Inflation and economic growth projection of Narodowy Bank Polski based on the NECMOD model

Transcription

1 Economic Analysis Department Inflation and economic growth projection of Narodowy Bank Polski based on the NECMOD model Warsaw / November

2 Inflation projection of the NBP based on the NECMOD model Outline Outline: Changes between rounds Projection - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Changes between projection rounds Projection - Uncertainty Uncertainty

3 Inflation projection of the NBP based on the NECMOD model Outline: Changes between rounds Projection Changes between projection rounds - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Uncertainty

4 Inflation projection of the NBP based on the NECMOD model November GDP projection compared to July projection p.p.... Private consumption Gross capital formation GDP Public consumption Net exports... Upward correction of GDP forecast due to higher than expected reading for Q (in particular higher exports and household consumption with lower investments) Still optimistic consumer sentiment reported in GUS survey in Q -. Source: GUS data, NBP calculations 9 y/y, % 9% % % July Nov 7 - q q 7q q 9q q q In 9- expiration of factors increasing the forecast for this year. Higher energy prices inflation. GDP y/y, % 9 July... November...

5 Inflation projection of the NBP based on the NECMOD model November CPI projection compared to July projection. Core inflation Energy prices Food prices CPI inflation. p.p Higher commodity prices on global markets. Weaker zloty exchange rate against US dollar Higher prices of CO emission allowances and green certificates y/y, %. - 9% % % July Nov inflation target - - q q 7q q 9q q q - CPI y/y, % 9 July..7.9 November...9 Source: GUS data, NBP calculations

6 Inflation projection of the NBP based on the NECMOD model Outline: Changes between rounds Projection - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Uncertainty Projection - Economic conditions abroad Consumption demand Investment Foreign trade Inflation

7 Inflation projection of the NBP based on the NECMOD model 7 GDP dynamics in H exceeded % y/y Industrial and constr. production y/y Real wage fund in corporate sector y/y Retail sales y/y GDP y/y q q GDP (y/y) (%). (.). (.) Domestic demand (y/y) (%). (.). (.) Household consumption (y/y) (%).9 (.). (.) Public consumption (y/y) (%). (.).7 (.) Gross fixed capital form. (y/y) (%). (9.). (.) Exports (y/y) (%).9 (.). (.) Imports (y/y) (%). (.) 7. (.) Net exports contribution (p.p.). (-.) -.7 (-.) Values from the July projection are given in brackets (q 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 - - 9q q q q q q q q 7q q PMI Poland and corporate sentiment (GUS) general expected economic conditions in industry, construction and trade (sa.) - industry construction - trade PMI Poland (RHS)

8 Inflation projection of the NBP based on the NECMOD model in the quarters to come it will gradually slow down together with weakening of economic growth in the euro area and due to higher energy prices 7 Consumption Change in inventories GDP Gross fixed capital formation Net exports 7 Private consumption is the main factor behind GDP growth over the projection horizon due to further improvement in the labour market and positive consumer sentiment. In 9- gross fixed capital formation will start to play bigger role in the GDP growth, which is related to the need of rebuilding productive potential and to the inflow of EU funds under the - financial framework. Gradual slowdown in the euro area will have a negative impact on the GDP growth at home q q 9q q q Another factor limiting GDP dynamics will be an increase in energy prices. y/y, % 7 9 GDP.... Source: GUS data, NBP calculations

9 Inflation projection of the NBP based on the NECMOD model 9 Outline: Changes between rounds Projection Economic conditions abroad - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Uncertainty

10 Inflation projection of the NBP based on the NECMOD model Despite the good global economic situation, expectations for growth abroad have decreased due to the deterioration of world trade prospects Despite maintaining relatively high global GDP growth rate, business climate indicators point to its gradual slowing. Stronger than expected slowdown in q in euro area, particularly in Germany. GDP and PMI of the world economy. The introduction of customs duties by the United States and retaliatory duties may translate into slightly lower GDP growth in the world.... GDY y/y, % 9.. Euro area. (.). (.). (.) Germany. (.). (.9). (.) 7 GDP (q/q, RHS) PMI (LHS). United States.9 (.9). (.7). (.) United Kingdom. (.). (.). (.) Source: NBP forecast (in brackets July projection); Datatstream, OECD, IMF WEO, NBP calculations.

