View
1
Download
0
Category
Preview:
Citation preview
Economic Analysis Department
Warsaw / 13 November 2017
Inflation and economic growth projection
of Narodowy Bank Polski
based on the NECMOD model
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
2
1 Changes between projection rounds
2 Projection 2017 - 2019
3 Uncertainty
Outline
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
3
Changes between projection rounds
Inflation projection of the NBP based on the NECMOD model 4
November GDP projection compared to July projection
-0.4
-0.2
0
0.2
0.4
-0.4
-0.2
0
0.2
0.4
2017 2018 2019
Private consumption Public consumption
Gross capital formation Net exports
GDP
Source: GUS data, NBP calculations.
Higher private consumption growth (better-than-expected
data for 2017Q2 and more favourable readings and the
prospects of wages and employment growth).
Higher contribution of net exports to GDP growth in 2017
(the positive balance of payments for July-August 2017).
Higher growth in investment in 2018 as a result of the
postponement of some public sector’s expenditures.
Downward revision of the inventory forecast in 2017H2.
Lower growth in current expenditures in the public finance
sector (wage freeze in some sectors of public administration
in 2018 – Draft Budget).
GDP y/y, % 2017 2018 2019
July 2017 4.0 3.5 3.3
November 2017 4.2 3.6 3.3
p. p.
Inflation projection of the NBP based on the NECMOD model 5
November CPI projection compared to July projection
Source: GUS data, NBP calculations.
CPI y/y, % 2017 2018 2019
July 2017 1.9 2.0 2.5
November 2017 1.9 2.3 2.7
-0.4
-0.2
0
0.2
0.4
-0.4
-0.2
0
0.2
0.4
2017 2018 2019
Core inflation Food prices
Energy prices CPI inflationp. p.
Higher prices of energy commodities in the global markets.
Lower availability of some agricultural products in the
domestic market.
Increase in demand and cost pressure in the long term.
Higher growth in the prices of agricultural commodities in
the global markets in 2019.
Lower core inflation in 2017 (lower-than-expected growth in
prices of services related to dwellings and transport
services).
Inflation projection of the NBP based on the NECMOD model 6
Changes between projections
-2
-1
0
1
2
3
4
5
6
-2
-1
0
1
2
3
4
5
6
14q1 15q1 16q1 17q1 18q1 19q1 19q4
r/r, % 90% 60% 30% Jul 17 Nov 17 Inflation target
Source: GUS data, NBP calculations.
-1
0
1
2
3
4
5
6
7
8
-1
0
1
2
3
4
5
6
7
8
14q1 15q1 16q1 17q1 18q1 19q1 19q4
r/r, % 90% 60% 30% Jul 17 Nov 17
CPI inflation y/y, %GDP y/y, %
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
7
Projection 2017-2019
Economic conditions abroad
Consumption demand
Investment
Foreign trade
Inflation
Inflation projection of the NBP based on the NECMOD model 8
GDP growth is likely to accelerate in the second half of 2017
17q2 17q3
GDP (y/y) (%) 3.9 (4.0) 4.5 (4.2)
Domestic demand (y/y) (%) 5.6 (4.9) 4.7 (5.0)
Private consumption (y/y) (%) 4.9 (4.7) 4.7 (4.2)
Public consumption (y/y) (%) 2.4 (3.0) 3.3 (3.3)
Gross fixed capital form. (y/y) (%) 0.8 (1.1) 6.1 (7.0)
Exports (y/y) (%) 2.8 (6.9) 6.5 (7.8)
Imports (y/y) (%) 6.1 (9.1) 7.0 (9.4)
Net exports contribution (p.p.) -1.5 (-0.7) -0.1 (-0.7)
Values from the July projection are given in brackets (17q3 seasonally adjusted). Indicators with values
higher than in the July projection are marked green, whereas indicators with lower values are marked red.
Source: GUS data, NBP calculations.
-8
-4
0
4
8
12
-8
-4
0
4
8
12
09q1 10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q3
Industrial and constr. production y/y Retail sales y/y
Real wage fund y/y GDP y/y (RHS)
Inflation projection of the NBP based on the NECMOD model 9
-3
-2
-1
0
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
4
5
6
7
16q1 17q1 18q1 19q1 19q4
Consumption Gross fixed capital formation
Change in inventories Net exports
GDP
In 2017 GDP is expected to grow at 4.2% and in the years 2018-2019 will slow down to the level close
to the potential output growth
Private consumption as the main factor behind GDP growth
over the projection horizon due to further improvement in
the labour market and – in short term - payments of benefits
under the “Family 500 plus” programme
Economic growth driven also by positive gross fixed capital
formation dynamics – supported by the inflow of EU funds
under the 2014-2020 financial framework
The decline in GDP growth in the euro area (negative
contribution of net exports to growth in 2019 as a result of a
slowdown in the domestic demand).
y/y, % 2016 2017 2018 2019
GDP 2.7 4.2 3.6 3.3
Source: GUS data, NBP calculations.
