Our GDP growth forecast for 2021 stays below consensus at 3.8%. Inflation should be slightly above NBP target (2.8% on average).
Next months will bring attempts to accelerate the pace of vaccination. We expect that herd immunity is within reach in 2021 in the majority of developed countries. However, the assumption does not apply to poorer countries. The virus will mutate there and generate ongoing risk for vaccines’ efficacy. We can safely assume though, that 2021 will be marked with much lower risks of lockdowns. It is most likely that developed countries 60+ populations will be vaccinated until H2. It would be sufficient to lift almost all epidemic restrictions, also in Poland and do not impose them again. At this very moment, the inoculation campaigns are only limited by supply of vaccines. However, there is short-term risk of increased number of infections as the new versions of the virus are much easier transmittable (+60%) and Polish economy partially opens up again (shopping malls) without any meaningful progress in vaccinations.
In Poland, we expect current account surplus to stay more or less unscathed. Perspectives for exports are favorable and imports is not going to accelerate a lot (we saw it in the previous cycle and expectations for imports rebound were overrated). Our growth forecast for 2021 stays below consensus at 3.8%. Why? It is not because demography because it is obviously not the problem for current year and also for the current economic cycle (say, next 5 years). It is also not because of fiscal drag, since we expect none. We have strong conviction that first phase of the upswing will be of jobless recovery type. Weak labor market is sufficient to bring down the momentum of consumption in the early stage of recovery even though the consumption itself will jump-start as restrictions are lifted (and pent-up demand is released). Withoutstrong conviction of consumers, that their incomes are permanently out of the woods, even higher savings (in terms of wealth) will not be sufficient to stimulate consumption much above the figures suggested by simple restart of some consumption activities (mostly services). However, the outlook brightens for 2022 as both labor market and higher savings (in terms of wealth) will be working together to boost consumption expenditures. As for investment, we expect slow start and it is also possible that investment will be slightly lagging the cycle. Our 3.8% growth forecast is sufficient to reach Q4 2019 GDP stream in Q32021.
2021 will be marked with falling inflation that should stabilize slightly above NBP target (2.8% on average). Such inflation should encourage MPC/NBP to stay on current course (no change in rates). New monetary policy tools (bond buying, currency interventions) are powerful and fast in transmission (as seen in the context of policy mix). That is why, in our opinion, they will be treated as a first best solution to even out any negative developments in the short-term. Scenario of further rate cuts is reserved for a substantial, negative turn in business activity (currently outside any reasonable market forecasts). Aggressive FX interventions in December made investors believe the NBP/MPC is serious on exchange rate. Therefore the majority of market participants abandoned bets for stronger zloty. That is also why we expect only marginal appreciation of the zloty in 2021 and it will be allowed (by the NBP) to occur only in H2.