11 Inflation projection of the NBP based on the NECMOD model Favorable economic conditions in the United States, although the risk of a slowdown is growing GDP growth forecast (y/y, %) 7 P 9 P P P P Private consumption Private investment Inventories Net exports Public consumption GDP Value of net assets of households (% of disposable income) S&P (RHS) Source: BEA, BLS, Economic Policy Uncertainity, FRB, NBP calculations Private investment decomposition (q/q, %, SAAR) 7 Mining, shafts and drilling Residential construction Other corporates Total Index of the trade policy uncertainty for US (p.) Change in employment (thous., m/m sa) and unemployment rate (%, sa) Employment (LHS) Unemployment rate (RHS) Probability of recession within months (%) Y-M Y-Y Y-Y+NW/DPI Y-Y

12 Euro area Outside EA EU ex. EA CIS Canada US Latin America Asia China Japan India Africa Inflation projection of the NBP based on the NECMOD model Deterioration in the outlook for global trade fosters slowdown in euro area GDP growth in euro area (y/y, %) 7 P 9P P Public consumption Investment Net exports Assessment of export orders in industry (p.p.) Source: Eurostat, European Commission, NBP calculations. Private consumption Inventories GDP Total Intermediate goods Consumer goods Capital goods Germany Italy Others Investment (q/q, %) Wage fund (y/y, %) France Spain Euro area ex. Ireland 7 P P Compensation per employee Employment Wage fund Goods exports from euro area by destination (y/y,%) - 7H 7H H Consumer credit growth (y/y, %) and propensity to make larger purchases (balance of answers) Consumer credit for households (y/y, %, LHS) Current purchases of durable goods (p., RHS) Future purchases of durable goods (p.,rhs)

13 Inflation projection of the NBP based on the NECMOD model Outline: Changes between rounds Projection Consumption demand - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Uncertainty

14 Inflation projection of the NBP based on the NECMOD model Consumption demand as the main driver of GDP growth in the projection Decomposition of households consumption (y/y, %, dev. from average) Private consumption: Favourable labour market conditions. Optimistic sentiment among households Low interest rates facilitate financing consumption through borrowing. Purchasing power of households reduced by rising energy inflation Disposable income HH wealth Permament income Interest rates Credit conditions Others HH consumption Consumption forecast - - Household consumption (y/y, %) Public consumption (y/y, %) - - q q q q q q 7q q 9q q q Source: GUS data, NBP calculations Public consumption: In relatively high growth of current expenditures of local government units. Draft Budget Act for 9 increase in wages in budget sector and selected professional groups (among others teachers, academic teachers and employees of uniformed services) y/y, % 7 9 Households consumption..7.. Public consumption....

15 Inflation projection of the NBP based on the NECMOD model Still good financial situation of households q q ULC (y/y, %). (.). (.) Labour productivity (y/y,%).7 (.).9 (.) Gross wages (y/y, %) 7. (7.).9 (7.) Employment LFS (y/y, %). (.).7 (.9) Unemployment rate LFS (%). (.). (.) Participation rate (%). (.). (.) 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. Disposable income decomposition (constant prices) (y/y, %) Net transfers and taxes excl. plus plus Wage fund Property income Operating surplus Disposable income (y/y, %) Financial situation of households and fear of being unemployed Current financial situation of households Financial situation of households in the next months Fear of being unemployed - 7q q 9q q q Source: GUS data, NBP calculations -

16 Employment stabilization Inflation projection of the NBP based on the NECMOD model % % Employment in corporate sector y/y, %, LHS sa. RHS,, % 9% LFS employment by sectors (y/y, %) % % % % -% -% 7,,,,,, %.% % % -.% -% -% -.% -9% Agriculture Industry and construction Services -% Decomposition of employment by status Employment and hours worked (sa, y/y, %, LFS) % % % Employees Pracujący najemnie (BAEL) Self-employed in agriculture Self-employed outside agric. Contributing family workers Samozatrudnieni w rolnictwie (BAEL), sa Samozatrudnieni poza rolnictwem (BAEL), sa Pomagający członkowie rodzin (BAEL) Total Pracujący employment ogółem (BAEL) (LFS, r/r y/y, %) % % % Permament contracts Definite period contracts Employees (y/y, %) Hours worked in week - RHS... %. % % 9. -% Source: GUS data, NBP calculations, Quick Monitoring NBP -%

17 Inflation projection of the NBP based on the NECMOD model 7 % % % % % 9% Labour shortages Economically active (sa, q=%, LHS) Population (q= %, LHS) Participation rate (sa, RHS) Demographic structure Population Participation rate (population /+ years of age) Participation rate (population -9/ years of age) Participation rate (population - years of age) Participation rate (population - years of age) Labour force 7%.% 9% % Changes in labour force, thous. y/y - 7q q 9q q q Source: GUS data, NBP calculations. % % % % % % % 7% 7% 7% 7% Changes in participation rate by age / /+ 7q (y/y change) 7q (y/y, change) 7q (y/y, change) q (y/y, change) q (y/y, change) q level, RHS Changes in women participation rate - k - k 7% - k % (RHS) 7 % % % % % % % % % %

