Economic growth getting back to normal in Q3

In accordance with the flash estimate published by the GUS, Polish GDP growth fell from 11.2% YoY in Q2 to 5.1% YoY in Q3, running above the market consensus (4.8%) which was consistent with our forecast. The economic growth was strongly driven down mainly by the abatement of the last year’s low base effect related to the COVID-19 pandemic and associated restrictions curbing the economic activity in Q2 2020. Seasonally-adjusted quarterly GDP growth accelerated from 1.8% in Q2 to 2.1% in Q3, which shows that economic growth has accelerated. This means that in Q3 GDP exceeded the pre-pandemic level (Q4 2019) by 2.9%. The data published by the GUS is a flash estimate and the full GDP data including information on its structure will be published at the end of the month.

Consumption and investments as economic growth drivers in Q3

Today’s data on GDP in the third quarter shows that annual growth is getting back to normal following the abatement of the last year’s low base effect. We believe that consumption (we estimate its contribution to annual GDP growth to be 3.0 pp.), supported by the effect of pent-up demand in households and continuing improvement in the labour market was the main driver of economic growth in Q3. Economic growth was also driven up by the recovery in investments (their contribution most likely standing at 1.1 pp.) arising mainly from growing corporate investment related to high capacity utilisation and from housing investments of households. Net exports, however, had a negative impact on GDP growth (-0.8 pp. according to our estimates), with imports growing stronger than exports as a result of a quick growth in domestic demands and global supply chains disruptions curbing the growth in exports.

Today’s data on GDP growth in Q3 shows that there is a slight upside risk to our economic growth forecast for 2021 (4.9%). However, GDP growth in Q3 was consistent with the November inflation projection of the NBP. It means that the much-higher-than-projected inflation in Q4 2021 will be the main argument for further tightening of the monetary policy in the next MPC meeting.

In our opinion, today’s data on inflation and GDP is neutral for the PLN and the yields on Polish bonds.

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