macro scope - santander bank polska · 2017-01-08 · macro scope polish economy and financial...

MACROscope Polish Economy and Financial Markets March 2012

skarb.bzwbk.pl

Softer landing � In December’s edition of MACROscope we wrote about a slight downward revision of our GDP forecast in 2012 from 2.7% to 2. 3%. Based on recent information, we decided to return to our previous forecast and raised predictions for each quarter in 2012 by 0.2-0.4 pp. This is due to higher starting point after better-

than-expected 4Q11 (4.3%YoY) and positive macro data for January together with our expectations about main indicators in February and March. Overall, the first quarter 2012 may show GDP growth of close to 3.5%. We still anticipate a slowdown

in consecutive quarters, which should be visible in production, both of industry and of construction. In the latter case this will be due to a lower pace of growth in fixed investments as compared to exceptional results achieved at the turn of 2011 and

2012 (two-digit growth). We do not change forecasts of relatively low growth rate of exports and consumption, which should stay more or less at levels seen in 4Q11.

� In our view, the expected breakdown of economic gro wth does not support a monetary tightening, especially as inflat ion should decline markedly soon. Even though a slight increase of inflation rate is probable in February, we predict a decline towards ca. 3.5% in March-April. At the year-end we see CPI inflation at ca. 3%. Moreover, an economic slowdown means that medium-term

inflation forecasts are favourable, which is also indicated by the new NBP staff projection (central path at 2.9% in 4Q13 and 2.0% in 4Q14). We do understand that the Monetary Policy Council finds itself in an uncomfortable situation, as inflation has

been running above target for a better part of two years of their term, and even above the upper end of tolerance band around the target in 2011. Still, it was difficult for the MPC to counteract most of the culprits behind elevated inflation (VAT hike,

commodity prices, weaker zloty), but still the Council raised interest rates by 100bps in 2011, in order to anchor the inflation expectations. Currently, amid deterioration of labour market conditions, the risk of second-round effects is small. Hence, hiking

interest rates based on last year’s data about robust economic growth and elevated inflation is like driving while looking only in the rear-view mirror. Though the view through windscreen is not very clear and there are numerous uncertainties, the

picture seems to differ significantly, which is also indicated by the new NBP projection.

� A correction in the foreign exchange market that we used to expect did not appear, except for a short-lived rise in the EURPLN f rom 4.10 to 4.20. After this

move, the zloty again strengthened and although it seems the appreciation may be running out of steam (our base scenario assumes a correction), we see a risk of EURPLN decrease to 4.05, which we have already mentioned last month. Taking into

account a very good start of the year for the Polish currency, we have changed the path for subsequent months and quarters (average rate lower by ca. PLN0.1, end-year forecast still near 4.20 versus euro).

Financial market on 9 March 2012:

NBP deposit rate 3.00 NBP reference rate 4.50 NBP lombard rate 6.00

WIBOR 3M 4.94 Yield on 2-year T-bonds 4.57 Yield on 5-year T-bonds 4.80

EURPLN 4.1143 USDPLN 3.1126 CHFPLN 3.4125

This report is based on information available until 09.03.2012

In this issue:

Economic update 2

Monetary policy watch 4

Fiscal policy watch 6

Housing market 6

Foreign exchange market 7

Interest rate market 8

Market monitor 9

Economic calendar 10

Statistics & forecasts 11

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-1.5 -0.5 0.5 1.5

Business cycle clock

Aggregated monthly indicator

Aggregated quarterly indicator

forecast

Q4 2011

expansionslowdown

depression recovery

January 2012

Note: construction of business cycle clock, including concepts and methodology used for its creation was presented in MACROscope in November 2009

Maciej Reluga Chief economist +48 22 586 8363

Piotr Bielski +48 22 586 8333 Agnieszka Decewicz +48 22 586 8341 Marcin Luzi ński +48 22 586 8362 Marcin Sulewski +48 22 586 8342 Email: [email protected]

MACROscope March 2012

2

Economic update

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3Q03

1Q04

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1Q06

3Q06

1Q07

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1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

Seasonally adjusted growth, %QoQ

GDP Private consumption Fixed investment

GDP growth in 2011Q4 slightly above expectations � GDP expanded by 4.3%YoY in 4Q11, slightly above forecasts. As we expected, last quarter of 2011 has seen a considerable acceleration of fixed investments (above 10%YoY) and a continuation of consumption slowdown (total consumption slowed to 1.2%, the weakest growth since 2Q09). � In our view, tendencies seen in the consumer demand will continue in 2012 due to deterioration of labour market situation. On the other hand, uncertainty about economic prospects will limit growth rate of investment. Such a breakdown of growth is hardly a worrying factor from the MPC’s perspective. � Better-than-expected data on GDP in Q4 and positive figures released at the beginning of the year stand for a higher economic growth as compared to our previous forecast (2.7% vs. 2.3%). Hence, our forecast is back to the level we have seen in November.

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Jan 12

%YoY Output in industry and construction

Industry Industry (s.a.) Construction Construction (s.a.)

January’s strong rises of output and sales under in fluence of statistical effects � January’s data on output proved to be quite positive (rise by 9%YoY in industry and by 32.3%YoY in construction), but these figures were distorted by a higher number of working days and by exceptionally favourable weather conditions. That is why an accurate assessment of actual economic activity in these two sectors is difficult. In February the positive working days effect will be present as well, yet the considerable deterioration of weather conditions (severe frosts and heavysnows) will negatively affect output in construction and possibly also in some industrial branches. In general, we expect slowdown of output in upcoming months, which seems to be already suggested by leading and economic activity indicators (details in the box below). � Retail sales accelerated to double-digit 14.3%YoY in January (second highest result in 3.5 years). Just as in case of output, the annual pace of growth of retail sales was distorted bystatistical base effect – exceptionally low base from last year. In January 2011, just after the implementation of VAT tax hike, retail sales were very low as Poles decided to purchase more in advance, at the end of 2010, in order to avoid higher prices. The strongest low base effect was visible in the segment car sales, which expanded by whopping 30%YoY. According to our estimates, retail sales excluding autos and fuels increased in January by 8%YoY. The base-effect mentioned above has probably already waned in February, which is indicated by a declining number of car registrations (-2%MoM vs +10%MoM one year before). In the upcoming months the growth rate of sales will be capped by weak labour market conditions.

