Warsaw, July 1 Inflation projection of the National Bank of Poland based on the NECMOD model Economic Institute
THE JUNE AS COMPARED TO THE FEBRUARY Change in the projection scenario Re-estimation of the model Change of exogenous Starting point
The June projection of CPI inflation compared to the February projection 7 6 per cent 7 6 5 5 3 3 1 1-1 7q1 7q3 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 1q1 February 1 June 1-1 1q
The June projection of GDP compared to the February projection 8 7 per cent 8 7 6 6 5 5 3 1 3 1-1 -1 - - 7q1 7q3 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 1q1 1q February 1 June 1
Decomposition of the differences between the February and the June projections 1.5 1..5. -.5-1. -1.5 9Q 9Q3 9Q 1Q1 1Q 1Q3 1Q 11Q1 11Q 11Q3 1Q1 1Q 1Q3 Core inflation Food prices inflation Energy prices inflation CPI inflation 3..5. 1.5 1..5. -.5-1. -1.5 9Q 9Q3 9Q 1Q1 1Q 1Q3 1Q 11Q1 11Q 11Q3 1Q1 1Q 1Q3 Consumption Investments Net exports GDP
Change in the projection scenario Re-estimation of the model** Change of exogenous *** Weaker exchange rate of the euro against the dollar Higher receipts from EU funds in 11 Starting point* CPI:. percentage points above the February projection Higher inflation of food and energy prices Lower core inflation GDP: in line with expectations Lower domestic demand Higher contribution of net exports Scale of impact: *** significant ** medium * small
Re-estimation estimation of the model
Re-estimation main areas of change Intensification of mechanisms closing the output gap after the occurrence of disruptions. Reinforcement of impact of the output gap on prices. Re-specification of the equation of food and energy prices. Weakening of the effect of budget deficit and disparity of interest rates on the exchange rate. Change in the estimates of the income from operating surplus and income from property. Disaggregation of consumption.
Change of exogenous Growth abroad Price growth abroad Interest rates abroad Energy commodity price index Agricultural commodity price index USD/EUR exchange rate EU funds
- - Growth abroad (lower) External GDP (y-o-y) (%) -6 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q Feb 1 Jun 1 In the NECMOD model, the foreign sector is represented by three economies (with weights, respectively): euro area (87.8%) Great Britain (7.%) United States (5.%) 1Q
3.5 3..5. 1.5 1..5. Price growth abroad (lower till 1 Q) External value added deflator (y-o-y) (%) 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
6 5 3 1 Interest rates abroad (lower) External interest rates 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q Feb 1 Jun 1 1Q
Energy commodity price index* (slightly lower) Energy commodity price index 1..8.. 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1 * Global index of energy prices includes prices of coal, crude oil and natural gas.
1. Agricultural commodity price index * (lower till 11 Q3) Global prices of agricultural commodities.8.6 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1 * Global index of agricultural commodity prices consists of prices of wheat, pork, beef, poultry, fish, seed oil, sugar, oranges, bananas and index of beverages. Index weights represent the structure of consumer consumption (CPI basket) the June projection consistent with the structure of 1, the February projection with that of 9.
1.6 1.5 1. 1.3 1. 1.1 1. EUR/USD exchange rate (EUR weaker against USD) USD/EUR exchange rate 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
5 3 1 Transfers from the EU (higher in 11) Funds from the EU (in Mio EUR) 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
Starting point GDP and its Labour market Inflation
GDP and its starting point February projection (s.a.) 1 Q1 June projection GUS* estimates (31.5) GDP (y-o-y) (%) 3. 3. 3. Domestic demand (y-o-y) (%).5.. - Individual consumption (y-o-y) (%).3 1.6. - Collective consumption (y-o-y) (%) 1.5 1.5. - Gross fixed capital formation (y-o-y) (%) -.5 -. -1. Contribution of net exports (pp).9 1..7 - Exports (y-o-y) (%) -.3 1. 9.8 - Imports (y-o-y) (%) -. 7. 7.9 * Central Statistical Office
Labour market starting point February projection (s.a.) 1 Q1 June projection* BAEL (LFS) data (6.5) ULC (s.a.) (y-o-y) (%) -.. - Labour productivity (y-o-y) (%). 3. - Wages (y-o-y) (%)..1 - Number of working persons according to BAEL (y-o-y) (%) -.6.1 -.9 Unemployment according to BAEL (s.a.) (%) 9.6 8.5 1.6 Labour market participation rate (s.a.) (%) 55. 55.1 55. * In the June projection, due to significant differences between the adopted starting point and LFS data, the data for 1 Q1 have been adjusted (the number of working persons and the economically active).
Inflation starting point February projection (s.a.) 1 Q1 June projection CPI inflation (y-o-y) (%).6 3. Core inflation (y-o-y) (%).7. Inflation of food prices (y-o-y) (%) 1.1. Inflation of energy prices (y-o-y) (%) 5.1 7.
