The rebound of Poland after the pandemic collapse is faster than expected a few months ago. It pleases. However, with each subsequent GUS reading, the weakness of this growth becomes apparent – economically she is attracted by consumer spending. Investments weigh on it. This is clearly visible on Friday, when two pieces of information were released – on retail sales and construction and assembly production.
- Construction and assembly production in July 2020 decreased by 10.9%. yoy, and compared to the previous month it fell by 3.6 percent.
- It seems that the weakness of investments in the second half of the year will be one of the main economic topics in Poland in the near future – Bank Pekao economists believe
- Piotr Popławski from ING Bank Śląski is also worried that the economic rebound in Poland after the pandemic has a weak structure – the driver is consumption, and investment is the brake, and it is they that build healthy economic growth for the coming years
As we wrote, In July, Poles threw themselves at home electronics, household appliances and furniture. The increase in this category amounted to nearly 16%. year on year what overall increased the retail sales index measured by the Central Statistical Office to 3 percent. yyyyy Consumer spending is clearly growing and only less than 4% is needed for sales to reach pre-pandemic levels.
The construction production disappointed. Its dynamics dropped to -10.9 percent in July. yyyy, significantly below analysts’ forecasts (-4.5%). What was the biggest brake?
Construction and assembly production in Poland in July 2020
– This was due to the breakdown in the category of construction of civil engineering structures (from -1.2% to -12.9% y / y). This category includes infrastructure projects, e.g. roads, and therefore, to a large extent, public sector investments – explains Piotr Popławski, economist at ING Bank Śląski.
He adds that the decline in dynamics only partially reflects the less favorable pattern of working days – in June there were 2 more days than in 2019, in July this effect did not occur. – The decline in the construction of buildings and specialist works deepened, but on a scale corresponding to the effects of working days. After taking into account the calendar effects, the dynamics of construction and assembly production decreased by -4.5%. down to -8.5 percent rdr – enumerates.
Construction, and especially the section responsible for the construction of civil engineering, is an extremely important item in this reading, because thanks to it, we can conclude on the situation with national public investments. It can be seen from the Friday’s GUS reading that it is not good.
Especially that it is investments that give the economy healthy growth, thanks to which it increases its potential in later years.
Investments are the topic for the coming months
This drawback is noticed by Bank Pekao specialists.
– The data on construction and assembly production are of course the biggest disappointment. The drops (-10.9% y / y) were even deeper than we expected. It seems that the weakness of investments in the second half of the year will be one of the main economic topics in Poland in the near future – they predict.
Piotr Popławski agrees with them. – The published data suggest a slightly faster recovery in the early third quarter of 2020 than could have been expected. However, their structure is disappointing, with a picture of a rapid rebound in consumer spending and very weak investment – the economist concludes.
GDP decline due only to exports and consumption
Monika Kurtek, the chief economist of Bank Pocztowy, also sees problems.
– Detailed data on construction and assembly production indicate that the decline in investment in the Polish economy is deepening. The pandemic caused the private sector to strongly verify its investment plans. Most companies decided to suspend them or postpone them, while households, in turn,, despite record low interest rates, find it much more difficult to obtain financing for the purchase of e.g. real estate. This situation is likely to last for many months, as the uncertainty about the future is still huge, he says.
In her opinion the decline in investment will weigh heavily on GDP growth, which will remain negative until the end of this year. – Only the scale of the decline in GDP due to consumption and exports will decrease – predicts Monika Kurtek.
Fortunately, the government seems to be seeing an investment low and forecasting a deficit of PLN 110 billion in the budget, representatives of the Ministry of Finance assure that they will want to finance the construction of roads and railroads as well as water infrastructure with some of the borrowed money, which is to strengthen trust between the private and public sectors.
This, in turn, according to right-wing politicians, may help in rebuilding private investment. And these have been our economic ball at our feet for years, the main aspect of which is the increase in uncertainty and instability in the legal and tax environment caused by a peculiar personnel and legislative revolution of the United Right, which affected a significant part of our economic and social life.
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