The economic and social year of 2021 will be determined by the path of the Coronavirus pandemic recovery process. So what do economists expect, given the state of knowledge in December 2020?

According to Citi Handlowy analysts, plans regarding the vaccination program thus far indicate that it will not be possible to develop a so-called vaccination program next year. Herd immunity. However, it should be noted that a portion of the population may already have acquired immunity to the coronavirus after contracting COVID-19.

Therefore, Citi suggests, in line with the expectations of foreign health experts, that we will be able to return to normal business from the fourth quarter of next year. This means that for most of the next year, the economy will still have to deal with the effects of the pandemic restrictions. What will be their effects?

What about the economy after vaccinations?

According to Citi Handlowy, vaccinations will have a major impact on post-pandemic economies’ recovery. According to the bank’s projections, achieving herd immunity will contribute to the recovery of Poland’s GDP by 6% in the coming years. Compared to the current situation. This is more than in the case of the United States and, on average, in the countries of the Eurozone, but much less than in Ireland (about 10%), Great Britain (about 9%) or Slovakia (about 8%).

“Looking at it from the right perspective, it is worth emphasizing that the scale of the post-pandemic recovery will be very large, exceeding the values ​​observed after the” normal “recession. This phenomenon will apply not only to Poland, but also to other countries.” – Citi Handlowy Economists write.

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“However, the differences will be which part of the reversal will materialize in 2021, and which part only in 2022. In developed countries that get the vaccine faster, recovery will occur at an early stage.” – and they add.

Back to GDP growth

Within the next year, Poland’s GDP growth will return to pre-pandemic dynamics – however, the delays and losses caused by the crisis will not be quickly compensated for. Just looking at this statistic, that time is lost, at least for now.

Consumption and investment as drivers of growth

The factor that will allow the aforementioned return to economic growth will be the same force that drove growth largely before the pandemic – consumption. However, in the opinion of Citi Handlowy experts, in 2022, investments that did not occur on this scale in the pre-pandemic period will also be an important factor in Poland’s GDP growth.

Inflation will not slow

We cannot count on inflationary growth slowing – although in Poland this indicator is already reaching the highest readings among all EU member states. Moreover, in 2022, inflation is set to exceed the upper bound of the range around the European National Bank’s inflation target set at 3.5%. According to some economists, the impact on the price increase next year will be, among other things, the introduction of a sugar tax.

The budget deficit will decrease – but remain at a record level

According to the accounts of bank analysts, the deficit of the central and local government sectors in 2020 will reach the level of 10 percent. Polish GDP, the highest in the history of Polish statistics. Next year, it is expected to decrease to 6 percent. – which, however, will remain a historic record result.

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This strong fiscal drive had an impact on the GDP. According to Citi Handlowy, fiscal policy halted Poland’s GDP decline by about 2.5 percentage points. Over the next year, the positive impact on economic growth will also be evident – despite the expected reduction in the deficit by roughly half.

“We expect that despite the decrease in the deficit, fiscal policy will still have a positive impact on economic growth also in 2021. Taking into account the type of government aid, when used by the recipients and the size of fiscal multipliers, we expect fiscal policy to add about 1.2 points. GDP in 2021 – Economists write.

GDP growth will be behind the deficit reduction

“According to our estimates, in the past year, central and local government sector debt, which also includes financial shields to finance debt, increased by more than 12 percent. – Citi Handlowy Economists write.

According to the authors of the study, the deficit will be reduced in 2021 due to the reflection of the same factors that led to its increase in 2020 – the acceleration of the economy and the strengthening of the zloty.

The zloty will get stronger

“In our opinion, the next year will bring about a gradual boost in SLUTE, which will be supported by several factors. We believe that the main factor will be the spread of vaccines, leading to the gradual acquisition of herd immunity in more and more countries.” – Citi Handlowy Economists write.

In their view, the strength of the zloty will be supported by a weak dollar and the simultaneous increase in the value of the euro. According to the bank, Poland will recover from the crisis in a relatively good economic position.

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Moreover, despite the significant increase in the fiscal deficit, public debt will remain moderate compared to many other developed and developing countries. This, in turn, makes debt financing risks rather limited, especially considering the presence of NBP in the market. Banking economists are adding.

In these 6 graphs, you will see the importance of EU funds to the Polish economy