BANKING MARKET IN POLAND 2014-2016, CEE BANKING SERIES
ECONOMY AND THE BANKING SECTOR IN POLAND
In 2013, Poland's economy demonstrated clear signs of recovery. The GDP growth accelerated to 2.7% in 4Q 2013 and to 3.3% in 1Q 2014. Stronger private and public consumption (+2.1% in 4Q 13) and rapidly increasing exports (+6.3% in 4Q 13) were key drivers of growth. The rebounding economy resulted in falling unemployment rate (13.5% in March 2014), which has been a very positive trend, not seen since 2008. At the same time, the consumer price index (CPI) fell below 0.7% in 1Q 2014, which has been the lowest level since 2006. Better economic indicators have been also confirmed by increasing optimism in households sector as the key confidence indicator (BWUK) hit a three-year high in January 2014.
In our base-case scenario, we see Poland's economy accelerating in 2014-2015 with GDP growth rate exceeding 4%. We assume a strong growth in key banking volumes in 2014-2015 followed by a possible deceleration in 2016. Total banking assets are expected to grow at 8% p.a. from 2013 to 2016. As far as profitability is concerned, we expect banks to face stagnating revenues and profits in 2014 due to number of factors including: unfavourable regulatory decisions (e.g. card interchange) resulting in revenue loss, slowing down other F&C revenues items (including FX) and increasing risk costs. An improvement in revenues and profits should be assumed first for 2015.