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Will Poland be badly hit by Recession ? I don't think so. [70]
From the Financial Times:
The region's largest economy, Poland, surprised analysts by contracting in the second quarter, falling by 2.3 per cent, according to preliminary data from its statistics office.
"We see it as a first step into recession," said Katarzyna Rzentarzewska, chief analyst for central and eastern Europe at Erste Group. "The economic growth in Poland is a massive surprise to the downside . . . [it] wiped out expansion from the beginning of the year."Surprise to some... logical to others. Still, this is quite the swing, from rather strong growth in the last two quarters of 2021 and the first quarter of 2022, to a full blown recession in Q2. Even I would not have expected such a rapid pace of deceleration. Remember this post, since it may mark the point when Poland's rapid economic growth hit a wall.
Consumer confidence is at its lowest levels since the first weeks of the pandemic. Remember - this is when we all sat and home for days on end, and waited for death to come - that's how jolly Polish consumers are feeling at the moment.
Inflation is at a 25-year record high of 15.6%.
The Central Bank, in its efforts to rein in inflation, has raised the key interest rate to 6.5%. This is up from pretty much zero at the end of last year. This will absolutely hammer businesses reliant on raising debt, and people planning to buy a house or car. Despite this, the CB is warning that further rate hikes may be necessary, since inflation is still not responding and continuing to grow.
The prognosis for the rest of the year and the first half of next year is deepening pain. There is now almost a 100% probability of the Polish economy contracting year-on-year.
Let's look at what is happening in Hungary, who's government was not so keen on virtue signaling on the subject of energy sanctions. Hungary's annual growth slowed from 8 per cent in the first quarter to 6.5 per cent, while quarterly growth halved to 1 per cent in the three months to June, the statistics office said. Remember - Hungary has still not received a single Euro of help from the EU post-pandemic recovery fund, but is expected to come to an eventual agreement with Brussels. If this money comes, Hungarian economic growth will likely pick up substantially. Bottom line: Poland is entering a recession, and Hungary is growing at rates that would still be the envy of most any country in the world.
In other news - the IMF keeps revising its forecast for how much the Russian economy will contract this year. From its initial estimate of -15% in March, it has now revised it down (in several steps) to just -6%, while the Russian Central Bank is forecasting -4%. It will be very funny if Poland's recession ends up being deeper than Russia's this year, which has thousands of sanctions applied against it.
