Poland’s K-shaped recovery weighs on growth, supports stable rates
Lead — Poland's economy is demonstrating a K-shaped recovery, where strong industrial performance contrasts with slumping sectors like construction and those vulnerable to Asian competition. This divergence supports the notion of stable interest rates from the National Bank of Poland given the disinflationary pressures emerging from moderate wage growth and subdued inflation expectations. Per the full note from ing-think, the unchanged monetary policy stance reflects the muted risk of entrenched inflation, allowing traders to gauge the Zloty against a stable rate backdrop.
What the desk is arguing
The desk posits that Poland's K-shaped economic recovery implies a stable interest rate environment, which is conducive to a resilient Zloty through year-end. This resilience is underscored by moderate wage growth, with average salaries rising by 5.9% year-on-year in September, albeit falling short of expectations. Per the full note from ing-think, sectors such as accommodation and food services are stabilizing wage pressures, limiting the likelihood of accelerated inflation.
The ongoing struggles in sectors like construction and competitive industries suggest that the anticipated investment rebound may not materialize, with persistent employment declines also projected. This backdrop indicates limited upward pressure on wages, which stands at 5.6% across manufacturing, supporting disinflation in core inflation metrics and alleviating fears of entrenched inflation.
Where it sits in our coverage
The consensus target for the EUR/PLN stands at 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
Our desk’s assessment aligns closely with jpmorgan while reflecting caution against bofa’s more pessimistic outlook, positioning us in the upper end of the spread as we approach year-end.
How other firms see it
Firms like jpmorgan and others view the K-shaped recovery and stable rates as aligned with a bullish stance towards the Zloty. Conversely, bofa presents a more cautious perspective, factoring in the slipping sectors and employment challenges.
Traders should also consider the EUR/PLN trajectory as it closely mirrors the economic signals from Poland’s National Bank, highlighting the stabilization of monetary policy in the face of mixed economic signals.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Poland's economy features a K-shaped recovery impacting various sectors unevenly.
- 02Stable monetary policy anticipated from the National Bank of Poland supports the Zloty's resilience.
- 03Wage growth remains moderate despite higher inflation, reducing the risks of entrenched inflation.
- 04Ongoing employment declines in sectors like construction may hinder an investment rebound.
Market implications
Watch EUR/PLN closely, particularly as it tests the 1.075 resistance level amidst mixed economic signals. The labor market and inflation data will be pivotal as these developments unfold, guiding future monetary policy directions.
Risks to this view
A significant shift would arise from unexpected macroeconomic data indicating strong wage inflation or a resurgence in construction activity, potentially leading the National Bank of Poland to reassess its interest rate stance, which could undermine the current outlook for the Zloty.
Articles Poland’s K-shaped recovery weighs on growth, supports stable rates Published 13:48 Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download September’s data highlights Poland’s K-shaped economy: resilient industry contrasts slumping construction and weakness in sectors exposed to Asian competition. Hopes for an investment rebound are fading, while wage pressures remain moderate despite higher inflation. Producer price increases remain largely energy-led, with limited spillover Leszek Kasek and Mateusz Sutowicz Warsaw, Poland.
The country's K-shaped story is bad news for the economy, but good news for inflation and signals no change to National Bank of Poland rates this year Higher inflation has a limited impact on wage growth. Average wages in Poland rose by 5.9% year-on-year in September, up from 5.6% in August; both our forecast and consensus expected 6.0%. Volatile sectors drove the acceleration: agriculture, forestry, hunting and fishing rebounded to 6.8% from -11.9%, while mining and quarrying rose to 1.8% from -1.7%.
Underlying wage pressures are better reflected in services, where growth remained broadly stable. Accommodation and food services recorded 5.6% YoY versus 5.1% in August, transportation and storage 5.9% versus 6.0%, and information and communication 6.6% versus 7.1%. Moderate services wage pressures limit the risk of entrenched services inflation and support gradual core disinflation.
Manufacturing wage growth was also stable at 5.6% YoY, versus 5.5% in August. Continued decline in corporate sector employment Average employment fell by 0.8% YoY in September, matching both our forecast and consensus. Jobs declined by 7k from August to 6,360k and by almost 50k over 12 months.
Most major sectors recorded declines, led by mining and quarrying (-9.1%) and professional, scientific and technical activities (-2.1%). Accommodation and food services grew by 2.0%. The persistent decline partly reflects retirements not being fully offset by new labour market entrants.
However, corporate sector data mainly covers firms employing at least 10 people. Changing employment arrangements and the growing role of foreign workers complicate interpretation, with these figures showing steeper declines than economy-wide data. September’s labour market data confirms gradually easing wage pressures, with no clear inflation pass-through despite elevated and partly energy-driven price growth.
Construction slumps in September Construction output fell by 9% YoY, versus August’s 6.6% growth, our 2.7% forecast and the 3.4% consensus. Following August’s National Recovery Plan (NRP) grant milestone deadline, civil engineering fell by 4.1%, after 29% growth. Specialised construction declined by 2.7%, versus 3.1% growth.
Sources & References
How we cover this story