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
10
Economic conditions abroad
Inflation projection of the NBP based on the NECMOD model 11
The November projection assumes a higher GDP growth in the external environment in 2017-2018
Source: OECD, Thomson Reuters Datastream, NBP calculations.
Consumer sentiment: averages of the group of countries are weighted by the nominal GDP in PPP terms.
Developed economies: The Czech Republic, Denmark, Israel, Japan, Republic of Korea, New Zeland, Norway,
euro area, US, Sweden, Switzerland, UK.
Emerging economies: Brazil, China, Mexico, Poland, Russia, South Africa, Hungary, Turkey.
High readings of current activity indicators and both consumer
and business sentiment.
Stronger economic growth in the euro area.
Higher growth path in China.
Weak long-term global economic outlook due to low productivity
growth and unfavourable demographic trends.
Weak medium-term outlook for global trade growth.
GDP y/y, % 2017 2018 2019
Euro area 2.2 (1.9) 1.9 (1.7) 1.6 (1.6)
Germany 2.2 (1.9) 1.9 (1.7) 1.5 (1.5)
United States 2.2 (2.2) 2.4 (2.5) 2.1 (2.1)
United Kingdom 1.6 (1.4) 1.4 (1.5) 1.7 (1.7)
-2
-1
0
1
2
Jan-12 Aug-12 Mar-13 Oct-13 May-14 Dec-14 Jul-15 Feb-16 Sep-16 Apr-17
Consumer sentiment(deviation from 2000-2017 average)
Developing economies Advanced economies
-2
-1
0
1
2
3
4
5
Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17
PMI in industrial production(deviation form 50 pts)
World Advanced economies Developing economies
Values from the July projection (seasonally adjusted) are given in brackets. Figures with values higher than
in the July projection are in green, whereas those with lower value are in red.
Inflation projection of the NBP based on the NECMOD model
In the short run - a lower inflation is expected in Poland’s external environment
12
Source: OECD.
Despite positive output gap consumer price inflation in the US is lower than expected in 2017.
The forecast of inflation in the euro area has been lowered due to revised estimates of potential output growth in the EA.
-2
-1
0
1
2
3
4
Jan-12 Aug-12 Mar-13 Oct-13 May-14 Dec-14 Jul-15 Feb-16 Sep-16 Apr-17
Japan United Kingdom United States Euro area
CPI inflaction in advanced economies (%, y/y)
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
Japan United Kingdom United States Euro area
Consumer inflation in main developed
economies excluding food and energy
prices (%, y/y)
Inflation projection of the NBP based on the NECMOD model
The heightened uncertainty about inflation outlook due to persistently low wage growth
13
0
2
4
6
8
10
12
14
Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Jul-16 Apr-17
Unemployment rate in selected developedcountries
Japan United Kingdom
United States Euro area
Despite tight labour markets conditions, wage growth in the main developed economies remains weak.
Low wage pressure is due, inter alia, to: i) sluggish growth in labour productivity; ii) low inflation expectations; iii) still low labour utilisation in some
countries; iv) increase in labour participation in the groups with lower wages (women, elderly people); v) reduced workers’ wage-bargaining power and
higher preferences for the job security and benefit packages over the wage increase; vi) an increased importance of temporary or part-time jobs, vii) an
impact of structural reforms; viii) a declining number of hours worked.
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0 Economies characterised by lower unemployment rate than the average of 2000-2007
Factors explaining the deviations of wage growth from the average of 2000-2007
according to IMF research (WEO, 2017):
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2000–07 2008–12 2013 2014 2015 2016
Economies characterised by markedly higher unemployment rate than the average of 2000-2007
Delayed inflation Trend in productivity growth Unemployment rate
Share of workers forced to work part-time The rest Wage dynamicsSource: OECD.
Inflation projection of the NBP based on the NECMOD model 14
Labour market in G7 countries
Source: BIS, 87th Annual Report.
Labour share (% of GDP) Labour productivity and wages (1980=100)
Inflation projection of the NBP based on the NECMOD model 15
Labour market in G7 countries
Source: BIS, 87th Annual Report.
Labour’s pricing power (%) Unemployment gap
Inflation projection of the NBP based on the NECMOD model 16
Expected stabilization of oil prices
Source: Bloomberg.
WTI oil prices and number of drilling rigs in United States
Brent oil prices (USD/b)
Oil production in the United States (mln b/d)
25
30
35
40
45
50
55
60
01-16 04-16 07-16 10-16 01-17 04-17 07-17 10-17
daily monthly average quarterly average4
5
6
7
8
9
10
11
2010 2011 2012 2013 2014 2015 2016 2017 2018
oil production in the US EIA forecast Oct 2017
0
400
800
1200
1600
2000
2400
0
20
40
60
80
100
120
2010 2011 2012 2013 2014 2015 2016 2017 2018
WTI oil prices (4 months shifted)the number of active drilling rigs (RHS)
Source: The United States Department of Energy.