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Jan 09

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%YoY Retail sales

Real terms Nominal terms Nominal terms excluding autos and fuels

35

40

45

50

55

60

-20

-15

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10

15

20

25

30

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Jul 10

Oct 10

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Oct 11

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pts Business climate indices (seasonally adjusted)

CSO Industry CSO Construction

CSO Retail sales PMI manufacturing (rhs)

… but a slowdown is approaching � The PMI index for Polish manufacturing declined in February to 50pts from 52.2pts recorded in January. A negative impact on the performance of this indicator was exerted by slowdown in production and by decline of new orders, including export orders. Some respondents explained lower orders by bad weather conditions. Negative tendencies in production and orders have triggered a reduction of employment. � The CSO’s economic activity indicators also suggest that negative tendencies were prevailing over last few months, yet it is noteworthy that indicator for industry recovered slightly in February (after seasonal adjustment). � The recent release of OECD’s leading indicators suggests a stabilization of index for Poland, as compared to an upward rebound predicted before.

Source: CSO, NBP, Reuters, own calculations


3

Economic update

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Oct 08

Jan 09

Apr 09

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Oct 10

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Apr 11

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Oct 11

Jan 12

%YoY Labour market in the enterprise sector

Real wage bill Employment Wages

Unemployme nt rate the highest since 2007 � In January employment in enterprise sector increased by 0.9%YoY. The number of jobs grew by ca. 50k compared to both January and December of 2011, which could mainly come from the fact that in January statistical office revised its respondents pool (the number of enterprises employing over 9 persons). In spite of rising employment in corporate sector as a whole, the industry has lost 6k workplaces, which is a worrying signal. The PMI report suggests that manufacturing companies continued to reduce employment in February. � A slightly less pessimistic picture is painted by the LFS data, according to which number of employees rose in January by a moderate 1.2%YoY. On the other hand, the survey has shown a considerable acceleration of number of jobseekers (9.2%YoY), while seasonally adjusted unemployment rate amounted to 10.1%, the same as in December (after correction) and the highest since 2007. � We expect the growth rate of employment to slow down in upcoming months, while unemployment will run at elevated level. � Average wages in corporate sector surged in January by 8.1%YoY. This was probably due to earlier payments of bonuses in some companies prior to hike of disability benefit contribution (coming into force on 1 February). We will see a reversal of this effect in the upcoming months, so the annual pace of growth of wages can temporarily fell even to nearly 0%YoY. We expect a wage rise similar to inflation rate in the remainder of the year. � Wage and social benefit bill accelerated in January to 6.4%YoY in nominal terms and to 2.2%YoY in real terms (as compared to 5.5% and 0.8% in December, respectively). Growth rate was pushed upwards by a temporary acceleration of wages, so in our view the real growth will be close to zero, which is not supportive for the consumer demand.

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3

6

9

12

-40

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0

10

20

30

40

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

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Jan 12

%%YoY Unemployment rate and change in number of jobseekers

Registered unemployed (lhs)

LFS unemployed (lhs)

LFS unemployment rate (sa, rhs)

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6

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Oct 08

Jan 09

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Oct 10

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Apr 11

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Oct 11

Jan 12

%YoY Inflation measures

CPI CPI excl. food and energy prices PPI

Price growth slowed down in January � CPI inflation rate fell in January to 4.1%YoY from 4.6%YoY in December 2011. One of main factors contributing to this decline was the effect of high statistical base, related to VAT hike at the start of 2011. The January data will be revised amid changes in CPI basket weights and will be released together with February’s data. Our estimates based on results of households’ budgets survey indicate that CPI revision should be insignificant. In February inflation may rise due to higher food prices, but the upcoming months will show a considerable decline towards 3.5%. � PPI has decelerated only slightly in January, to 8%YoY. Prices in industrial manufacturing declined by 0.1%MoM, which was a results of a stronger zloty and decreasing export prices. In our view PPI inflation will be decelerating in upcoming months.

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-1

0

1

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3

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-40

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-20

-10

0

10

20

30

40

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Jan 10

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

€ bn%YoY Balance of payments data

C/A balance (rhs) Export (lhs) Import (lhs)

Slowdown visible in foreign trade � Current account deficit amounted to €1.34bn in December and was slightly higher than forecasts and last figure. In the whole 2011 current account deficit decreased to 4.1% of GDP from 4.7% in 2010. What is important, it was covered in 94% by the inflow of long-term capital (FDI and EU funds). � In line with expectations, growth rate of Polish exports continued on a downward trend in December (5%YoY), but is still higher than a very weak imports growth (2.4%YoY). � The Eurostat data show that the most considerable slowdown of exports occurred in trade with the euro zone, while exports to non-EU countries proved to be robust (increase by ca. 18%YoY in November). Global slowdown has undermined exports of consumer goods (-4%YoY), while exports of capital goods even accelerated in recent months (to 23%YoY).

Source: CSO, NBP, Eurostat, own calculations


4

Monetary policy watch

Fragments of the MPC statement in March

Global economic growth remains low. Acceleration in GDP growth in the United States is accompanied by a recession in the euro area and a slowdown in most major emerging economies. At the same time, since the previous meeting of the Council selected leading indicators have improved, what points to possible stabilization of economic activity in some countries. Inflation abroad remains heightened, although is gradually declining. High commodity prices, including crude oil prices, which have been recently on the rise again, are one of the main factors behind elevated inflation. Uncertainty related to the sovereign debt crisis in some euro area countries has persisted. Data on 2011 Q4 GDP in Poland as well as data on output and retail sales in the early 2012 indicate that economic growth has remained robust. However, relatively low level of most leading business indicators suggests that economic activity may weaken in the coming quarters. In 2011 Q4, the number of the employed in the economy increased. At the same time, however, a rise in the number of the economically active contributed to a higher unemployment rate, which continues to curb wage growth in the economy. The substantial acceleration of wage growth in enterprises observed in January 2012 was probably due to temporary factors. In the opinion of the Council, in the short term inflation – despite some expected decline – will probably remain above the NBP's inflation target. Heightened inflation will be supported by the previously observed zloty depreciation and persistently high commodity prices, which may lead to further rise in energy prices. In turn, in the medium term, inflation will be curbed by the expected deceleration of economic growth amid moderate wage growth as well as continued fiscal tightening. The zloty appreciation at the beginning of 2012 will also be conducive to lower inflation The Council decided to keep the NBP interest rates unchanged. The Council does not rule out the possibility of further monetary policy adjustments in the future, should the positive signs of economic activity in Poland continue and the outlook for inflation returning to the target fail to improve.

The MPC is waiting for improvement of inflation outl ook � The Monetary Policy Council has kept main interest rates unchanged during the March meeting, in line with broad expectations. At the same time, the MPC’s statement was more hawkish, reading that adjustment of monetary policy cannot be ruled out “should the positive signs of economic activity in Poland continue and the outlook for inflation returning to the target fail to improve”. In the previous statements monetary tightening was conditional on deterioration of outlook, not on lack of its improvement. � More hawkish tone of the MPC was probably due to higher short-term inflation path in the new NBP staff projection (see the box below). However, it is worth noting that medium-term inflation prospects improved slightly, especially when taking into account data released after cut-off date of the projection. GDP path was also lowered. � The Council has assessed the January’s strong wage rise in corporate sector a temporary and noted presence of factors limiting the wage growth, thus suggesting that they diminish the need for monetary tightening. � In our view in the nearest months the MPC will maintain its “wait-and-see” mode, observing further releases of macroeconomic data and assessing their impact on growth and inflation outlook. Amplified signals of slowing economic growth , deterioration of labour market conditions and substantial decline of inflation since March (to upper band of fluctuations around the NBP target) will scale back the MPC’s concerns about realisation of CPI path suggested by the NBP projection. In our view, in 2012H2 the economic slowdown in Poland and improvement of inflation prospects will be so considerable that there will be some room for monetary easing.