JUNE for 1-1 1 GDP and its Labour market Exchange rate Inflation
Investment outlays (alternately) 5 Gross fixed capital formation (y-o-y) (%) 15 1 5-5 -1 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
Gross fixed capital formation: decomposition 1 5-5 -1 9Q1 9Q 9Q3 9Q 1Q1 1Q 1Q3 1Q 11Q1 11Q 11Q3 1Q1 1Q 1Q3 GFCF enterprises GFCF public sector GFCF housing GFCF
Decomposition of potential output growth 5 p.p. 3 1-1 9Q1 9Q 9Q3 9Q 1Q1 1Q 1Q3 1Q 11Q1 11Q 11Q3 1Q1 1Q 1Q3 Population Labour market Private capital Public capital TFP Potential output
Individual consumption (higher from 1 Q3) Individual consumption (y-o-y) (%) 6 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
Contribution of net exports (higher till 11 Q) 3 Contribution of net exports (pp) 1-1 - -3 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
8 6 GDP (higher from 1 Q3 till 1 Q) GDP (y-o-y) (%) 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
Labour market (similar change rate in the number of working persons and the unemployment rate, lower growth rate of wages till 11 Q1, lower ULC) 6 5 3 1-1 - -3 Employment (y-o-y) (%) 16 1 8 Unemployment (pp) 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1 1 1 8 6 Gross wages (y-o-y) (%) 1 8 6 - - ULC (y-o-y) (%) 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q Feb 1 Jun 1 1Q
6.5 6. 5.5 5..5. 3.5 Exchange rate (stronger) Real effective exchange rate (REER) 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
3 Core inflation * (lower) Core inflation (%) 1-1 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1 * Core inflation does not include prices of food and non-alcoholic beverages or energy prices
Determinants of core inflation Growth rate (y-o-y) (%) 15 1 5-5 -1-15 - 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Gap between the number of working persons in the equilibrium and the current number of working persons Import prices (excluding oil and natural gas) ULC 3 1-1 - -3 - % of working persons in the equilibrium
9 6 3-3 Inflation of food and energy prices (food growth rate higher till 1 Q1, higher growth rate of energy prices till 11 Q) Food prices inflation (%) -6 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q Feb 1 Jun 1 1Q 1 Energy prices inflation (%) 8 6 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
5 CPI inflation (higher till 11 Q) CPI inflation (%) 3 1 3Q1 3Q Q 5Q 6Q 7Q 8Q 9Q 1Q Feb 1 Jun 1
Inflation projection June 1 6 per cent 6 5 5 3 3 1 1 7q1 7q3 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 1q1 1q
Probability distribution of inflation Probability of inflation running below 1.5% below.5% below 3.5% below the central path in the range (1.5%; 3.5%) 1 Q.5.57 1..6.95 1 Q3.1.55.96.7.8 1 Q.13.5.93.7.8 11 Q1.13.9.9.7.76 11 Q.1.6.88.7.76 11 Q3.9.37.79.8.7 11 Q.8.3.7.8.67 1 Q1.8.3.7.9.6 1 Q.9.33.7.9.61 1 Q3.1.3.69.5.59 1 Q.1.36.69.9.57
GDP projection June 1 9 8 per cent 9 8 7 7 6 6 5 5 3 3 1 1-1 -1 - - 7q1 7q3 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 1q1 1q
OF THE
Risk factors not accounted for in the projection Scale of impact: *** significant ** medium * small
Risk area Description Impact Scale of impact External environment The uncertainty with respect to the rate of monetary and fiscal policy tightening in the euro area and the ensuing risks for growth and inflation in Poland's main trade partners. High uncertainty in the world financial markets connected with the effects of increasing indebtedness of some euroarea countries. inflation GDP *** Developments of commodity prices and cross exchange rates (including, in particular, USD/EUR exchange rate). Recovery in domestic demand Lower than accounted for in the projection level of EU fund utilisation. Fiscal policy adjustments (on the revenue and expenditure side) in connection with consolidation measures announced by the government (among others, spending rule, freezing public sector wages in 11). inflation GDP ** Nature of adjustments in the private sector in Poland as the economy enters the recovery phase developments in inventories and investments
Risk area Description Impact Scale of impact Food and energy prices of Poland Significant uncertainty of the future effective exchange rate of the zloty, connected, among others, with real and nominal economic developments around the world and in Poland, the rate of accumulation of general government sector debt and international financial flows. Unknown scale of regulatory measures in the energy market in Poland. Uncertainty as to the impact EU regulation on prices in Poland (connected, among others, with natural environment protection, including carbon dioxide emissions, and regulatory measures in the food market). inflation GDP ** Data after the cut-off date GUS estimate of GDP. percentage points lower than assumed at the starting point of the projection. Higher than expected data on the path of agricultural commodity prices in the world markets in May 1. inflation GDP * Summary inflation GDP