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Lower consumption is the main reason behind the Polish GDP decline

Final data on the GDP consistent with the flash estimate

In accordance with the final estimate published by the GUS, the Polish GDP fell by 2.8% YoY in Q4 2020 comparing to -1.5% in Q3, in line with the GUS flash estimate. Seasonally adjusted GDP fell by 0.7% QoQ in Q4 comparing to +7.9% QoQ in Q3. This means that seasonally adjusted GDP in Q4 2020 was 2.8% lower than in Q4 2019, i.e. before the COVID-19 pandemic. A strong slowdown in the economic activity in Q4 2020 was a result of the second wave of the pandemic and administrative restrictions adopted by the government.

Lower consumption is the main reason behind the Polish GDP decline

Lower contributions of private consumption (-1.7 pp. in Q4 vs. 0.2 pp. in Q3), net exports (0.4 pp. vs. 1.7 pp.), investments (-2.8 pp. vs. -1.7 pp.) were driving the annual GDP growth rate down, while higher contributions of inventories (0.6 pp. vs. -2.3 pp.) and public consumption (0.7 pp. vs. 0.6 pp.) had the opposite effect. Therefore, lower private consumption was the main reason behind the Polish GDP decline in Q4. A significant drop in private consumption growth rate (-3.2% YoY vs. +0.4% in Q3) resulted from administrative restrictions adopted in Q4 2020 to curb the second wave of the pandemic. However, the decline in consumption was limited by a relatively good situation in the labour market (see MACROpulse of 17/2/2021).

Stronger imports reduced the contribution of net exports to the growth

A strong decline in net exports contribution is also noteworthy here. It resulted from the recovery in imports (7.9% YoY in Q4 vs. -1.0% in Q3) supported by last year’s low base effects, while the exports growth rate increased in Q4, but less markedly (8.0% vs. 2.0%). What is also noteworthy is that investments dropped significantly (-10.9% YoY in Q4 vs. -9.0% in Q3). Continuing uncertainty connected with the development of the pandemic constrained the companies’ investments. In turn, gross fixed capital formation was supported by the activity in the housing market (see MACROpulse of 29/1/2021).

Data supports our GDP growth forecast for 2021

Q4 data on economic activity supports our economic growth scenario for 2021 (3.6%). However, the recovery in global trade which can be seen these days carried an upward risk for this forecast (see MACROmap of 22/2/2021). In turn, the deteriorating epidemiologic situation in Poland (see the COVID Dashboard) pose a downward risk to our forecast.

Today’s GDP data is neutral for the PLN and the yields of Polish bonds.