Outlook 2024

Our report can be downloaded here (and also as an attachment the end of this article).

In our view, recessionary climate will be a dominant mood in the core markets during the first half of the year, although there won’t be significant falls in GDP. Inflation is set to fall and central banks are going to start easing. Fed and EBC are expected to cut rates by 150 and 125bp, respectively. The risks are tilted in the direction of larger-scale reductions, especially in the euro zone. Monetary policy easing abroad will be beneficial to growth again which will – in turn – support Polish business activity. Weak German economy will weigh on the Polish economy for next months (possibly quarters), but we believe that over the years, there will be a new positioning of Poland in the global value chains and this cyclical connection will weaken significantly.

We expect GDP growth in Poland of 3.5%. The economy should accelerate steadily, driven initially mainly by consumption and then also by exports and investment (although annual dynamics will look weak in the latter case). As early as 2024 year, we should see a new, long-term source of investment (energy, automation) which will boost the cyclical picture for the years to come. Due to initially weak activity abroad, Poland will not be a rocket. However, even the growth forecasted is rather low by historical standards, it will be difficult to sustain in non-inflationary manner for several years due to a supply-limited labour market. It is because investments, before they become capital increasing production capacities, will strain current capacities further and require additional financing (and therefore – in view of high labour costs -  also  higher prices).

Average annual inflation will be 5.2% and will reach its lowest point in March/April. However, the MPC will not announce that inflation is on target, as core inflation will again accelerate at least to a trot and the overall CPI will be further boosted by the end of inflation shields. Consequently, interest rates will be kept unchanged (5.75%) throughout 2024 year. However, small rate cuts may occur, as MPC’s reaction function is still unclear to us, and this decision body may have the desire to do „something” when the monetary policy horizon extends to 2026 as the mechanics of inflation models is unlikely to give much chance of finally not returning to the target in that date.

2024 will continue to be marked by geopolitical tensions. The chances of ending the war in Ukraine are very low. In contrast, we rate the chances of escalation in the Middle East highly. Tensions over transport through the Red Sea and the Suez Canal will persist. The closer we get to the US presidential election, the rivalry with China (at least in the communications sphere) will escalate. We expect that climate problems will also hit. Large temperature amplitudes will persist and the probability of sudden floods and droughts is significant. For this reason, the expected value of food prices ranks higher than in previous years. 2022 and part of 2023 year showed that quite a few food categories behave very similarly to core inflation. Hence, if companies keep raising prices, the global food price squeeze that has happened so far will exhaust the potential in the first half of the year. A resurgent global economy is also unlikely to lead to lower agricultural commodity prices in future years.