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
17
Consumption demand
Inflation projection of the NBP based on the NECMOD model 18
-8
-6
-4
-2
0
2
4
6
8
10
-8
-6
-4
-2
0
2
4
6
8
10
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q119q4
y/y, %
Public consumption (y/y, %)
Private consumption (y/y, %)
Private consumption:
Good labour market conditions.
Improvement in consumer sentiment.
In 2017 GDP growth supported by the “Family 500 Plus” programme.
Low interest rates facilitate financing consumption through borrowing.
Purchasing power of households reduced by rising inflation
Public consumption :
Relatively slow growth in current expenditures and in subsidies
financing current expenditure of other units of the sector (2017 Budget
Act and draft 2018 BA, incl. further wage freeze of part of the
government sector workers)
Lack of detailed information on the continuation of cutting public
expenditure in 2019.
Consumption demand as the main driver of GDP growth in the projection
y/y, % 2016 2017 2018 2019
Private consumption 3.8 4.7 3.7 3.5
Public consumption 2.8 2.4 2.4 3.4
Source: GUS data, NBP calculations.
Inflation projection of the NBP based on the NECMOD model 19
Good households’ financial situation
-6
-4
-2
0
2
4
6
8
-6
-4
-2
0
2
4
6
8
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
y/y, %Private consumption (y/y, %)Disposible income (constant prices) (y/y) (%)
Further decline in unemployment rate and acceleration of wage growth
are expected, although the purchasing power of households will be
reduced by rising inflation.
In 2016-2017 dynamics of households’ disposable income will be
elevated by the growth in family benefits, due to the programme
„Family 500 plus”, which was implemented in April 2016 (it will affect
private consumption with a lag due to the intertemporal consumption
smoothing mechanism).
-4
-2
0
2
4
6
8
10
-4
-2
0
2
4
6
8
10
16q1 17q1 18q1 19q1 19q4
Net transfers and taxes excl. 500 plus 500 plus
Wage fund Property income
Operating surplus Disposable income (y/y, %)
Disposable income decomposition (constant prices) (y/y, %)
Source: GUS data, Eurostat, NBP calculations.
Inflation projection of the NBP based on the NECMOD model 20
Consumption is driven by favourable consumer sentiment and very good labour market
conditions
Values from the July projection are given in brackets (seasonally adjusted).
Indicators with values higher than in the July projection are marked green,
whereas indicators with lower values are marked red.
Source: GUS data, NBP calculations.
Consumer confidence indicators
17q2 17q3
ULC (r/r, %) 2,7 (1,6) 3,1 (1,9)
Labour productivity (y/y,%) 1,9 (2,7) 2,2 (2,8)
Gross wages (y/y, %) 5,0 (4,3) 5,4 (4,8)
Employment LFS (y/y, %) 1,9 (1,2) 2,3 (1,3)
Unemployment rate LFS (%) 4,9 (5,1) 4,6 (5,0)
Participation rate (%) 56,7 (56,4) 56,7 (56,3)
Financial situation of households and risk of unemployment
-30
-20
-10
0
10
20
30
40
2014-01 2015-01 2016-01 2017-01
Current financial situation of housholdsFinancial situation of households in the next 12 monthsFear of being unemployed
-45
-35
-25
-15
-5
5
15
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
current (s.a.) leading (s.a.)
Inflation projection of the NBP based on the NECMOD model 21
Source: GUS data, NBP calculations.
Increasing participation rates, but labour supply affected by changes in the demographic structure
54
54.5
55
55.5
56
56.5
57
-1
-0.5
0
0.5
1
1.5
2
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
Population (s.a.) (y/y) (%)
Participation rate (%, RHS)
0
5
10
15
20
32
33
34
35
36
10 11 12 13 14 15 16 17 18 19
15-24 years old 25-44 years old
45-60/65 years old 60/65+ years old
Participation rate in the given age group (%, LHS )
Share of age group in the population (%, RHS)
0
5
10
15
20
25
30
35
40
10 11 12 13 14 15 16 17 18 19
84
85
86
87
88
0
5
10
15
20
25
30
35
10 11 12 13 14 15 16 17 18 19
62
64
66
68
70
72
74
76
0
5
10
15
20
25
30
10 11 12 13 14 15 16 17 18 19
0
2
4
6
8
10
12
Changes in population and participation rate
Inflation projection of the NBP based on the NECMOD model 22
Source: GUS data, NBP calculations.
The lowest in the history probability of loosing job and transition from employment to inactivity
Recent increase of LFPR of people aged 50+ reflected in the
drop of the flows from employment to inactivity (E->N).
