The Polish central bank is expected to hold rates steady at 1.5 percent for the rest of this year, as the country’s rate of inflation remains well below the central bank’s targeted range of 2.5 percent. However, the rates may be considered for a raise gradually from 2018 onwards, EconoTimes reports.
Fitch Ratings expects Polish inflation to rise gradually and reach 1.6 percent y/y by end-2017 and 2.3 percent by the end of next year, from 1.0 percent in December 2016. The key drivers of price growth are rising commodity prices, the closing output gap and a tightening labour market.
Given the expected increase in domestic demand and uncertainties surrounding demand from Poland’s main trade partners in the EU (80% of total exports), the contribution from net external demand to GDP growth in 2017 and 2018 should remain limited.
“Increased domestic political tensions and weaker predictability of economic policy could affect Poland’s attractiveness as a place to invest and are another risk to the outlook,” The report commented.