the return to normality will be painfully slow even though we are about to temporarily see strong GDP numbers as economies jump start. We expect 4.2% recession in 2020 and substantial drop of core inflation into year’s end. Seemingly high CPI inflation results from high food prices and possible (delicate) turnaround in oil prices in H2. Q4 2019 GDP level is not to be reached until 2022.

Fiscal policy gets actively involved along with central bank support. Polish economy is not an exception. Polish central bank reacted to pandemics with catalogue of measures, primarily with two interest rates’ cuts on March 17th and April 9th, each by 50 bps. Quantitative Easing measures are already in place, meaning purchases of government bonds and bonds with state guarantees. Polish TLTRO is in the pipeline. Now, the vital role is to be played by the government with use of fiscal policy. We estimate that government programmes launched in March and April will be able to save up to 600k jobs. It allows for a stabilization of unemployment rate in Q3 at 10.2% level (official, registered unemployment rate, not LFS).

Household deposits will continue to rise, but the growth rate will decrease gradually. An ailing economy, salary cuts, and the need to finance consumption with savings will push the growth rate of household deposits down to around zero in the quarters to come. However, it is possible that the support programmes launched by the government and the dramatic decrease in consumer spending caused by administrative measures will result in a temporary increase in savings. The large cash withdrawals reported in March (estimated at approximately PLN 30 billion based on NBP data) will not take place again. They were driven by consumers’ fears about the consequences of economic lockdown. As none of the pessimistic visions materialised, the cash should soon turn into corporate deposits or return to the banking sector in the form of household deposits. Consumers’ borrowing activity will soon decrease rather abruptly due to shrinking consumer loans.

A slowing economy will soon trigger a contraction in corporate lending. We can expect a decrease in both working capital and investment loans. An alternative, especially to working capital loans, will be offered in particular by the Polish Development Fund’s (PFR) programme, which will provide companies with liquidity support worth as much as PLN 100 billion in the next months. Investment activity will recover slowly, but a structural shift in the economy is expected to increase demand for investment loans. Corporate deposits are expected to shrink in the nearest future due to a significant decrease in revenues. The government support programmes will also be important in this context as they will reduce at least part of operating costs and prevent an abrupt decrease in deposits.

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