Double-digit investment growth in Q4 2017

In accordance with GUS data published today, real GDP growth rate stood at 5.1% YoY in Q4 2017 vs. 4.9% in Q3, running in line with our forecast and the flash estimate released on 14 February 2018. The structure of GDP growth was in line with our estimates that were based on the preliminary annual GDP data (see MACROpulse of 30/1/2018). The main factor behind the acceleration of GDP growth in Q4 was the acceleration of investments growth to 11.3% YoY vs. 3.3% in Q3. Consequently, the contribution of investments to GDP growth in Q4 amounted to 2.8 pp (the highest since Q4 2011) and was higher from the contribution of private consumption (2.5 pp). In our view, the sharp increase in fixed capital formation should be attributed mainly to faster growth of public investments and, to a smaller extent, to recovery in corporate investments, the annual dynamics of which has most probably been below 5%.

Noteworthy in the Q4 GDP structure is a negative contribution of inventory growth to the economic growth rate (-0.4 pp vs. a zero contribution in Q3). However, it should be stressed that inventory growth in Q4 was second highest in history and amounted to PLN 11.2bn vs. a record growth registered in Q4 2016 (PLN 13.9bn). This means that in Q4, despite a strong surge in demand, the companies significantly increased inventories, which, in our view, iindicates that enterprises are optimistic about future business climate.

Upside risk to forecast of GDP growth in 2018

The data on GDP in Q4 do not alter our view on the prospects for economic growth in 2018 (see MACROmap of 5/2/2018). However, we see a significant risk to our forecast of GDP growth in 2018 (4.3% vs. 4.6% in 2017), as signaled in the data concerning construction-assembly production and retail sales in January 2018 (see MACROpulse of 20/2/2018). They indicate that the recovery in investments and private consumption growth in Q1 may be stronger than we expect. A fuller assessment of prospects for economic growth in Q1 and in the whole 2018 will be possible after the publication of data on industrial production and retail sales in February and investments of enterprises employing at least 50 persons in Q4 2017.

Today's data on GDP in Q4 are neutral for PLN and prices of Polish debt.