Companies retain 50+ employees.
Since 2013 higher intensity of transitions between inactivity (N)
and unemployment (U) due to activation of people loosely
attached to labour market. This positively influences labour
supply.
50
100
150
200
250
300
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
E->N U->N N->E N->U
Flows to and from inactivity (N)
(number of people in thous. per quarter)Probabilities of flows between employment (E)
and unemployment (U)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
U->E (s.a., LHS) E->U (s.a., RHS)
The lowest in the history probability of loosing job
(E->U).
The highest in the LFS history (since 1992) probability of the
transition from unemployment to employment (U->E).
Inflation projection of the NBP based on the NECMOD model 23
Source: GUS data, NBP calculations.
Biggest changes do not apply to retirement age, but 3-6 years
before retirement and are related to job retention of older
workers
Unitil the second quarter of 2017, despite the planned lowering
of retirement age, labour force participation is growing faster
than in the corresponding quarters of 2016 – lack of workers?
Growing labour force participation of people 45+ on the eve of lowering retirement age
Labour force participation and its changes Changes in labour force participation by distance to age 60/65
0
10
20
30
40
50
60
70
80
90
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
15-24 24-34 35-44 45-59/64 60/65+
QoQ change (LHS) YoY change (LHS) Level 2Q (RHS)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
-0.08
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
0.08
0.10
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5
M (LHS) F (LHS)
Level M (RHS) Level F (RHS)
60/65
years old
Inflation projection of the NBP based on the NECMOD model 24
Source: Labour force sourvey.
Labour force participation rates - Males Labour force participation rates - Females
Labour force participation of people at „prime-age” is close to the
EU average of 28.
Despite the reduction of early retirement in Poland, there is still a
problem of the relatively low activity of men aged 50+ in relation
to the EU28.
Successive generations are more and more active in the labour
market - there is a potential for increased labour force
participation.
Lower than average in the EU28 labour force participation of
women up to the age of 24 is associated with a high level of
academic enrollment, mainly in full-time studies.
Labour force participation of women aged 25-54 does not differ
significantly from the EU28 average.
Quite early retirement remains a problem due to retirement age
(60 years), although there is a potential for further growth in
labour force participation for people aged of 55-59.
Labour force participation in the pre-retirement age is still lower than in the EU28 average
0
10
20
30
40
50
60
70
80
90
100
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69
LFPR, Male, Poland LFPR, Male, EU28
0
10
20
30
40
50
60
70
80
90
100
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69
LFPR, Female, Poland LFPR, Female, EU28
Inflation projection of the NBP based on the NECMOD model 25
Source: GUS data, NBP calculations.
■ According to GUS data, the number of retirees and pensioners in Q1-Q3
2017 was lower than in the projection of 2016, which did not take into
account lowering of retirement age. This is due to the good situation on the
labour market.
■ According to The Polish Social Insurance Institution (ZUS) estimates,
applications for retirement due to lowering the retirement age could
amount to about 330 thousand. people by the end of 2017. The NBP's
assessment is similar, but submitting the application does not mean that
the number of retirees will increase immediately. Therefore, estimates of
the increase in the number of pensioners are slightly lower and spread over
time because::
- submitting the application does not mean going for retirement
- to retire, employment contract need to be terminated,
- some people may need time to collect all the documents needed to
establish the initial capital.
■ In the current projection, the jump in the number of retirees due to lowering
the retirement age will be visible in the fourth quarter of 2017 and the first
quarter of 2018. Moreover, in the coming years people who are
approaching the age of 60/65 (who would have to wait longer for retirement
based on old regulations) will retire early.
■ Historically low unemployment can cause the labour force participation
of retired people to decline not as rapidly as it has been observed in the
past.
Without pension benefits With pension benefits
Labour force participation of people within the retirement age
Good labour market situation can spread over time the effects of lowering the retirement age
The number of retirees (thous.)
0
0.1
0.2
0.3
0.4
0.5
0.6
-1 0 1 2
Distance to retirement
2016M 2016F 2013M 2013F 2010M 2010F
0
0.1
0.2
0.3
0.4
0.5
0.6
-1 0 1 2
8 800
8 900
9 000
9 100
9 200
9 300
9 400
9 500
9 600
2010Q1 2012Q1 2014Q1 2016Q1 2018Q1 2020Q1
2012 - before increase of the retirement age 2016 - last projection before reverse of the reform.
2017.07 2017.09
Inflation projection of the NBP based on the NECMOD model 26
Source: The National Border Guard and Ministry of Family, Labour and Social Policy data, NBP calculations..
Total change in sectoral structure of immigrant jobs in 2014-
2016.
Most of the immigrants work in services, there is also a
significant increase in employment in the industry.