Evolution of NBP projections in consecutive Inflation Reports

GDP growth

Mar 11 Jul 11 Nov 11 Mar 12

2012 2.3-4.8 1.9-4.5 2.0-4.1 2.2-3.8

2013 1.7-4.4 1.5-4.3 1.5-4.0 1.1-3.5

2014 x x x 1.9-4.4

CPI inflation

Mar 11 Jul 11 Nov 11 Mar 12

2012 2.2-3.4 2.1-3.4 2.5-3.9 3.6-4.5

2013 2.1-3.7 1.8-3.4 2.2-3.7 2.2-3.6

2014 x x x 1.2-3.0

New NBP projection does not justify rate hikes � The results of new NBP’s projection show clearly higher than previously central path of inflation in 2012 and similar as predicted in November path in the next year. At the end of 2013 inflation approaches the target (2.5%) and goes down below that level in 2014. However, data that appeared after the projection cut-off date (24 January) have clearly lowered the inflation path – by 0.3-0.4 pct. points in 2012 and by 0.2-0.3 pct. points in 2013, bringing it closer to our inflation forecast. � Predicted GDP growth is close to the level presented previously in 2012 and much lower in the next year. In our view, the GDP growth this year may be lower than envisaged by the NBP’s projection due to weaker consumption growth. � In our view, the results of projection do not justify the need for monetary tightening.

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10

20

30

40

50

60

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

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Oct 09

Jan 10

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

%YoY Loan growth after FX adjustment

Households' loans Mortgage loans

Corporate loans Investment loans

Banks tighten criteria, but corporate loans are acc elerating � In January pace of growth of corporate loans accelerated again, to 15.5%YoY after FX adjustment. Investment loans still show the highest growth (25%YoY). What is interesting, NBP data are suggesting that this increase takes place mainly in SME sector, where loans are advancing two times faster than in case of large companies. This is happening in spite of the fact that banks have tightened credit criteria for the SME sector in 2011Q4 and are planning to tighten them further. � Households’ loans decelerated slightly in January (6.2%YoYafter FX adjustment), among other due to a slowdown in housing credits (10.2%). In Q4 banks have tightened credit criteria regarding housing loans in all the credit conditions, mainly in own contribution and collaterals. Further tightening of criteria in this segment is planned.

Source: NBP, Reuters, ECB, Fed, own calculations


5

Restrictiveness of the Monetary Policy (Council)

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-4

-2

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2

4

6

8

10

12

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Jan 10

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Nominal MCI (monthly)

Sharp rise of monetary restrictiveness � In February the nominal index of monetary policy restrictiveness MCI recorded its highest gain in the history of the study (i.e. since 2004) and reached level seen in August 2011. Such a substantial surge was due to a strong zloty appreciation against the euro (by 4.4% on average), accompanied by aninsignificant decline of money market rates (WIBOR 3M fell by 0.01pp on average over the month). � We expect that in the upcoming months the MCI may decline slightly due to zloty depreciation amid persisting uncertainty on the financial markets and due to gradual decline of money market rate. Still, the value of the index should remain close to levels recorded currently.

Index is between 0 and 2. A vote for the majority view is given a score of 1. A vote for a more hawkish (less dovish) decision than the majority view has a score of 2 and a vote for a less hawkish (more dovish) decision than the majority view has a score of 0. Average of points for all votes is the value of the index for a given MPC member.

Numbers directly by the name are values of the index for period since the beginning of current term of office of the current MPC and NBP governor.

Direction of the restrictiveness axis reflects our expectations regarding direction of interest rate changes in the nearest 12 months.

More dovish comments of some MPC members prior to me eting A couple of less hawkish comments of MPC members appeared In the second part of February. Andrzej Kaźmierczak, who earlier thought “enough waiting, time for action” stated in an interview that he supports maintaining the restrictiveness of monetary policy at current level in Q1. The NBP president Marek Belka said in an interview with NBP’s Obserwator Finansowy website that there is no price-wage spiral, which would have demanded a “sharp reaction” of the MPC. Belka highlighted that inflation is clearly too high, but he also stressed that it is fuelled mainly by external factors, like expensive commodities and fuels. A couple of days later Belka stated that “in a situation like we have today, when we can say nothing about shape of economy in the upcoming months, a “wait-and-see” mode is reasonable.” A similar opinions was expressed by Jerzy Hausner, who said that “the line of monetary policy and level of interest rates are correct” and there are no reasons to change it. Comments of Andrzej Bratkowski were more dubious. Initially, Bratkowski decided for a more hawkish tone, stating that it is not a question if, but a question when to raise the interest rates and such a move may prove necessary already in H1. According to Bratkowski, upward move of interest rates is justified by the fact that domestic GDP will grow by 3.5% in 2012, so stronger than government’s forecasts assume. However, a couple of days later Bratkowski stated that “surely, the MPC has no reasons to cut the interest rates, and as long as there is no sharp downturn in the EU, these reasons will be absent. However, question of rates are to be raised or left unchanged is still valid.” He added that there is no need to hurry with hikes.

Is a change in communiqué heralding a hike? Jerzy Hausner stressed prior to March meeting that if the new NBP staff projection will show “an unfavourable inflation path” and the Council will decide that a hike is necessary, then it would be suggested in the statement in order not to surprise the market. The new projection has shown a higher inflation in 2012 and tone of the MPC communiqué was actually more hawkish. Marek Belka stated during the press conference that interest rates hikes are still more probable than cuts. It is the signal of a hike, suggested ahead of the meeting? In our view prospects of economic growth and inflation do not justify a monetary tightening and we expect that the Council will agree with this opinion. Macroeconomic data in the upcoming months should clearly support this view. According to minutes from February’s MPC meeting, the decision to leave interest rates unchanged was unanimous. It is difficult to say if it was similar in March. Marek Belka, when asked if the MPC has voted a motion of hike, dodged the question. A change in tone of the statement may suggest that the group of hike-supporters is growing.

Wage growth will affect the willingness to hike Issue of wage growth appeared a couple of times during the press conference in comments of president Belka and MPC’s Kaźmierczak as an important argument from the MPC’s point of view. According to NBP president, low wage growth will be a factor “moderating willingness to hike”. Taking into account that we expect a strong slowdown of wages in the upcoming months, this is a factor supporting forecast of stable interest rates.