18 Inflation projection of the NBP based on the NECMOD model 7 % % % % % % Bigger impact of demographic factors on unemployment rate Unemployment rate labour offices and LFS data (%) LFS unemployment rate Registered unemployment rate,% 7,%,% % Unemployment rate changes decomposition (y/y, p.p., LFS data) Changes in participation rate Changes in employees - Changes in population - Changes in the unemployment rate (y/y, pp) % % % Decomposition of y/y changes in the number of unemployed persons by age and education (LFS) / /+ Unemployed % % % Primary Vocational Secondary education Post secrondary and secondary vocational Higher Unemployed -% -% -% Source: GUS data, NBP calculations -% 7 9 7

19 Inflation projection of the NBP based on the NECMOD model 9 Effect of retirement age change mainly in 7q and q drop in the numer of economically active people by ca. 7 thous. Economically active aged (women) and (men), no pension benefits - Change in employment flows (q/q, thous., sa., LFS data) podniesienie wieku emer. 7 Economically active aged (women) and (men), with pension benefits obniżenie wieku emer E->U U->E E->N, N->E Change in employment podniesienie wieku emer. obniżenie wieku emer. Source: GUS data, NBP calculations, Quick Monitoring NBP 7

20 thous. Tysiące Inflation projection of the NBP based on the NECMOD model Inflow of workers from Ukraine mitigates labor shortages, but the risk factor is the possible moves of other EU countries to facilitate their work Ukrainians in the Polish labour market by residence permits Schengen visas (<M) National visas (>M) Temporary residence permits Permanent residence permits Visas issued for work / self empl., Pole's Cards, res. permits Ukrainians insured in ZUS (Q) Other insured (among others civil contracts) Non-agricultural business owners Workers Number of insured 9 7 Q Total Ukraine Belarus Vietnam Moldova Russia India Foreigners % % 7% % % % % % 7 7.%.%.%.%.%.% -.%.% -.% -.% -.%.% Employment LFS y/y Employment LFS + Ukrainian workers y/y Population LFS -/ y/y Population LFS -/ + UA immigrants y/y.%.%.% -.%.%.%.9% -.% -.%.9%.%.%.7%.%.% -.%.% 7 -.% -.% -.% 7 Source: data of Border Guard, Ministry of Family, Labour and Social Policy, GUS, NBP calculations.

21 Inflation projection of the NBP based on the NECMOD model At the same time slower growth in labor demand Vacancies Number of vacancies within a month (sa. LHS) Number of non-subsidized vacancies (sa. LHS) Inverse of labour market ind. (RHS) % % % % % % % Share of companies reporting difficulties with finding new employees as a barrier for expansion % Source: GUS data, NBP calculations, Quick Monitoring NBP Employment forecast (in %) balance Employment (y/y, %) Participation rate (%,RHS) empl. ind. (sa.) 7 Employment and participation rate forecast - q q q q q q 7q q 9q q q 7

22 Inflation projection of the NBP based on the NECMOD model Stabilization, and than sligthly slower wage growth in the projection horizon expected hikes in public sector in 9 together with gradual decrease of wage pressure in corporate sector Nominal wages (y/y,%, sa.) 9% Public sector Private sector % 7.% Total Corporate sector 7% % %.9% % % % % % 7 Increase in wage pressure and wage growth exceeding labour productivity (share of enterprises) 7 firms with wage growth faster than productivity growth firms with increasing wage pressure Source: GUS data, NBP calculations, Quick Monitoring NBP Agriculture, forestry, hunting and fishing Production and supply of electricity, gas, Sections with high share of employed in public sector Public administration and national Health care and social assistance public Mining and quarrying Transport and storage private Education % % % % % % Wage growth forecast Nominal wages (y/y,%) Real wages (y/y,%) - - q q q q q q 7q q 9q q q

23 Inflation projection of the NBP based on the NECMOD model Projection scenarios of only moderate increase in wage pressure and a slight impact on inflation are confirmed 7 Wages (y/y, %) q q 7q q 9q q ULC (y/y,%) CPI inflation (y/y, %) q q 7q q 9q q Source: GUS data, NBP calculations - - q q 7q q 9q q

24 Inflation projection of the NBP based on the NECMOD model Outline: Changes between rounds Projection Investment demand - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Uncertainty

