In 2015 the Polish economy proved to be resistant to global threats to GDP growth. The economic slowdown in China and the other main emerging markets and the ensuing deceleration in global trade should be counted among them.
GDP growth in 2016 may prove to be lower than last year’s, although the data from the end of 2015 give hope for a better outcome.
The Polish economy has so far proved resistant to global threats to GDP growth that grew more significant in the second half of 2015. They include, first of all, the economic slowdown in China and on key emerging markets and the related drop in dynamics of global trade. We assume that the GDP growth in 2016 may turn out only slightly below the 2015 level, even though the end-of-year data let us hope for a better result.
The factors that affect domestic demand, i.e. key driver of GDP growth in the face of external threats, are likely to remain favorable. In the second half of 2015, enterprises intensified their recruitment efforts, even though at the end of the year it could have resulted from the plan to apply social security contributions to mandate contracts in early 2016. Real households income is on a solid, stable increase.
The unemployment rate continues to fall systematically and the employees’ bargaining position is improving. It is therefore expected that the pace of nominal growth of salaries will accelerate, despite the persistently low inflation rate which favors a milder pressure on salary increase. Taking into consideration a very low inflation, probably amounting to an annual average of 0% in 2016, low interest rates, and higher social transfers (the 500+ program), we estimate that the consumption dynamics may reach approximately 4.0%.
In 2016, the investments are likely to grow at a solid pace, yet slower than in 2015. The capacity utilization level is relatively high and good financial standing of enterprises and low interest rates will facilitate financing of investments.
Moreover, residential housing investments are expected to increase relatively fast. Yet, increasing uncertainty concerning demand forecasts, highlighted by enterprise sector, may prove to be a factor that limits investment demand. What is more, the cycle of investment growth in enterprises will be rather advanced in 2016. However, the effects of the new financial institution tax on crediting the economy are yet unknown. It is expected that investment in infrastructure will grow throughout the year, even though funds granted within European Union financial perspective 2007–2013 are almost finished and the new projects will only enter the implementation phase.
It seems that macroeconomic background regarding sales of household-oriented insurance may be slightly better than in 2015, taking into account the increase in real income, improving situation on labor market and higher savings.
Conditions for corporate insurance sales, implied by the increased GDP and financial standing of companies, should be similar to those observable the year before.
The economic growth in Poland may be negatively impacted mainly by the external situation, mostly by the slowdown in GDP growth of emerging markets, including China. There is a growing concern that in such conditions the drop in resource prices and the tightening monetary policy in the US may lead to a financial crisis in developing countries, where companies have been early increasing their USD-denominated debt in the recent years. Uncertainty results also from the situation in Greece, Ukraine, refugee crisis in Europe, and ISIS operations (Islamic State). No major signs of impact of the problems of developing economies on the economic growth in the USA and the Eurozone are at the moment observable both on the US market and in Eurozone, including the German market, which is the most important from Poland’s perspective. We expect that the 2016 GDP growth in Eurozone will be at least similar to that of last year. However, in case that crisis hits emerging markets, a slowdown in Poland’s GDP growth is to be expected.
Due to the aforementioned threats and relatively high risk aversion, we expect that in 2016 prices on the global (and, consequently, Polish) financial markets will remain highly volatile. This may have negative impact on investment income. If the weakness of PLN continues, it may result in the higher costs of motor insurance due to growing spare parts prices.
The drop in oil prices at the turn of 2015 and 2016 caused a significant fall in fuel prices in Poland. As a result, provided that the consequences of PLN weakness are inflationary, sector taxes are introduced and food prices grow, the average annual inflation rate in 2016 may only slightly exceed zero.
The low fuel prices may produce a higher claims ratio for motor insurance. We estimate that the new Polish Monetary Policy Council will keep interest rates of the National Bank of Poland unchanged, even though the rates are more likely to decrease due to low inflation and likely easing of monetary policy by the European Central Bank. However, the interest rates will remain low, which will continue to be a problem for achieving the guaranteed rate of return in life insurance.
|Forecasts for the Polish economy||2016*||2015||2014||2013||2012|
|Real GDP growth in % (year-on-year)||3.5||3.6||3.3||1.3||1.6|
|Increase in individual consumption in % (year-on-year)||3.8||3.1||2.6||0.2||0.8|
|Increase in gross expenditure on fixed assets in % (year-on-year)||4.9||6.1||9.8||(1.1)||(1.8)|
|Increase in prices of consumer goods and services in % (year-on-year, yearend)||1.1||(0.5)||(1.0)||0.7||2.4|
|Nominal wage growth in domestic economy in % (year-on-year)||4.5||3.2||3.2||3.7||3.7|
|Rate of unemployment in % (end of the year)||9.0||9.8||11.4||13.4||13.4|
|NBP base rate in % (end of the year)||1.50||1.50||2.00||2.50||4.25|
|Average annual EUR/PLN exchange rate||4.35||4.18||4.19||4.20||4.19|
|Average annual USD/PLN exchange rate||3.98||3.77||3.16||3.16||3.26|
Source: PZU Macroeconomic Analysis Office
*Forecast as at 29 February 2016