The European Bank for Reconstruction and Development (EBRD) has lowered its forecast for Poland’s GDP growth by 0.5 percentage points from previous expectations (in September) to 1% in 2023, while it expects a GDP growth rate of 3% next year, the bank said.
In 2022, the EU economies in Central Europe and the Baltics proved more resilient than expected at the start of Russia’s war with Ukraine. At the end of 2022, economic activity remained stable and employment rates high, especially in countries receiving large numbers of refugees from Ukraine, such as Poland. In contrast, in 2023, a technical recession is expected over the winter, due to declining purchasing power (especially in the Baltics, which had the highest inflation rate in the EU in 2022), weakening demand from Western Europe and increased financing costs, according to “The Regional Economic Prospects January 2022” report.
The EBRD noted that growth forecasts were revised downward in more than half of the region’s economies and did not occur upward.
Output in EBRD regions is expected to grow by 2.1% in 2023, as high gas prices and continued high gas prices and persistent inflation affect the economic outlook. The current forecast represents a downward revision from the baseline scenario published in September 2022, although it is stronger than the previous downside scenario, which assumed no Russian gas supplied by pipelines. Economic growth forecasts have been revised up in more than half of the region’s economies, with virtually no upward revision. Growth is expected to accelerate to 3.3% in 2024, broadly in line with estimates of medium-term potential growth, according to the report.
The bank indicated that “disinflation may take longer than markets expect.”
Disinflation tends to be faster if economic conditions are weaker and unemployment is high and rising, because under such circumstances inflation expectations have less of an impact on wage growth.
Markets now expect disinflation to be faster than after the 2008 peak, with inflation expected to fall by about 10 percentage points, although food or energy prices are not expected to fall further in any significant way. Similarly, the IMF’s October 2022 projections expect inflation in the EBRD regions to decline to around 7 percent by the end of 2023 (still averaging to inflation of almost 10 percent for all of 2023; IMF October 2022 forecast).
Source: EBRD and ISbnews
