The Ukraine war is expected to hit exports, create supply-chain disruptions and push inflation higher in Poland.
However, Peach said the war in Ukraine was casting a"dark cloud" over the country.
Capital Economics has revised down its 2022 GDP growth forecast for Poland from 4.5% to 3.5% — below consensus expectations among economistsOne particular cloud on Poland's horizon is inflation. Along with much of Europe and beyond, Poland was battling persistently rising prices even before the conflict began.
Capital Economics' Peach highlighted that higher commodity prices in particular will push up food and energy inflation, squeezing real incomes and household spending. However, there is another upside risk to inflation in the country, according to the analysts: the European gas market. Gas prices hit an all-time high in Europe earlier this month.
However this is combined with a fragile growth outlook which means the central bank can't tighten policy as aggressively as it might usually do. As a result, the economists believe the NBP will likely remain hawkish — favoring higher interest rates to keep inflation in check — though the timing and scale of future policy tightening moves remains uncertain, dependent on risk appetite in the foreign exchange market and demand dynamics.
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