Permanent employment contracts are more and more
frequent in sectors with less „underground economy” than in
agriculture and construction.
Data for the first half of 2017 indicate that Poland issued over 108
thous. work permits for foreigners and registered 948 thous.
employer's declarations that form the basis for applying for a visa.
In 2017, the number of immigrant workers in Poland may be 60%
higher than in the previous year.
These estimates is confirmed by the growing number of border
crossings between Poland and Ukraine
Immigration from Ukraine
Number of immigrants on the Polish labour market
(mostly from Ukraine)
Structure of employer's declarations by sector
2000
3000
4000
5000
6000
7000
0
500
1000
1500
2000
2500
2010 2011 2012 2013 2014 2015 2016 2017
Th
ous.
Th
ous.
Work permits
Declarations of the intention to entrust a job to a foreigner
Visas issued on the basis of declaration
Arrivals of Ukrainians to Poland (excl. LBT) - rhs
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 I poł.2017
Agriculture Industry Construction Services
Inflation projection of the NBP based on the NECMOD model 27
Source: GUS data, NBP calculations.
The scale of migration flows of Ukrainian citizens to
Germany seems to be low compared to Poland.
Long- and medium-term immigrants dominate in the
structure of Ukrainian migration to Germany.
Since June 2017 Ukrainians are exempted from EU
short-stay visa requirements.
Although visa liberalisation doesn’t mean opening of the
EU labour market. Regarding the legalization of
employment regulations have not changed.
The recent liberalization of EU visa policy towards Ukraine does not result in significant outflow of
immigrants from Poland
UA citizens in Germany by length of stay (level) UA citizens in Germany by length of stay (YoY change)
0
20
40
60
80
100
120
140
160
Th
ous.
<1Y 1-4Y 4-10Y >=10Y
-15
-10
-5
0
5
10
15
20
Th
ous.
<1Y 1-4Y 4-10Y >=10Y Total YoY change
Inflation projection of the NBP based on the NECMOD model 28
Source: GUS data, NBP calculations , Quick Monitoring NBP, F-01/I-01 GUS.
Despite favourable labour demand conditions …
Employment forecasts
Employment forecasts by company size
Employment in the corporate sector
-20
-10
0
10
20
30
40
2012 2013 2014 2015 2016 2017
SMEs (s.a.) only up to 49 persons (s.a.)Large enterprises (s.a.) only over 2000 persons (s.a.)
-30
-25
-20
-15
-10
-5
0
5
10
15
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
balance empl. ind.empl. ind. (s.a.) long-term average
Increase of employment by sector of economy
-4%
-2%
0%
2%
4%
6%
5 200
5 400
5 600
5 800
6 000
6 200
2009-09 2010-09 2011-09 2012-09 2013-09 2014-09 2015-09 2016-09 2017-09
y/y (LHS) s.a. (RHS)
70
80
90
100
110
120
2007 I 2008 I 2009 I 2010 I 2011 I 2012 I 2013 I 2014 I 2015 I 2016 I 2017 I
Services (National Economy) Services (LFS)Agriculture (National Economy) Agriculture (LFS)Industry (National Economy) Industry (LFS)
Inflation projection of the NBP based on the NECMOD model 29
... limited labour supply will lead to a slowdown in
employment growth
Unemployment rate
Change of labour force, thous. y/y
0%
5%
10%
15%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
LFS unemployment rate (s.a.) Registered unemployment rate (s.a.)
5,1 %
7,2%
Vacancies and difficulties with hiring employees
(percentage of enterprises)
%
54
55
56
57
-2
-1
0
1
2
3
4
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
Employment (y/y, %) Participation rate (%, RHS)
Source: GUS data, NBP calculations, Quick Monitoring NBP.
-400
-300
-200
-100
0
100
200
300
400
500
600
-400
-300
-200
-100
0
100
200
300
400
500
600
16q1 17q1 18q1 19q1 19q4
Demographic structurePopulationParticipation rate (population 60/65+ years of age)Participation rate (population 45-59/64 years of age)Participation rate (population 25-44 years of age)Participation rate (population 15-24 years of age)Labour force
0
10
20
30
40
50
2006Q4 2007Q4 2008Q4 2016Q3 2017Q1 2017Q2 2017
vacancies difficulties with hiring employees
Inflation projection of the NBP based on the NECMOD model 30
Higher wage dynamics
Wage increases forecasts
Wage pressure (percentage of firms)
Source: Quick Monitoring NBP, NBP calculations.
Increase in wage pressure and faster wage growth than labour
productivity (percentage of firms)
-2
0
2
4
6
8
-2
0
2
4
6
8
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
Nominal wages (y/y) (%)
Real wages (y/y) (%)
4
6
8
10
12
14
16
18
20
40
44
48
52
56
60
64
68
2012 2013 2014 2015 2016 2017firms with no change or increasing wage pressureonly firms with increasing wage pressure (RHS)
0
5
10
15
20
25
30
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
firms with wage growth higher than productivity growthfirms with increasing wage pressure
0
10
20
30
40
50
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017share of enterprises s.a.
share of employees s.a.
