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Brussels has raised its forecasts for Poland. But growing trade tensions with the United States may soon weaken the entire Union.
This year, Polish gross domestic product is expected to grow by 4.6%. – The European Commission predicts summer economic forecasts released Thursday. A few months ago, the forecast was 4.3%. For 2019, the forecast remains unchanged at 3.9%. According to EC experts, the economic growth in Poland is now mainly the result of a rapid growth of wages and a good feeling of consumers, which together support a strong consumer demand. Over time, however, its growth will be more moderate, as inflation will accelerate. Brussels predicts that the core inflation rate will be 1.3% this year, and will rise to 2.6% by 2019.
Investment time
The Commission expects rapid acceleration public investments, which in Poland are financed mainly by European funds. Data on high capacity utilization also indicate the need to accelerate private investment, especially in new equipment. Some risk could be a slowdown in German exports, given the strong correlation between the Polish economy and the German supply chain
For the whole of the EU and the euro area, the EC expects stable economic growth at level 2, 1 in 2018 and 2 percent in 2019. Although during the first half of the year, GDP growth was slightly lower than previously forecast , the EC expects the growth rate to increase slightly in the second half of this year. This will be facilitated by the improvement of the labor market situation, the decline in household debt, consumer confidence remains high and monetary policy continues to favor the economic situation. Overall, for this year, the forecast is 0.2 percentage point. The downward revision of GDP growth since May shows that an unfavorable external environment, such as growing trade tensions with the United States, could weaken confidence and affect economic growth. The growing external risk is another element that reminds us of the need to strengthen the resilience of the economies of different countries and the euro area as a whole – said Valdis Dombrovskis, Vice President of the European Commission for the Euro and social dialogue. Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxes and Customs, also warned of the possible negative effects of economic protectionism. – There are no winners in the trade wars, there are only losers – he said
Throughout the EU, as in Poland, the l & # 39; inflation will also increase. This is mainly the effect of rising oil prices since the spring
Read also: The EC raises forecasts for Poland. We are stronger than Germany
Many risks
At present, the situation is stable, but the EC calculates the risk factors for its forecasts. The new escalation of trade tensions could have a negative impact on trade and investment and reduce prosperity in all the countries that it covers. Other risks include financial market instability related to, among other things, geopolitical risks.
The EU is in commercial conflict with the United States, which has imposed penalties on it for steel and aluminum. Europe responded with retaliatory measures on some US products. President Donald Trump is now threatening tariffs on European cars. He has already ordered an analysis of this case and announces that he could make the decision in the fall. He also ordered a similar analysis of the threat to national security before imposing sanctions on steel and aluminum, so Europe must be prepared for the worst.
Brexit can also have a negative impact on GDP growth. For the moment, negotiations on future relations are rather chaotic and companies do not know what to expect. "Uncertainty of the outcome of the negotiations on the transitional agreement (between 29 March 2019 Brexit and the new agreement – ed.) Confuses scramble," preview extract.
The recovery in European industry helps exporters
This is largely the effect of a recovery in the euro area industry.
According to the CSO on Thursday, in the first five months of the year Polish companies sold goods for 88.9 billion euros abroad, or 6.1% more . compared to the same period of 2017. In the first four months of the year, exports were 5 percent higher than those of the previous year, which means that only the growth of the month May has sharply accelerated. The Russian market is growing fastest: sales for the first five months of the year have increased by 11.5% year-on-year (in euros). However, the increase in the growth rate of Polish exports in May was a resumption of trade with the euro area, which is responsible for 58%. sales abroad of Poland. In the period from January to May of this year. the export to Euroland was 7.2%. larger than last year, while after April, it was 6 percent.
The demand for Polish goods is favored by the improvement of the economic situation in the euro area economy after its sharp deterioration in the first quarter of this year. As reported by Eurostat on Thursday, industrial production rose 1.3% in May after a 0.8% discount. in April. This is the best result since last October
– it was found that in June production remained at the level of May, it would increase by 0.1% on the Whole of the second quarter, after a drop of 0.6%. in the first quarter – noted Jennifer McKeown, an economist at the Capital Economics analyst. – This adds credibility to the European Central Bank's assessment that the slowdown in GDP growth in the first quarter partly reflects temporary factors such as adverse weather conditions and strikes – does it added. According to her, the economy of the euro zone will grow by 2.3% this year. Last year it rose 2.4%, the best result since 2007 and resulted in an 11% increase in Polish exports to Euroland
The resumption of Polish exports in May does not it's not accompanied by an acceleration in import growth. Its value after May of this year. it was 7.9%. bigger than last year, just like after April. As a result, Poland 's trade deficit rose from 0.7 billion euros in the first four months of 2018 to 0.4 billion euros in the first five months.
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