Macro: COVID-19 Update Poland: Scenario of a relatively mild recession still intact

A new record peak of daily corona cases could be observed at the beginning of June. However, as the cluster has now been contained a stabilisation of new daily cases is reported when looking at the 7-day moving averages. The easing of restrictions was also reflected in recent economic data in May revealing a significant recovery with retail sales surprising to the upside. However, former pre-crisis growth pillar consumer demand may be weakening going forward as the situation on the labour market continues to deteriorate. The increase in unemployment rate is so far subdued, though (6% in May) but employment continues to decline now also on an annual basis while wages are also being cut. Overall, we expect a clear recession this year with GDP down by 4.5%. While massive fiscal (7.5% of GDP) and monetary expansionary measures (e.g. 140 bp cuts) surely helped stabilize local financial markets and the economy, room for additional support becomes limited in case of another shock. Political uncertainty, finally, decreased with incumbent president Duda winning a second term back on Sunday, so legislation processes of ruling PiS will remain smooth without substantial vetoes.

This Research was produced and first published by Raiffeisen Bank International AG which is supervised by the Austrian Financial Market Authority and the National Bank of Austria.