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
31
Investment demand
Inflation projection of the NBP based on the NECMOD model 32
Private investment:
Increasing use of funds from 2014-2020 EU financial perspective
Improving forecasts of demand, orders and production
Improving investor sentiments.
Low interest rates.
Capacity utilisation in the economy highest since 2008.
Public investment:
Increasing use of funds from 2014-2020 EU financial perspective.
Housing investment:
Good labour market conditions.
Low interest rates.
Increase in investment since 2017
y/y, % 2016 2017 2018 2019
Gross fixed capital formation -7.9 5.8 7.6 5.0
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q119q4
GFCF enterprises GFCF public sector
GFCF housing GFCF
Source: GUS data, NBP calculations.
Inflation projection of the NBP based on the NECMOD model 33
Current data support the scenario of acceleration of public investment in 2017, though at a rate lower
than assumed in the previous round
Source: Ministry of Finance data, Eurostat, The National Road Fund, own calculations.
Total public investment growth,% YoY Investment expenditures of local government units,% YoY
Slower pace of growth in public investment in 2017 caused by low level of road investment in Q1-Q3 and lower than expected level of military
equipment delivery in 2017
-25
-20
-15
-10
-5
0
5
10
15
20
25
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
%, y/y
Jul assumptions realization Nov asumptions
-60
-40
-20
0
20
40
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
2013 2014 2015 2016 2017
%, y/y
Inflation projection of the NBP based on the NECMOD model 34
The high level of signed contracts for the use of EU funds supports the high growth of EU funds
absorption over the projection horizon
Source: GUS, Ministry of Finance data, own calculations.
Value of signed contracts for projects financed
from Cohesion Policy funds, cumulative % of
allocation
Payment requests from beneficiaries – PLN
billion
Slower rate of EU funds absorption from 2014-2020 perspective compared to the previous one indicates a lower utilization of EU funds in 2017.
The use of EU funds (without
CAP and RDP)
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
07-13
14-20
07-13
14-20
07-13
14-20
2008/2015 2009/2016 2010/2017
bill
ion P
LN
I-IX X-XII
0
10
20
30
40
50
III VI IX XII III VI IX XII III VI IX
II year III year IV year
cum
. %
of allo
catio
n
07-13 14-20
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
% G
DP
Jul assumptions realization Nov asumptions
Inflation projection of the NBP based on the NECMOD model 35
Overall investor optimism ratings (standardized index)
Source: Quick Monitoring NBP.
Survey among enterprises point to low demand barriers, growing optimism, …
Quarterly forecasts of demand, output and orders (s.a.)Demand-side barriers
5
10
15
20
2010 2011 2012 2013 2014 2015 2016 2017
-15
-10
-5
0
5
10
15
20
25
2012 2013 2014 2015 2016 2017
permanent demand component demand new orders output
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2012 2013 2014 2015 2016 2017
QM - OPTIN - private F01 - investment y/y - private
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2012 2013 2014 2015 2016 2017QM - OPTIN - public F01 - investment y/y - public
Inflation projection of the NBP based on the NECMOD model 36
Source: GUS data.
… further economic recovery and improvement in the forecasts of orders
Construction - general economic climate indicatorIndustry - general economic climate indicator
-12
-10
-8
-6
-4
-2
0
2
4
6
8
2012 2013 2014 2015 2016 2017-30
-25
-20
-15
-10
-5
0
5
2012 2013 2014 2015 2016 2017
Construction - a portfolio of domestic ordersIndustry - a portfolio of domestic and foreign orders
-20
-15
-10
-5
0
5
10
2012 2013 2014 2015 2016 2017-25
-20
-15
-10
-5
0
5
2012 2013 2014 2015 2016 2017
Inflation projection of the NBP based on the NECMOD model 37
… and high capacity utilisation in the economy
Capacity utilisation
Source: Quick Monitoring NBP, GUS data.
Uncertainty assessment
72
74
76
78
80
82
84
2012 2013 2014 2015 2016 2017
QM NBP (s.a.) GUS (industry)
Źródło: Szybki Monitoring NBP.
2
3
4
5
6
7
8
9
-26
-23
-20
-17
-14
-11
-8
2012 2013 2014 2015 2016 2017
Own uncertainty (LHS) Own uncertainty s.a. (LHS)
barrier - uncertainty (RHS)
Inflation projection of the NBP based on the NECMOD model 38
Companies plan to increase investment expenditure
Planned changes in investment outlays
Source: Quick Monitoring NBP, GUS data.
