The Polish economy lost some momentum in Q2 due to a drop in exports to Russia and Ukraine. Over the remainder of the year, the slowdown will be further exacerbated by the Russian-EU sanctions. Slowing exports and rising uncertainty will dampen the pace of investment and labour market improvement. Average GDP growth may slow to less than 3 percent this year and next. However, with the government’s fiscal stance likely to soften, domestic demand should fare relatively well.
Disappointing Polish growth, in addition to the ECB’s policy stance, will give the National Bank of Poland (NBP) room to ease their monetary policy significantly in the near term, 50bp of easing by the end of this year and another 50bp by Q1 2015. However, substantial base effects combined with a relatively resilient domestic picture is likely to see inflation rebound thereafter, and may force a relatively swift about-turn by the NPB in 2015.
Occupier Market
• The Occupier Sentiment Index (OSI) remained slightly negative at -9.
• Occupier demand continued to grow firmly, but was outpaced by that of availability.
• Primary market rents at the all property level are expected to fall by about 1 percent over the next 12 months, but on average, rise by about 1 percent per annum over the next three years.
• Meanwhile, secondary market rents at the all property level are expected to fall by about 3 percent over the next 12 months, but on average, fall by about 1.5 percent per annum over the next three years.
Investment Market
• The Investment Sentiment Index (ISI) edged down slightly but remains in positive territory.
• Credit conditions, on balance, improved over the quarter.
• Investment enquiries continued to increase very robustly, particularly foreign buyer appetite.
• Primary market capital values at all property levels are expected to increase by about 2 percent over the next 12 months and, on average, by about 3.5 percent per annum over the next three years.
• Meanwhile, secondary market capital values at all property levels are expected to remain more or less flat over the next 12 months and over the next three years.
