Poland’s current account deficit narrows in May amid softer imports
The desk interprets that Poland's current account deficit has improved in May, signaling resilience amid a challenging trade environment. Per the full note, the deficit narrowed to €1.1 billion, considerably lower than forecasts from ING (€1.3 billion) and consensus (€1.6 billion). This development, alongside a stabilizing services surplus, could influence investor sentiment towards the Polish zloty, particularly against a backdrop of stable economic indicators and lack of high-impact events on the calendar.
What the desk is arguing
The desk frames this as a positive sign for Poland’s economic outlook, indicating a narrowing of its current account deficit despite external pressures. While the energy import costs remain elevated, a decline in import volumes could support the currency and reflect underlying economic resilience.
Further, the data indicate that the services surplus has stabilized, contributing positively to the current account balance with a recorded €3.4 billion. However, a noted decline in the growth rates of exports and imports raises questions about long-term trade dynamics, as export growth decelerated to 5.5% year-on-year in May compared to earlier months.
Where it sits in our coverage
Our consensus target for the EUR/PLN is 1.075, with a range of 1.04 to 1.12, supported by firms including: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's prognosis leans towards the upper bound of the target range, expecting stability in the zloty as the current account data reinforces a cautiously optimistic outlook for Poland's trade dynamics moving forward.
How other firms see it
Group-aligned firms such as jpmorgan are supportive of a stable view on the zloty, while contrary perspectives from bofa suggest potential for volatility. Both viewpoints underscore the critical interplay of trade balances and current account performance.
Worth monitoring, the general sentiment around the EUR/PLN could also reflect shifts based on upcoming economic indicators from the eurozone and broader trade developments related to Poland's outsourcing sectors.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Poland's current account deficit narrowed to €1.1 billion in May, below forecasts.
- 02Despite high energy costs, a decrease in import volumes has positively impacted the balance.
- 03A stable services surplus around €3.4 billion indicates ongoing resilience, but export growth is slowing.
- 04The consensus for EUR/PLN remains at 1.075, suggesting a stable outlook for the zloty.
Market implications
Watch for the EUR/PLN to maintain proximity to the 1.075 target as external balances strengthen amid softer import growth. Investor attention should remain on trade dynamics and potential shifts in regional economic indicators, especially from Germany.
Risks to this view
A significant reversal in energy prices or a drastic decline in service export growth could challenge the current account improvement narrative, leading to potential depreciation of the zloty. Additionally, geopolitical tensions could disrupt trade flows unexpectedly.
Older quick take Quick take Published 14:48 Poland Poland’s current account deficit narrows in May amid softer imports Poland’s external imbalance came in below our forecast and market expectations as import growth fell short of forecasts. The external imbalance remains narrow despite the higher cost of energy imports as volumes have declined. The services surplus has stabilised after years of improvement Poland's current account deficit came in below our forecasts and below market expectations in May Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In May, the current account deficit amounted to €1.1bn (ING: €1.3bn; consensus: €1.6bn), compared with €1.5bn in April and €1.2bn in May last year.
On a 12-month rolling basis, the deficit narrowed to 0.8% of GDP from 0.9% of GDP in April. The primary source of the current account deficit was the primary income balance, which recorded a deficit of €3.2bn. This largely reflects income earned by foreign direct investors on their equity investments in Polish companies.
Meanwhile, Poland continued to post a solid surplus in trade services (€3.4bn). After many years of steady growth, the services surplus has broadly stabilised since 2022. This may raise some concerns, as services have a significant positive contribution to GDP growth.
Poland has substantial potential to further expand exports of high value-added services, particularly in areas such as business process outsourcing (BPO) and the IT sector. However, the balance of payments data suggests that the surplus generated by the services sector is no longer increasing. The trade balance recorded a deficit of €1.2bn.
In euro terms, exports of goods and services increased by 5.5% year-on-year in May, while imports rose by 3.7% year-on-year, compared with 6.7% and 7.8%, respectively, in the previous month. The lower annual growth rate of trade flows relative to April was partly due to a smaller number of working days. In recent months, the trade deficit has been under upward pressure from the energy crisis and rising oil and natural gas prices linked to the military conflict in the Middle East.
In May, however, import growth proved weaker than we had expected. According to analysts at the National Bank of Poland, the sharp increase in energy prices led to a reduction in import volumes. At the same time, the upward trend in car imports came to a halt, although this did not apply to vehicles imported from China.
Imports of computer components and parts also continued to increase. Export growth was driven primarily by higher foreign sales of silver, refined copper and computer equipment. By contrast, exports were weighed down by the deepening decline in the automotive sector, affecting both finished vehicles and automotive parts.
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