Source: CSO, Eurostat, NBP, own calculations

Bratkowski (1.42)

Zielińska-Gł ębocka (1.42)

Rzońca (1.58)

Winiecki (1.45)

Hausner (1.45)

Chojna-Duch (0.75)

Kaźmierczak (1.08)

Belka (1.00)

Glapiński (1.00)

Gilowska (1.08)


6

Fiscal policy watch

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-35

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-15

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-5

0

5

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Feb

Mar

Apr

May Jun

Jul

Aug

Sep Oct

Nov

Dec

PLN bn Realisation of budget deficit (cumulative)

2007 2008 2009 2010 2011 2012

Budget liquidity situation favourable � MF sees budget deficit at the end of at ca. 47% (PLN16bn) of annual plan (PLN35bn). It is an increase by PLN11bn MoM, which is not a surprise taking into account February’s realisation in 2010-2011. This year, as previously, the February deficit growth came from higher payments to the EU budget (in 2010-2011 period average realisation was above 27%), subsidies in general (ca. 27%) and subsidies to Social Security Funds (ca. 25%). � Coming months should bring significantly lower scale of deficit increase, mainly due to lower spending. However on the revenue side we see risks for indirect taxes mainly due to expected different structure of GDP growth (lower private consumption). � Liquidity situation of the budget is favourable. At the end of February gross borrowing needs were covered in 42%. MF accumulated also a liquidity cushion worth PLN40bn.

Spread vs Bunds (10Y) in bps CDS (5Y USD)

9.03 change since 9.02.12

change since

30.12.11 9.03

change since 9.02.12

change since

30.12.11

Poland 356 3 -49 184 -42 -95

Czech 170 47 -6 126 -13 -47

Hungary 701 44 -106 522 -28 -77

Greece 3718 510 352 37030 27946 26828

Spain 322 6 -5 393 45 15

Ireland 519 12 -147 620 66 -119

Portugal 1222 65 49 1257 -4 82

Italy 306 -38 -212 363 -5 -123

Germany - - - 75 -5 -24

LTRO support ed debt markets in euro zone’s peripheries � Improvement of sentiment (ahead of the ECB’s second LTRO) caused a decline of risk premium in Europe. Peripheries’ debt market strengthened significantly, especially Italian. Yield of 10Y Italian bond fell to 4.91% at the beginning of the March (the lowest level since July 2011). This was due to news that Italian banks were most active during LTRO and expectations that part of cheap measures received from the ECB will be used to purchase bonds. � In February spread vs. Bunds narrowed for nearly all bonds of European countries. Spread between Italian bonds vs. Bunds in 10Y sector narrowed by more than 100bps to ca. 300bps. We noted also CDS quotation decrease. � In case of Greece yields and CDS quotation increased significantly. It resulted from S&P decision to downgrade rating to „SD” and worries about debt restructuring process in Greece.

Housing market update

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5.5

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7.5

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8.5

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9.5

Jan 08

Apr 08

Jul 08

Oct 08

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Apr 09

Jul 09

Oct 09

Jan 10

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

'000 Offered flat prices in major cities (PLN/sqm)

Warsaw Krakow Wroclaw Gdansk Poznan

Further decline of offered house prices � In February home prices declined at a slower pace than earlier. Over the month, offered prices rose by 0.3% on average, while transactional prices continued on a downward trend. � According to REAR report, describing situation of housing markets in CEE region capital cities, in 2011 the whole region have seen reviving demand and slowing declines of prices. However, the situation of housing market proved to be the best in Warsaw, where 18k flats were offered in 2011. In Poland as a whole number of completed dwellings rose by 18% on annual basis, which – combined with a positive growth rate of house starts and building permits is suggesting increasing homes supply in the upcoming months. � Demand for housing loans weakened over last few months. Downward tendency is shown by both number and worth of new loans. According to Polish Banks Association (ZBP) in 2011Q4 number of new loans by lower by 13% than in Q3, while their value was lower by 15.5%. A considerable decline was recorded by loans taken with support of government’s program for young families (by 47%QoQ), which was due to changes in functioning of this program. At the end of January total value of mortgage loans taken by household amounted to PLN323bn and was higher by 18% than one year before (10.2%YoY after FX adjustment). � Loans denominated in Swiss francs were less popular (decrease from 10 to 6% of new loans), while loans denominated in euros gained (from 12 to 15%). Still, we expect that loans denominated in domestic currency will gain most in the upcoming months, as many banks are withdrawing currency loans from their offer, hiking margins, while recommendation S, which came into force in January, has considerably diminished creditworthiness as regards currency loans.

100

120

140

160

180

200

220

240

260

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Jan 10

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

'000 Dwellings construction (12-month moving sum)

dwellings completed building permits new home starts

Source: CSO, Finance Ministry, NBP, Reuters, own calculations, szybko.pl, AMRON-SARFiN, REAS


7

Foreign exchange market

y = 0.0033x + 3.5118R² = 0.8162

4.10

4.15

4.20

4.25

4.30

4.35

4.40

4.45

4.50

4.55

4.60

180 200 220 240 260 280 300 320 340 360

EURPLN and Itraxx Europe Senior Financials (4 month s)

Further zloty appreciati on in February … � During February the zloty gained versus main currencies but at slower pace than it was recorded in January: 2.1% versus the euro, 4.1% versus the dollar and 2.1% versus the Swiss franc. Thus the risk scenario indicated last month materialized – the EURPLN declined below 4.10. � It seems that the zloty continued to benefit from December’s ECB LTRO as well as from expectations for strong demand at February’s 3Y operation. In recent weeks the relationship between the EURPLN and the iTraxx Europe Senior Financials index increased, as well as ten-year Italian yields, increased (see charts). This clearly shows that lower worries as regards European debt problems and European banking sector continued to play the main role on the Polish FX market. � Even as the second bailout package for Greece was finally agreed, the market reaction was rather muted. First, investors have been pricing in such a decision. Second, details of the agreement show there are still open questions regarding bailout package and central scenario of expected developments relies on optimistic assumptions. Also, positive market sentiment that emerged after it was announced that 800 banks (versus 523 in December) borrowed from the ECB €529.5bn for 3 years, was rather short-lived as next data showed that ca. €800bn was deposited back to the central bank. ... but correction getting more likely � We expect the zloty to depreciate in March. In our view, the market has currently run out of fuel that has been supporting risky assets since the beginning of the year. For the time being there is no option of third LTRO, while the past two clearly played an important role in recent months regarding performance of the zloty. Furthermore, as we mentioned a month ago, latest macro data supported hopes that the economic slowdown in Europe will be less severe than feared and currently the market seems to be already pricing this positive scenario. If we add that recently expectations for Fed’s QE3 also diminished, there is a limited number factors, that could support investors’ demand for risky assets. As a result, the risk of profit taking from recent rally of (among others) the zloty is getting higher. In the short term signals from the US, mainly Fed’s statement, may be vital for performance of the zloty. We see lower risk that market turns its attention to Portugal as next potential country needing debt restructuring. Our risk scenario for the EURPLN assumes the exchange rate falls first to 4.08 and then even to 4.05. � We anticipate that zloty’s depreciation versus the dollar will be more pronounced due to expected gradual decline of EURUSD. On the other hand, weakening of the domestic currency versus the Swiss franc shall come from higher EURPLN as EURCHF should remain relatively stable. � Strong performance of Polish currency prompted us to lower the forecasts of EURPLN. Now we anticipate the exchange rate to be atca. 4.25 on average in 2012 (versus 4.34 expected previously). We still expect some more visible increase of EURPLN in the coming months, but given the recent decline of the zloty exchange rate the upward move shall have smaller reach than we initially expected. Forint surprisingly stable � HUF performed surprisingly well given prevailing risk factors. Some temporary depreciation – that hit also the zloty – was observed when S&P warned that freeze of Hungarian cohesion funds may have a negative impact on country’s rating. On monthly basis HUF gained 1.21% versus EUR. � The Czech koruna gained in February. That was due to relatively positive market sentiment persisting on the market, as well as the fact of being perceived as the CEE safe haven currency when situation in the region deteriorated slightly amid developments in Hungary. In February Czech koruna gained 1.02% versus the euro.

