GDP: Approaching A Trough?
Flash estimates show that Polish real GDP growth slowed to 1. 1 % y-o-y in Q 412 as domestic demand continued to suffer , although consensus expectations were slightly lower at 0.9% . Individual private consumption contracted by 0.5% y-o-y , weighed down by negative real wage growth and sticky unemployment. As we expected, net exports were the main driver of growth - a trend we expect to remain in place over the course of 2013 - with exports growing by 2.4% and imports c ontracting by 2.4% ( see our online service, February 1, 'Slower Growth Outlook Ahead' ) .
|Poland - GDP by Expenditure, % chg y-o-y|
While private consumption growth in Q412 was weak, contracting by 1.0% y-o-y - the lowest reading on record - we expect to see the environment for the household sector improve by mid-2013 as gov ernment austerity burdens ease and unemployment begins to decline. Indeed, there are already some positive data readings emerging, and although it is still too early to call the trend, retail sales grew by 3.1% y-o-y in January, following a 2.5% contraction the month before. However, we expect the bulk of the recovery in private consumption to take place in the second half of the year.
|Weakest Individual Consumption Growth On Record|
|Poland - GDP By Expenditure Components, % chg y-o-y|
In the meantime, net exports should continue to prop up growth, as weak domestic demand curbs import growt h. While exte rnal demand remains relatively weak, strong PMI readings from Germany in January (49.8) and February (50.3) bode well for Polish exports, which tend to hold strong correlations with German economic performance ( exports to Germany account for around 25% of total Polish exports ). A weaker zloty over Q113 should also provide Polish exports with a mild competitive edge. As such, we think the slowdown may be approaching its trough, and maintain our above consensus forecast for real GDP growth of 1.9% in 2013, versus consensus forecasts of 1.5%.