Country Economic Forecasts > Poland

Brexit has continued to weigh on Polish assets in July. While most other EM currencies rebounded, the PLN has remained about 4% weaker against the US$ after the referendum. Equities are some 3% below their pre-Brexit level, further hit by the government's decision to dismantle the funded pillar of the Polish pension system (private pension funds account for 20% of the Polish stock market capitalisation). Although Poland is less reliant on exports than smaller CEE economies and therefore less vulnerable to the potential slowdown in external demand, its higher political risk premia is weighing on investor sentiment.Strong growth in industrial output and retail sales suggest GDP growth is rebounding after a weak start to the year. In H2, consumption will continue to accelerate on the back of fiscal loosening and rising real wages. But investment will be subdued as EU-funded investment drops and Brexit-related uncertainty weighs on euro area demand. Uncertain external demand along with higher imports on the back of surging consumption, will mean net exports are an increasing drag on growth in 2016. We still forecast GDP growth of 2.9% in 2016 (significantly below the consensus of 3.5%), followed by 3.2% in 2017.