Source: Eurostat, BMI stance towards foreign-owned banks and retailers. However, the majority of Poland s FDI is channelled into the manufacturing sector, which PiS have wisely left untouched. ...Both of those should act as a positive impulse to household consumption once enacted, particularly given that both policies are being funded by the additional levies on the banking and retail sectors. On aggregate, we expect fiscal policy will actually be more ex- pansionary than our previous forecasts too, and we have revised our fiscal deficit forecasts post-election as a result, expecting the new government to run a budget deficit as close as possible to the EU s - of GDP threshold over ---- and ----. The motivation for rising spending is rooted in political motivations rather than economic justifications: economic activity is strong and accelerating and unemployment is below pre-crisis levels. ...In particular, the government s new levies on the banking sector, combined with the possibility of a forced conversion of CHF loans could cause significant damage to the sector s capital levels and profitability, and will likely lead to a tightening of credit conditions. More broadly, the government s investor-hostile policies will act as a deterrent to foreign investors, although quite how severe this dynamic will be is not clear at the moment.
...Wages, Employment & Real Domestic Demand Expenditure, chg y-o-y Source: Eurostat, BMI open economy, domestic demand is much more significant relative to total growth in Poland compared to other economies in Central Europe. This provides Poland with slightly better in- sulation against external shocks. ...As external demand has picked up, the manufacturing sector has driven steady gains in job growth, although other sectors of the economy have also contributed. Vacancies remain at all time highs, suggesting there are still some gains in employment ahead, and potentially signalling labour market tightness in some sectors which could lead to building wage pressure as early as the end of ----. Government Consumption: With Law and Justice at the reins, government consumption will take a more prominent role in real GDP growth over the coming years. ...Interest rates are at record lows, while domestic and external demand is strong and improving. Capacity utilisation rates among manufacturing firms are running at pre-crisis levels, holding at --.- in Q---. -- Business Monitor International Ltd www.bmiresearch.com
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