-30
-20
-10
0
10
20
30
-15
-10
-5
0
5
10
15
2012 2013 2014 2015 2016 2017
investment dynamics F01 (RHS) quarterly plans
annual plans until 2017 quarterly plans BLC
annual plans BLC
New investment index among sectors
15
20
25
30
35
40
2012 2013 2014 2015 2016 2017
private public
average 2009 private average 2009 public
average 2004 private average 2004 public
Share of companies planning new investments in the next quarter horizon.Planned change of investment in the quarter-on-quarter and in the current year-on-
year. Balance of change, balance of large changes BLC (increase-decrease).
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
39
Foreign trade
Inflation projection of the NBP based on the NECMOD model 40
-4
-3
-2
-1
0
1
2
3
4
5
-20
-15
-10
-5
0
5
10
15
20
25
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
Net exports contribution (percentage points, right axis)
Exports (y/y) (%)
Imports (y/y) (%)
Source: GUS data, NBP calculations.
Net exports will limit GDP growth
Exports:
High profitability of exporters (high price profitability)
Expected slowdown in the euro area growth.
Appreciation of the zloty exchange rate.
Imports:
In 2017 acceleration of consumption and investment
dynamics.
Lower growth of inventories in the second half of 2017.
From 2018 slower domestic demand growth.
y/y pp. 2016 2017 2018 2019
Net exports
contribution0.3 -0.4 -0.5 -0.1
Inflation projection of the NBP based on the NECMOD model 41
Changes in Polish exports
Source: CPB data, Eurostat, Quick Monitoring NBP.
Changes in Polish exports by groups of countries (%, y/y,
current prices, s.a.)Changes in the volume of exports in the Visegrad
Group (% y/y - national accounts)
Export changes of the Polish automotive industry
(% y/ y, current prices)
Dynamics of Polish exports - national accounts (% y/y)
Changes in Polish exports according to Balance of
Payments statistics (% y/y, current prices)
-12
-8
-4
0
4
8
12
16
I II III IV I II III IV I II III IV I II
2014 2015 2016 2017
price changes in EUR volume changes value changes in EUR
-3
0
3
6
9
12
15
I II III IV I II III IV I II
2015 2016 2017
Poland Czech RepublicSlovakia Hungary
-3
0
3
6
9
12
15
18
I II III IV I II III IV I II
2015 2016 2017
parts used vehicules cars total
0
4
8
12
16
20
Euro area UnitedKingdom
VisegradGroup
non-EUcountries
1Q 2017 2Q 2017
0
3
6
9
12
15
I II III IV I II III IV I II III*
2015 2016 2017
goods services export
* data include July and August
Inflation projection of the NBP based on the NECMOD model 42
3.6
3.7
3.8
3.9
4
4.1
4.2
4.3
4.4
4.5
4.6
3.6
3.7
3.8
3.9
4
4.1
4.2
4.3
4.4
4.5
4.6
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
Real effective exchange rate
Gradual appreciation of the zloty Positive current and capital account balance over the
projection horizon
Source: GUS data, NBP calculations.
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
-6
-4
-2
0
2
4
6
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Remittances Primary income
Secondary income Goods and services
Current and capital account (% GDP)
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
43
Inflation
Inflation projection of the NBP based on the NECMOD model 44
At the turn of 2017/2018 lower CPI inflation due to the base effect
Values from the July projection are given in brackets (seasonally adjusted).
Indicators with values higher than in the July projection are marked green, whereas indicators with lower values are marked red
Source: GUS data, NBP calculations.
Base effect – the influence on CPI
y/y, % 17q2 17q3
CPI inflation 1.8 (1.9) 1.9 (2.1)
Core inflation 0.8 (0.8) 0.8 (1.2)
Food prices
inflation3.4 (3.7) 4.6 (4.2)
Energy prices
inflation3.1 (3.4) 1.9 (2.1)
0
2
4
6
8
10
12
-0,2
-0,1
-0,1
0,0
0,1
0,1
0,2
2012 2013 2014 2015 2016 2017 2018
Food and non-alcoholic beverages Energy Core inflation CPI
Inflation projection of the NBP based on the NECMOD model 45
Source: GUS data, NBP calculations.
Consumer prices dynamics gradually reaching inflation target
In 2017 - growth in food and energy prices supported by temporary
factors.
Increase in cost pressure:
dynamics of unit labour costs will accelarate,
low inflation in the euro area ,
Over the projection horizon, stabilization of global energy
commodity prices combined with the forecasted depreciation
of the US dollar, the currency in which commodities are
quoted.