4.7

5.0

5.3

5.6

5.9

6.2

6.5

6.8

7.1

7.4

4.10

4.15

4.20

4.25

4.30

4.35

4.40

4.45

4.50

4.55

4.60

14 Nov

21 Nov

28 Nov

5 Dec

12 Dec

19 Dec

26 Dec

2 Jan

9 Jan

16 Jan

23 Jan

30 Jan

6 Feb

13 Feb

20 Feb

27 Feb

5 Mar

EURPLN and 10Y Italian bond yield

EURPLN 10Y IT

3.40

3.50

3.60

3.70

3.80

3.90

3.05

3.15

3.25

3.35

3.45

3.55

14 Nov

21 Nov

28 Nov

5 Dec

12 Dec

19 Dec

26 Dec

2 Jan

9 Jan

16 Jan

23 Jan

30 Jan

6 Feb

13 Feb

20 Feb

27 Feb

5 Mar

USDPLN and CHFPLN

USDPLN (lhs) CHFPLN (rhs)

90

92

94

96

98

100

102

104

14 Nov

21 Nov

28 Nov

5 Dec

12 Dec

19 Dec

26 Dec

2 Jan

9 Jan

16 Jan

23 Jan

30 Jan

6 Feb

13 Feb

20 Feb

27 Feb

5 Mar

Złoty na tle walut CEE (14 November 2011 = 100)

EURPLN EURHUF EURCZK

Source: Reuters, own calculations


8

Interest rate market

3.50

3.75

4.00

4.25

4.50

4.75

5.00

Feb 11

Mar 11

Apr 11

May 11

Jun 11

Jul 11

Aug 11

Sep 11

Oct 11

Nov 11

Dec 11

Jan 12

Feb 12

Mar 12

Apr 12

May 12

Jun 12

Jul 12

Aug 12

Sep 12

Oct 12

Nov 12

WIBOR3M and reference rate

reference rate

WIBOR3M

FRA-implied WIBOR as of 9/03/12

FRA-implied WIBOR as of 9/02/12

%

Money market rates gradually move down � Excess liquidity in banking sector continues. Commercial banks most of the surplus liquidity traditionally invested in NBPs money bills (over PLN85bn) and only slightly increases their activity on the money market 3M+. Notwithstanding, at the end of February WIBOR rates decrease by 1-3bps in comparison to the end of January. This trend has continued at the beginning of March. � More significant fall were observed in case of FRA rates, especially on the long tenors (FRA 6x9 and 9x12 decreased by over 10bps). Recent FRA rates suggest that investors expect lower path of 3M WIBOR in coming quarters as compared with January’s prediction. It is worth noting that FRA 9x12 is traded around 4.75%, which suggest that market has started to price-in interest rate cuts in Q4 2012. It is a time to correction on bond market… � In February mid and long end of yield curve continued to strengthen. Yields in 5Y and 10Y sectors fell by additional 10bps in monthly terms, after dropping by ca. 30bps in January. At the end of February yield of 5Y benchmark was at 4.89%, while 10Y was near 5.45%. In the same time yield of 2Y benchmark was more stable, oscillating around 4.65%. � Yields of both 5Y and 10Y benchmarks broke crucial support levels (of 5% and 5.50%). However, uncertainty about the Greek’s debt restructuring deal and worries about global economic growth caused some profit taking at the beginning of March. Better than expected results of auction of 5Y benchmark and sentiment improvement resulted in further fall in yields along the curve. Market mood is still fragile and therefore we do not exclude another profit taking after significant rally, expecting 5Y and 10Y yields to back towards support level at 5.00% and 5.50%, respectively. � As regards 2Y sector the CPI inflation prospects will be crucial. “Hawkish” rhetoric of the MPC together with higher February’s CPI reading (4.2%YoY vs. market consensus 4.1%) could cause yield increase towards 4.70%. … with IRS rates stabilisation � In February IRS curve moved down by 6-12bps, with the highest decrease in sector up to 2Y (after increase in January by ca. 18bps on average). It came partly from better-than-expected January CPI reading and freezing interest rates hike expectations (as mentioned above FRA rates have started to prices-in interest rates cuts in Q4 2012). � In coming weeks we expect IRS rates to remain relatively stable, in which 10Y IRS to be near 4.80%. Moderate Treasury Securities supply in March, incre ase in April � The issuance plan announced for March is more or less in line with expectations. The MF, as in February, refrained from switch tender, offering 5Y benchmark PS1016 at regular auction. Later this month the MF offers OK0114, DS1021/WS0429 and 52-week T-bills. The total planed supply worth PLN5.0-12.5bn. It is worth noting that the MF sold PS1016 worth PLN4.1bn, with average yield of 4.837% (lowest level for 6 years) and bid-cover ratio at 2.90. � We would like to point out that Director of Debt Department in the Ministry of Finance suggested a significant reduction in debt supply after April. However, in April we foresee higher Treasury Security offer as the MF wants to mop up an excess liquidity on the market due to maturing PS0412 (ca. PLN23bn) and coupon payments (ca. PLN7bn) from April’s series of PS. � The MF, in line with earlier announcement, has continued its debt strategy, assuming reduction in amount outstanding of T-bills debt. Currently supply of T-bills is limited to only one auction in a month. In March alone T-bills debt might decrease by PLN0.3-2.3bn. Moreover, the MF could proceed to another buy-back of T-bills later this year.