25 Inflation projection of the NBP based on the NECMOD model In acceleration of investments mainy due to local government spendings Public sector Private sector Gross fixed capital formation (y/y,%) Public sector investments: Significant increase in the use of EU funds in Local government elections in Signif. lower dynamics of EU absorption in 9- Private sector investments: Currently favorable demand conditions Very high level of capacity utilization in corporates Low interest rates Good households positition Problems with finding employees Growing energy prices and construction materials. In 9- lower dynamics of internal and external demand, slower increase of UE funds absorption - 7q q 9q q q - y/y, % 7 9 Gross fixed capital formation.... Source: GUS data, NBP calculations

26 7 9 7 P 9P P outturn outturn outturn outturn July Nov. July Nov. July Nov. Inflation projection of the NBP based on the NECMOD model Slower growth of public investment in the projection horizon Growth of public investment, % y/y, current prices q q q q 7q q Local govern. Total Public investment, bn PLN, current prices Domestic EU 7 F 9 F F Contributions to public investment growth, % y/y, current prices F P 9F9P F P local JST gov. Local government KFD others pozostałe National Road Fundtotal ogółem Other Total EU funds for public investments, % of allocation Source: GUS, Eurostat, MoF, KFD, PKP PLK, NBP calculations. F NBP DAE forecast Perspective 7- Perspective -

27 Inflation projection of the NBP based on the NECMOD model 7 Expected increase in corporate investment in the forecast horizon, however, lower dynamics than in previous business cycles Corporate sentiment (GUS) general expected economic conditions - - Industry Construction Trade Share of enterprises declaring that their capacity utilization is close to maximum (%) construction energy and water trade industry transport services 9 7 Contribution to the investment growth by type (in %, y/y, current prices) pozostałe others środki transport transportu equipment maszyny, machinery, urządzenia, equip. and narzędzia tools grunty land budynki buldings i and budowle structures Source: GUS data, NBP calculations, Quick Monitoring NBP Contribution to the investment growth by section (in %, y/y, current prices) construction energy mining trade industry transport services water

28 Inflation projection of the NBP based on the NECMOD model Barriers for the eneterprises development Development barriers Assessment of uncertainty lack of staff taxes/regulations inflation/commodity prices labor costs - high uncertainty exchange rate fluctuations/level payment gridlocks strong competition - 7 own uncertainty (LHS) low demand own uncertainty (sa., LHS) uncertainty barrier (RHS) the scale of the problem (Q) q/q change y/y change Source: GUS data, NBP calculations, Quick Monitoring NBP

29 Inflation projection of the NBP based on the NECMOD model 9 Outline: Changes between rounds Projection Foreign trade - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Uncertainty

30 Inflation projection of the NBP based on the NECMOD model Net exports will limit GDP growth Net exports contribution (p.p.,rhs) Exports (y/y) (%) Imports (y/y) (%) Net exports: Expected slowdown in the euro area growth, therein German economy Less favorable relation of prices in foreign trade, due to increase in energy commodities on global markets, lowers trade account balance expressed in current prices. In acceleration of investment dynamics, supported by persisting high consumption demand q q q q q q 7q q 9q q q y/y p.p. 7 9 Net exports contribution to growth Source: GUS data, NBP calculations

31 Inflation projection of the NBP based on the NECMOD model Expected slump in the current and capital account balance to the level close to zero in 9- Current and capital account balance (% GDP) Remittances Primary income Secondary income Goods and services Current and capital account (% GDP) Source: Eurostat, GUS data, CPB Netherlands, NBP calculations Goods import in global economy (%, y/y, - month. aver., and m/m) 7 m/m y/y, -month. aver Real effective exchange rate.7.7 Real effective exchange rate.. q q q q q q 7q q 9q qq Goods and services exports dynamics from Poland against euro area exports and imports (%, y/y) I II III IV I II III IV I II III IV I II 7 exports - Poland imports - euro area....9 exports - euro area

32 Inflation projection of the NBP based on the NECMOD model Outline: Changes between rounds Projection Inflation - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Uncertainty

33 Inflation projection of the NBP based on the NECMOD model Slightly lower than expected CPI inflation in Q-Q mainly due to slump in food prices y/y, % q q CPI inflation.7 (.). (.) Core inflation. (.). (.) Food prices inflation. (.). (.) Energy prices inflation. (.7).9 (.) 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 Decomposition of food and non-alcoholic beverages prices (p.p.) Oil and fats Milk, cheese and eggs Fruit, vegetables Meat Other (fish, bread, confectionary, beverages) Food and non-alcoholic beverages CPI and core inflation (y/y, in %, monthly data) - 7 Source: GUS data, NBP calculations CPI Inflation target Core inflation

