It was the last quarter with a YoY GDP decline

Final GDP data above the flash estimate

In accordance with the GUS data published today, the GDP rose to -0.9% YoY in Q1 2021 comparing to -2.7% YoY in Q4 2020, running markedly above the flash estimate published earlier (-1.2%). Seasonally-adjusted quarterly GDP growth accelerated from -0.5% in Q4 2020 to 1.1% in Q1 2021. This means that seasonally adjusted GDP in Q1 2021 was 1.7% lower than in Q4 2019, i.e. before the outbreak of the COVID-19 pandemic.

Investments are the main factor behind the GDP growth acceleration

A higher contribution of investments (+0.2 pp. in Q1 2021 vs. -3.9 pp. in Q4 2020) was the main reason behind the GDP growth in Q1 2021 vs. Q4 2020. What is more, it was the first time since Q1 2020 that we have seen a year-on-year growth in investments (+1.3% YoY in Q1 2021 vs. -15.4% in Q4 2020). Although data on companies’ investments were showing that the growth in investments was accelerating, the acceleration pace still comes as a huge surprise. Based on data on companies investments, we think that companies' investments aimed at restoration were a significant factor driving investments in the national economy up (see MACROmap of 31/05/2021).

Consumption was relatively resilient to the third wave of the pandemic

A higher contribution of consumption (+0.5 pp. in Q1 2021 vs. -0.2 pp. in Q4 2020) was driving the economic growth up, with year-on-year consumption going up after the decline in Q4 2020 (+0.6% YoY vs. -0.2%). With mobility increasing and pent-up demand having been released by consumers as administrative restrictions adopted towards the end of 2020 in response to the second wave of the pandemic were eased were conducive to the consumption growth. Restrictions aimed at curbing the third wave of the pandemic were adopted only in the second half of March, so their impact on consumption throughout the entire quarter was limited.

With low base effects no longer present, the contribution of inventories towards the GDP growth was lower

In turn, the GDP growth was driven down by a lower contribution of inventories (0.3 pp. in Q1 2021 vs. 1.3 pp. in Q4 2020). This was largely due to last year’s low base effect driving the contribution of inventories strongly up in Q4 2020 being no longer present. Increasing supply barriers that were signalled earlier in business surveys also reduced the contribution of inventories. Consequently, with deliveries being delayed, some companies may have been forced to sell the stocks they had.

Stronger imports reduced the contribution of net exports towards the GDP growth

A lower contribution of net exports (-1.9 pp. in Q1 2021 vs. 0.1 pp. in Q4 2020) also had a negative impact on the GDP growth. It was a result of an acceleration in imports growth (10.0% YoY vs. 8.2% in Q4 2020) related to an internal demand recovery following a gradual decrease of the pandemic, accompanied by a decline in the exports growth (5.7% vs. 7.6%) that can be linked to strong supply barriers in the manufacturing sector (see MACROmap of 26/04/2021).

It was the last quarter to see a GDP decline year on year

In our opinion, in the coming quarters, GDP growth will be driven up by low base effects, a growth in exports related to changes in global supply chains, which are favourable for Polish companies (see MACROmap of 17/05/2021), and by the boost in consumption and investments related to the pandemic pacing out. Therefore, the first quarter was the last one to see a fall of the GDP expressed in annual terms. Today’s data carry an upward risk for our projection, in which the GDP will grow by 4.6% in 2021 comparing to a 2.7% growth in 2020. We will present our revised GDP growth scenario in the next MACROmap.

In our opinion, today’s data on inflation and the GDP are slightly positive for the PLN and the yields on Polish bonds.