The Winner Takes it All


  • After a long period of Polish politics being stable and fairly boring, from an investment point of view, we are now facing a major change. After winning the presidential election in May, the opposition party PiS have now taken a majority in the Sejm and the Senate. This raises a lot of questions about macroeconomic policy in the next few years.
  • In terms of fiscal policy, we think that in the medium-term keeping the deficit at c.3% of GDP will be more important for the new government than quickly fulfilling all its costly pre-election promises. It does not mean there is no risk of a higher deficit in 2016. As the previous government used the so-called spending rule in full, any additional spending proposed in the budget amendment (e.g. benefits for children) will be accompanied by assuming better tax collection. If the latter does not materialise, a higher deficit would probably be temporary. We do not see fiscal consolidation and the GG deficit reaching the medium-term objective of previous government (1% of GDP), but we do not think this will have major market consequences, as long as the spending rule and Constitution's debt limit are binding.
  • The significant political change has implications also for monetary policy. In 2016 PiS will appoint eight new members of the MPC, the governor and deputy governor of the NBP, as well as the head of KNF (the Polish Financial Supervision Authority). The most likely outcome is additional monetary easing (not really necessary, in our view), probably to be delivered in 1Q16 (50bp).
  • We do not see any changes in FX policy by the NBP. The main risk for the zloty is connected with the FX loans conversion issue, as the new government and the president promised to resolve it. As we do not think this will be one of priorities for the cabinet in the first few months, we think that global factors will dominate and should support the zloty. For 2016, we see a risk of a higher EUR/PLN.
  • In terms of the yield curve, as we said in previous reports, macroeconomic prospects accompanied by looser macroeconomic policy than in the previous scenario (both monetary and fiscal) and higher FX risk speaks in favour of a steeper yield curve in 2016. In the short-term, however, we see lower yields across the curve.
  • The new prime minister's exposé should be expected within a month. We will publish a more detailed update on macroeconomic policy after elections in our Outlook for 2016, to be released at the start of December.


Kind Regards,
BZ WBK Economic Analysis Department

Keywords: elections, bzwbk

Author: BZ WBK Economic Analysis Department Price: Content is free of charge