Increase in demand pressure – positive output gap (however, the
sensitivity of price growth to changes in the domestic economic
conditions has decreased in the recent years)
y/y, % 2016 2017 2018 2019
CPI inflation -0.6 1.9 2.3 2.7-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
Core inflation Food prices
Energy prices CPI inflation
Inflation projection of the NBP based on the NECMOD model 46
In the years 2018-2019 the output gap will not exceed 1% of potential output
-3
-2
-1
0
1
2
3
4
5
6
-3
-2
-1
0
1
2
3
4
5
6
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
Output gap (% potential output) GDP (y/y, %)
Potential output (y/y, %)
Source: GUS data, NBP calculations.
-1
0
1
2
3
4
5
6
-1
0
1
2
3
4
5
6
TFP Capital
NAWRU Economically active pop.
Potential output
Inflation projection of the NBP based on the NECMOD model 47
The impact of rising cost pressure in domestic market limited by the moderate growth in import prices
Source: GUS data, NBP calculations.
-6
-4
-2
0
2
4
6
8
10
12
14
16
-6
-4
-2
0
2
4
6
8
10
12
14
16
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
y/y, %Import prices excl. oil and gas prices (y/y) (%)
Import prices (y/y) (%)
-2
0
2
4
6
8
-2
0
2
4
6
8
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q119q4
Wages (y/y, %) Labour productivity (y/y, %) ULC (r/r, %)
Inflation projection of the NBP based on the NECMOD model 48
Energy commodity prices after a hike in the short term will gradually decrease
The index of agricultural commodity prices will stand at a low, but gradually increasing level
Source: GUS data, NBP calculations, Bloomberg, Reuters.
-8
-6
-4
-2
0
2
4
6
8
10
12
-8
-6
-4
-2
0
2
4
6
8
10
12
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
y/y, % Energy prices inflation (y/y) (%)
Food prices inflation (y/y) (%)
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
10q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4
Index of energy commodity prices (USD, 2011=100)
VII/17
Index of agricultural commodity prices (EUR, 2011=100)
VII/17
Outline:
Inflation projection of the NBP based on the NECMOD model
Changes between rounds
Projection 2017 – 2019
- External environment
- Consumption demand
- Investment demand
- Foreign trade
- Inflation
Uncertainty
49
Uncertainty
Risk factors
Fan charts
Inflation projection of the NBP based on the NECMOD model 50
Risk area Description Impact
Scale
of
impact
Deterioration
of global growth
outlook
Decline in the US economy (household and corporate sentiment deterioration as a result of a smaller
scope of reforms or a delay in their implementation, stock market correction).
Sentiment deterioration and stronger economic slowdown in the euro area (stability of the financial
system, uncertainty concerning Brexit agreement, disintegration tendencies, elections in Italy).
Escalation of tensions on the Korean Peninsula.
Inflation
GDP **
Improvement in
global economic
conditions
Higher economic growth in US (positive effect of fiscal stimulus and stronger improvement in
household and corporate sentiment increasing faster growth of consumption and investment
expenditure, increase in infrastructure expenditure).
Higher economic growth in the euro area (higher dynamics of investment, stronger improvement in
competitiveness due to structural reforms implemented in some of the member countries).
Inflation
GDP **
Changes in labour
supply
Impact of lowering of retirement age on the labour participation rate – uncertain numer of people
going into inactivity, depending on the labour market situation.
Return migration of Poles.
Scale of migration of Ukrainian citizens to Poland (incl. impact of the introduction of a visa-free regime
in EU for Ukrainian citizens).
Inflation
GDP *
Crude oil prices
in the global markets
Fluctuations in the oil supply in the global markets:
- unknown shape of future OPEC's supply policy,
- impact of the disturbance in Iraq's oil production due to the increase tensions after the independence
referendum in Kurdistan.
Global growth outlook, especially in the emerging Asian countries.
Inflation
GDP *
ConclusionsInflation
GDP
Inflation projection of the NBP based on the NECMOD model 51
-1
0
1
2
3
4
5
6
7
8
-1
0
1
2
3
4
5
6
7
8
14q1 15q1 16q1 17q1 18q1 19q1 19q4
90% 60% 30% Central path
GDP
y/y, %
central
path
50% probability
interval
2017 4.2 3.8 4.6
2018 3.6 2.8 4.5
2019 3.3 2.3 4.3
Source: GUS data, NBP calculations.
CPI
y/y, %
below
1,5%
below
2,5%
below
3,5%
below
centr.
path
in the
range
1,5-3,5%
2017 0% 100% 100% 50% 100%
2018 22% 59% 89% 49% 67%
2019 21% 45% 70% 49% 49%
CPI
y/y, %
central
path
50% probability
interval
2017 1.9 1.9 2.0
2018 2.3 1.6 2.9
2019 2.7 1.7 3.7
CPI inflation y/y, % GDP y/y, %
-3
-2
-1
0
1
2
3
4
5
6
-3
-2
-1
0
1
2
3
4
5
6
14q1 15q1 16q1 17q1 18q1 19q1 19q4
90% 60% 30% Central path Inflation target
Recommended