4.40

4.60

4.80

5.00

5.20

5.40

5.60

5.80

6.00

0 1 2 3 4 5 6 7 8 9 10

Bond yield curve

9-Mar-12 9-Feb-12 9-Dec-11years

4.3

4.5

4.7

4.9

5.1

5.3

5.5

5.7

5.9

Jan 10

Mar 10

May 10

Jul 10

Sep 10

Nov 10

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

2Y and 10Y IRS rates (%)

PL IRS 2Y PL IRS 10Y

Sale in 2011 and 2012 and expected offer of T -Securities (in PLN bn)

-10

-5

0

5

10

15

20

25

2Y 5Y 10Y 15Y+ Floating bonds (WZ and IZ) T-Bills Retail bonds

forecast

Source: Reuters, own calculations


9

Market monitor

2.90

3.10

3.30

3.50

3.70

3.90

4.10

4.30

4.50

4.70

4.90

1.90

2.10

2.30

2.50

2.70

2.90

3.10

3.30

3.50

3.70

3.90

Jan 08

Mar 08

May 08

Jul 08

Sep 08

Nov 08

Jan 09

Mar 09

May 09

Jul 09

Sep 09

Nov 09

Jan 10

Mar 10

May 10

Jul 10

Sep 10

Nov 10

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

Zloty rate against major currencies

USD (lhs) EUR(rhs)

4.3

4.6

4.9

5.2

5.5

5.8

6.1

6.4

6.7

7.0

7.3

7.6

Jan 08

Mar 08

May 08

Jul 08

Sep 08

Nov 08

Jan 09

Mar 09

May 09

Jul 09

Sep 09

Nov 09

Jan 10

Mar 10

May 10

Jul 10

Sep 10

Nov 10

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

% Yields of T-bonds

2Y 5Y 10Y

3.50

3.90

4.30

4.70

5.10

5.50

5.90

6.30

6.70

Jan 08

Mar 08

May 08

Jul 08

Sep 08

Nov 08

Jan 09

Mar 09

May 09

Jul 09

Sep 09

Nov 09

Jan 10

Mar 10

May 10

Jul 10

Sep 10

Nov 10

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

% 1-month money market rates

WIBOR 1M FRA 1x2

3.3

3.6

3.9

4.2

4.5

4.8

5.1

5.4

5.7

6.0

6.3

6.6

6.9

Jan 08

Mar 08

May 08

Jul 08

Sep 08

Nov 08

Jan 09

Mar 09

May 09

Jul 09

Sep 09

Nov 09

Jan 10

Mar 10

May 10

Jul 10

Sep 10

Nov 10

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

% 3-month money market rates

WIBOR 3M FRA 3x6 FRA 6x9

-3

0

3

6

9

12

15

18

21

24

Jan 07

Mar

May

Jul

Sep

Nov

Jan 08

Mar

May

Jul

Sep

Nov

Jan 09

Mar

May

Jul

Sep

Nov

Jan 10

Mar

May

Jul

Sep

Nov

Jan 11

Mar

May

Jul

Sep

Nov

Jan 11

PLN bn Supply and total sale of treasury securities

other T-bills 52-week T-bills 2Y T-bonds5Y T-bonds 10Y T-bonds 20Y T-bondsother T-bonds T-bills buyback total sale

Treasury bills auctions in 2011/2012 (PLN m) Auction date OFFER DEMAND/SALE

26.05.2011 Repurchase tender 1444/940 30.05.2011 52-tyg.: 500-600 2667/505 20.06.2011 Repurchase tender 356/256 11.07.2011 Repurchase tender 2498/724 19.12.2011 Repurchase tender 4331/2247 27.12.2011 Repurchase tender 2939/2486 09.01.2012 49-week: 1000-2000 5402/2223 30.01.2012 30-week: 1000-2000 3249/1997 30.01.2012 51-week: 1000-2000 4225/1592 27.02.2012 52-week: 1000-2000 6711/2190 26.03.2012 52-week: 1000-3000

* based on data of the Ministry of Finance

Treasury bond auctions in 2011/2012 (PLNm)

month First auction Second auction Switch auction

date T-bonds offer sale date T-bonds Offer sale date T-bonds sale

March ‘11 9.03 OK0113 3000-4500 4500 16.03 WZ/Iś 1000-250 1030 3.03 OK0711/PS0511 PS0416/WZ0115 April 13.04 OK071 3000-5500 4759 - - - - 20.04 OK0 11/PS0511/IZ0 11 PS0416/WZ0115 May 12.05 OK0713 3000-4500 4306 18.05 PS0416 1500-3000 3000 - - June 9.06 OK0713 2000-3000 3000 15.06 WZ0121/IZ0823 1000-5000 3125 1.06 OK0711/WZ0911 PS/DS/WZ July 21.07 DS1021 1000-3000 3000 - - - - - - - August 10.08 OK/PS/OK 2000-3000 6008,7 - - - - 3.08 WZ/DZ WZ/DS September 22.09 WZ0115/WZ0121 1000-3000 1273,5 - - - - 8.09 WZ/DZ/OK PS0416/DS1021 October 19.10 PS1016 1000-3500 3638 - - - - 2.10 OK/PS/DZ OK0114 November 16.11 PS1016 1000-2500 2500 - - - - 10.11 DZ/OK/PS OK/WZ/DS/WS December - - - - - - - - 14.12 OK/PS WZ/IZ/PS January ‘12 12.01 IZ/PS/WS 1000-4000 4067 19.01 OK0114 3000-6000 6753 4.01 OK/PS/OK WZ/WZ/DS February 09.02 OK0114/PS1016 3500-5500 5049 16.02 WZ0117 1000-3000 3518 1.02 DS1021: 1000-3000 2937 March 14.03 OK0114 1500-3500 21.03 DS1021/WS0429 1000-2500 08.03 PS1016: 1500-3000 4080 * with supplementary auction, ** primary auction, *** demand/sale, **** in February and March 2012 the MF refrained from switch tenders

Source: Ministry of Finance. Reuters. BZ WBK


10

Economic calendar

Monday Tuesday Wednesday Thursday Friday

12 March

13 PL: Balance of payments (Jan) PL: CPI (Feb) DE: ZEW index (Mar) US: Retail sales (Feb) US: Fed decision

14 PL: Money supply (Feb) EZ: Industrial output (Jan) EZ: HICP (Feb) US: Import prices (Feb)

15 US: Philly Fed index (Mar)

16 PL:Wages and employment (Feb) US: Core CPI (Feb) US: Industrial output (Feb) US: Capacity utilisation (Feb) US: Flash Michigan (Mar)

