As the global economic landscape continues to evolve, the current state of affairs appears to favor the United States, while Europe teeters on the brink of recession, according to insights from Michał Stajniak, Deputy Director of Analysis at XTB, shared in a commentary with the Polish Press Agency (PAP).
Stajniak highlighted the resilience of the U.S. economy, noting stable consumer demand and positive indicators of economic activity. In contrast, Europe faces challenges, particularly in the manufacturing sector, with the accumulation of post-COVID-19 pandemic stockpiles, soaring energy prices, the ambitious climate policy of the European Union, and the ongoing effects of globalization contributing to a significant decline in production.
“While the USA surprises decidedly on the upside, Europe is clearly disappointing. Economic activity indicators, such as PMI, show that the situation in Europe is notably the most challenging among all key economic regions. We observed a particularly deep decline in the manufacturing sector,” remarked Stajniak.
The analyst pointed out that globally, most industrial firms have managed excess inventories, but in Europe, the burden seems too significant. Hopes that consumers would drive the economy through the services sector are fading, as it appears to be happening to the contrary.
Stajniak drew attention to the European Central Bank’s current deposit rate of 4%, contrasting it with years of negative rates or near-zero levels. He expressed skepticism about positive prospects for consumer demand in 2024, concluding that while the U.S. economy is holding up well, Europe is perilously close to recession, with the intensity hinging on global factors.
In contrast, Poland presents a more optimistic picture of an accelerating economy, as forecasted by XTB. Inflation no longer fully erodes income growth, and the job market remains robust, laying the groundwork for stronger consumption growth. However, Stajniak cautioned that this could have negative implications for inflation.
“The growing consumption and sustained wage growth may complicate the fight against inflation in Poland in 2024,” he noted. XTB’s forecasts suggest a decline in inflation to around 4-5% in early spring, followed by a slight increase. If consumption accelerates, further decline may prove challenging.
“Wages are currently growing at a double-digit pace. The base effect will lower the wage growth rate, but there’s a chance it will remain above the inflation level. Simultaneously, the number of unemployed is decreasing, which may lead to a slowdown in wage growth,” explained the XTB analyst.
Identifying excessive Polish debt as a risk factor, Stajniak stressed the importance of a more robust economic revival to avoid a negative perception of Polish assets abroad. Despite this risk, he expressed optimism about the country’s economic situation.
“A good domestic economic situation supports the value of the zloty, which is already relatively strong at the moment. In 2024, difficulties in lowering inflation by the Monetary Policy Council may lead to a more restrictive monetary policy. This should support the zloty,” said Stajniak.
He also pointed out that the hawkish stance of the Monetary Policy Council is a positive factor for the zloty, emphasizing that the exchange rate will depend primarily on global sentiment.
“In all likelihood, the dollar’s exchange rate will return above 4 PLN, but we shouldn’t expect levels higher than 4.25-4.4 PLN,” concluded the XTB analyst.