34 Inflation projection of the NBP based on the NECMOD model CPI inflation will increase and exceed.% in 9- Delayed effect of increase in cost pressure: Core inflation Energy prices Food prices CPI inflation Elevated wage growth exceeding in real terms the increase in labour productivity Delayed effect of 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). Situation in energy sector translating into higher prices of energy for households and enterprises, in particular in 9 Impact of factors contributing to increase of prices of fruits, vegetables, meat and dairy products in the last year will expire - - Globalization q q q q q q 7q q 9q q q y/y, % 7 9 CPI inflation....9 Source: GUS data, NBP calculations

35 Inflation projection of the NBP based on the NECMOD model Core inflation will gradually increase to around.% at the end of the projection horizon - TFP NAWRU Potential output Capital Economically active pop Output gap (% potential output) GDP (y/y, %) Potential output (y/y, %) - - q q q q q q 7q q 9q qq - - Nominal wages (y/y, %) Labour productivity (y/y, %) ULC (y/y, %) - q q q q q q 7q q 9q - q q Source: GUS data, NBP calculations y/y, % Import prices excl. oil and gas prices (y/y) (%) Import prices (y/y) (%) q q q q q q 7q q 9q q q - - -

36 Inflation projection of the NBP based on the NECMOD model The upward inflation trend in the global economy is also maintained Euro area: output gap (%) and value added deflator (%, y/y). Value added deflator (LHS) Output gap (RHS) Wage dynamics in the largest developed economies (%, y/y) United States: output gap (%) and GDP deflator (%, y/y). GDP deflator (LHS) Output gap (RHS) Inflation and energy prices growth in developed economies (%,y/y) Euro area United Kingdom Japan United States Source: BEA, CBO, Eurostat, OECD, Datastream, ONS, NBP calculations... Inflation (LHS). Core inflation (LHS) Energy prices inflation (RHS)

37 Inflation projection of the NBP based on the NECMOD model 7 Declining oil reserves in the world and higher vulnerability of oil prices to shocks 9 9 Global production, consumption and changes in crude oil inventories (mln b/d) Changes in global crude oil inventories (implied, mln b/d, RHS) Global crude oil production (mln b/d) Global crude oil consumption (mln b/d) Market crude oil inventories in US (mln b/d) Inventories 7 9 Source: GUS data, Bloomberg, Reuters, EIA, NBP calculations Changes in production of crude oil and liquid fuels in the world (mln b/d) OPEC North America Eurasia South America Non OPEC countries Energy commodity prices index (USD, =) and crude oil prices (USD/b). Energy commodity price index (LHS) Brent oil (RHS) q q q q q q 7q q 9q q q

38 Inflation projection of the NBP based on the NECMOD model Outline: Changes between rounds Projection - External environment - Consumption demand - Investment demand - Foreign trade - Inflation Uncertainty Risk factors Fan charts Uncertainty

39 Inflation projection of the NBP based on the NECMOD model 9 Risk area Description Impact Scale of impact Escalation of current trade disputes and further protectionism in the global trade, leading to disturbances in the global trade, elevated uncertainty and tensions in the financial markets. Global economic outlook Possible consequences for emerging economies, especially those with significant macroeconomic imbalances (increase in risk premium, deterioration of debt servicing conditions, outflow of capital and decrease in asset prices) Inflation GDP ** Disruptions in global crude oil markets and increase in commodities prices Influence of the energy sector on inflation in Poland Possible higher than assumed in projection increase in CO emmission allowances prices Uncertain scale of future increases of energy for households (Energy Regulatory Office) Impact of higher costs of electricity prices on business operations and final prices of goods and services. Inflation GDP ** Labour supply in Poland Legal changes in other EU countries facilitating employment for citizens from outside the European Union (eg proposed by the German government in October this year, liberalization of provisions on the immigration of professional workforce from outside the EU) - a risk factor for the assumed in projection increasing number of migrant workers in Poland, most of all from Ukraine Inflation GDP * Conclusions Inflation GDP

40 Inflation projection of the NBP based on the NECMOD model CPI inflation y/y, % GDP y/y, % 7 9% % % central path inflation target 7 9% % % central path q q 7q q 9q q q - - q q 7q q 9q q q CPI y/y, % below.% below.% Source: GUS data, NBP calculations below.% below centr. path in the range.-.% % % % % % 9 % % 9% % 7% % % % % 9% CPI y/y, % central path % probability interval GDP y/y, % central path % probability interval

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