19 PL: Industrial output (Feb) PL: PPI (Feb)

20 PL: Core inflation (Jan and Feb) US: House starts (Feb) US: Building permits (Feb)

21 US: Home sales (Feb)

22 PL: MPC Minutes DE: Flash PMI-mfg (Mar) EZ: Flash PMI-mfg (Mar) CN: Flash PMI-mfg (Mar) EZ: Industrial orders (Jan) EZ: Consumer confidence (Mar) US: Leading indicators (Feb)

23 US: New home sales (Feb)

26 PL: Retail sales (Feb) PL: Unemployment rate (Feb) DE: Ifo index (Mar) US: Pending home sales (Feb)

27 DE: GfK index (Apr) US: S&P/Case-Shiller home price index (Jan) US: Consumer confidence (Mar)

28 EZ: Money supply (Feb) US: Durable goods orders (Feb)

29 US: Final GDP (Q4)

30 PL: Balance of payments (Q4) PL: Inflation expectations (Mar) EZ: Flash HICP (Mar) US: Consumer spending (Feb) US: Personal income (Feb) US: Core PCE (Feb) US: Chicago PMI (Mar) US: Michigan (Mar)

2 April PL: PMI-mfg (Mar) DE: PMI-mfg (Mar) EZ: PMI-mfg (Mar) US: ISM-mfg (Mar)

3 US: Industrial orders (Feb)

4 PL: MPC decision DE: PMI – services (Mar) EZ: PMI – services (Mar) DE: Industrial orders (Feb) EZ: ECB decision US: ADP report (Mar) US: ISM - services (Mar) US: Minutes Fed

5 DE: Industrial orders (Feb) GB: BoE decision

6 US: Non-farm payrolls (Mar) US: Unemployment rate (Mar) CN: Trade balance (Mar)

9 EZ: Sentix index (Apr)

10 DE: Exports (Feb) CN: CPI (Mar)

11 US: Import prices (Mar) US: Fed’s Beige Book

12 PL: Balance of payments (Feb) EZ: Industrial output (Feb) US: Trade balance (Feb)

13 PL: CPI (Mar) PL: Money supply (Mar) US: Core CPI (Mar) US: Flash Michigan (Apr)

MPC meetings and data release calendar for 2012

I II III IV V VI VII VIII IX X XI XII

ECB meeting 12 9 8 4 3 6 5 2 6 4 8 6

MPC meeting 10-11 7-8 6-7 3-4 8-9 5-6 3-4 21 4-5 2-3 6-7 4-5

MPC minutes 26 23 22 26 24 21 - 23 20 18 22 20

GDP* - - 1 - 31 - - 30 - - 30 -

CPI 13 15a 13b 13 15 13 13 14 13 15 14 13

Core inflation 20 - 20 20 22 20 20 21 20 22 21 20

PPI 19 17 19 19 21 20 18 20 19 17 20 19

Industrial output 19 17 19 19 21 20 18 20 19 17 20 19

Retail sales 27 23 - - - - - - - - - -

Gross wages. employment 18 16 16 18 18 19 17 17 18 16 19 18

Foreign trade about 50 working days after reported period

Balance of payments* - - 30 - - - - - - - - -

Balance of payments 13 13 13 - - - - - - - - -

Money supply 13 14 14 - - - - - - - - -

Business climate indices 20 22 22 20 20 22 20 22 21 22 22 20

* quarterly data. a preliminary data for January. b January and February Source: CSO, NBP


11

Economic data and forecasts Monthly economic indicators

Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12

PMI pts 53.8 54.8 54.4 52.6 51.2 52.9 51.8 50.2 51.7 49.5 48.8 52.2 50.0 51.0

Industrial production %YoY 10.5 6.8 6.7 7.8 2.0 1.8 7.9 7.4 6.4 8.5 7.7 9.0 8.8 2.9

Construction production %YoY 18.7 24.2 15.6 23.9 17.0 16.5 10.8 18.1 8.9 13.0 14.6 32.2 17.3 3.0

Retail sales a %YoY 12.2 9.4 18.6 13.8 10.9 8.2 11.3 11.4 11.2 12.6 8.6 14.3 9.6 4.2

Unemployment rate % 13.4 13.3 12.8 12.4 11.9 11.8 11.8 11.8 11.8 12.1 12.5 13.2 13.5 13.6

Gross wages in enterprises sector a

%YoY 4.1 4.0 5.9 4.1 5.8 5.2 5.4 5.2 5.1 4.4 4.4 8.1 3.5 0.2

Employment in enterprises sector

%YoY 4.1 4.1 3.9 3.6 3.6 3.3 3.1 2.8 2.5 2.5 2.3 0.9 0.6 0.5

Export (€) %YoY 17.6 12.5 11.2 18.1 7.2 4.8 14.1 4.9 4.6 6.8 5.0 4.7 8.1 6.5

Import (€) %YoY 19.4 10.6 16.1 19.4 12.9 8.9 11.6 3.6 3.7 2.3 2.4 4.0 6.9 6.6

Trade balance EURm -702 -687 -1 004 -932 -1 203 -1 290 -1 036 -387 -671 -811 -1 076 -450 -618 -740

Current account balance EURm -714 -1 107 -1 149 -182 -2 023 -1 962 -1 428 -1 346 -1 546 -1 113 -1 337 -1 037 -190 -728

Current account balance % GDP -4.9 -4.8 -4.8 -4.7 -4.9 -4.9 -4.8 -4.7 -4.7 -4.3 -4.1 -4.0 -3.9 -3.8

Budget deficit (cumulative) PLNbn -14.4 -17.3 -21.6 -23.7 -20.4 -21.1 -20.7 -21.9 -22.5 -21.6 -25.2 -5.3 -16.5 -21.0

Budget deficit (cumulative) % of FY plan

35.9 43.1 53.8 59.0 50.7 52.5 51.6 54.5 56.1 53.6 62.7 15.1 47.1 60.0

CPI %YoY 3.6 4.3 4.5 5.0 4.2 4.1 4.3 3.9 4.3 4.8 4.6 4.1 4.2 3.6

CPI excluding prices of food and energy

%YoY 1.7 2.0 2.1 2.4 2.4 2.4 2.7 2.6 2.8 3.0 3.1 2.6 2.6 2.4

PPI %YoY 7.5 9.5 8.8 6.3 5.6 5.9 6.8 8.4 8.5 9.1 8.2 8.0 5.9 4.4

Broad money (M3) %YoY 8.3 10.9 9.4 7.7 7.2 7.4 8.8 10.2 10.5 11.8 12.5 13.7 14.0 10.7

Deposits %YoY 8.7 12.2 9.9 8.1 7.7 7.7 8.8 9.5 9.4 11.2 11.7 12.8 12.8 9.2

Loans %YoY 10.1 11.4 12.0 11.7 9.9 13.9 13.2 14.7 14.8 14.6 14.4 14.5 14.7 14.6

EUR/PLN PLN 3.93 4.01 3.97 3.94 3.97 3.99 4.12 4.33 4.35 4.43 4.48 4.37 4.18 4.14

USD/PLN PLN 2.88 2.87 2.75 2.75 2.76 2.80 2.87 3.15 3.18 3.27 3.40 3.39 3.16 3.11

CHF/PLN PLN 3.03 3.12 3.06 3.14 3.28 3.39 3.68 3.61 3.54 3.60 3.65 3.61 3.47 3.43

Reference rate b % 3.75 3.75 4.00 4.25 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50

WIBOR 3M % 4.11 4.18 4.27 4.40 4.61 4.70 4.72 4.75 4.80 4.94 4.98 4.99 4.97 4.95

Yield on 52-week T-bills % 4.41 4.54 4.61 4.61 4.63 4.61 4.53 4.48 4.48 4.48 4.55 4.51 4.50 4.52

Yield on 2-year T-bonds % 5.04 5.04 5.01 5.02 4.87 4.72 4.47 4.43 4.54 4.73 4.86 4.75 4.66 4.60



Source: CSO. NBP. Finance Ministry. BZ WBK own estimates; a in nominal terms. b at the end of period


12

Quarterly and annual economic indicators

2009 2010 2011 2012 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

GDP PLNbn 1 343.4 1 415.4 1 522.7 1 617.7 349.3 369.3 375.1 428.9 372.7 392.0 398.5 454.5

GDP %YoY 1.6 3.9 4.3 2.7 4.5 4.3 4.2 4.3 3.3 2.6 2.4 2.4

Domestic demand %YoY -1.1 4.6 3.8 1.0 4.4 4.3 3.2 3.3 1.9 0.8 0.9 0.7

Private consumption %YoY 2.1 3.2 3.1 1.9 3.7 3.6 3.0 2.0 1.8 1.8 1.9 2.0

Fixed investments %YoY -1.2 -0.2 8.5 5.2 5.9 6.9 8.5 10.3 9.5 7.0 5.0 3.0

Industrial production %YoY -4.5 9.0 7.7 4.5 9.1 5.8 6.1 9.7 6.7 5.0 4.2 2.4

Construction production %YoY 5.1 4.6 16.3 5.0 18.7 18.8 15.2 12.3 15.2 1.7 5.0 3.0

Retail sales a %YoY 3.5 6.1 11.2 6.1 9.4 14.5 10.3 10.6 8.9 6.0 5.2 5.0

Unemployment rate b % 12.1 12.4 12.5 13.5 13.3 11.9 11.8 12.5 13.6 13.1 12.6 13.5

Gross wages in enterprise sector a

%YoY 4.4 3.3 5.0 3.5 4.1 5.0 6.1 4.6 3.9 3.4 3.4 3.5

Employment in enterprise sector

%YoY -1.2 0.8 3.2 0.3 4.1 3.5 3.2 2.1 0.7 0.2 0.1 0.2

Export (€) %YoY -15.8 22.8 10.5 4.6 17.0 12.0 8.1 5.5 6.4 4.5 3.0 4.5

Import (€) %YoY -24.4 24.9 10.8 2.4 17.7 16.0 8.1 2.8 5.8 0.5 0.5 3.0

Trade balance EURm -5 427 -8 893 -10 269 -7 499 -1 894 -3 141 -2 676 -2 558 -1 808 -1 746 -1 829 -2 116

Current account balance EURm -12 152 -16 493 -15 199 -9 761 -3 135 -3 359 -4 709 -3 996 -1 955 -1 612 -3 187 -3 007

Current account balance % GDP -3.9 -4.7 -4.1 -2.6 -4.8 -4.9 -4.7 -4.1 -3.8 -3.3 -2.9 -2.6

General government balance

% GDP -7.3 -7.9 -5.5 -3.4 - - - - - - - -

CPI %YoY 3.5 2.6 4.3 3.7 3.8 4.6 4.1 4.6 4.0 3.6 3.9 3.3

CPI b %YoY 3.5 3.1 4.6 2.9 4.3 4.2 3.9 4.6 3.6 3.9 4.1 2.9

CPI excluding food and energy prices

%YoY 2.7 1.6 2.4 2.3 1.7 2.3 2.6 3.0 2.5 2.2 2.4 2.2

PPI %YoY 3.3 2.1 7.6 3.8 7.7 6.9 7.0 8.6 6.1 4.2 3.2 1.6

Broad money (M3) b %YoY 8.1 8.8 12.5 7.7 10.9 7.2 10.2 12.5 10.7 13.1 10.2 7.7

Deposits b %YoY 9.8 9.1 11.7 7.9 12.2 7.7 9.5 11.7 9.2 12.0 10.2 7.9

Loans b %YoY 8.6 9.2 14.4 3.9 11.4 9.9 14.7 14.4 14.6 11.6 3.6 3.9

EUR/PLN PLN 4.33 3.99 4.12 4.24 3.94 3.96 4.15 4.42 4.23 4.22 4.31 4.21

USD/PLN PLN 3.11 3.02 2.96 3.35 2.88 2.75 2.94 3.28 3.22 3.32 3.44 3.44

CHF/PLN PLN 2.87 2.90 3.34 3.29 3.06 3.16 3.56 3.60 3.50 3.34 3.25 3.08

Reference rate b % 3.50 3.50 4.50 4.00 3.75 4.50 4.50 4.50 4.50 4.50 4.25 4.00

WIBOR 3M % 4.42 3.94 4.54 4.76 4.10 4.43 4.72 4.91 4.97 4.93 4.79 4.37

Yield on 52-week T-bills % 4.54 3.96 4.51 4.35 4.37 4.62 4.54 4.50 4.51 4.47 4.36 4.07

Yield on 2-year T-bonds % 5.17 4.72 4.81 4.59 5.01 4.97 4.54 4.71 4.67 4.62 4.58 4.50



Source: CSO, NBP, Finance Ministry, BZ WBK own estimates; a in nominal terms. b at the end of period

This analysis is based on information available until 09.03.2012 has been prepared by:

ECONOMIC ANALYSIS DEPARTMENT ul. Marszałkowska 142. 00-061 Warszawa. fax +48 22 586 83 40

Email: [email protected] Web site (including Economic Service page): http://www.skarb.bzwbk.pl

Maciej Reluga – Chief Economist tel. +48 22 586 83 63. Email: [email protected]

Piotr Bielski +48 22 586 83 33 Agnieszka Decewicz +48 22 586 83 41 Marcin Luzi ński +48 22 586 83 62 Marcin Sulewski +48 22 586 83 42

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61-894 Poznań tel. +48 61 856 58 14 fax +48 61 856 55 65

Warszawa ul. Marszałkowska 142

00-061 Warszawa tel. +48 22 586 83 20 fax +48 22 586 83 40

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