After a significant revision of the July data (lower balance by 600 million euros compared to preliminary data and moving from a surplus to a small deficit of 100 million euros), the current account deficit in August widened to 200 million euros. This was notably weaker than the consensus and our forecasts (€700 million and €1 billion, respectively), which were, however, based on preliminary time series. In a 12-month analysis, we estimate that the current account balance improved to 0.3% of GDP in August from 0% of GDP in July. On the contrary, the trade balance in August (0.5 million euros) was comparable to that of July (0.3 million euros), and in a period of 12 months, the merchandise trade balance improved to -0 .2% of GDP from -0.6% of GDP in the previous month.
In other components of the current account in August, the surplus of €3.4 million in services trade did not exceed the high primary income deficit of €3.8 million and the deficit of €0.3 million of secondary income.
Data on merchandise trade confirms weakening export sales due to the stagnation of the eurozone economy (about 60% of our exports go there) and a probable recession in Germany in recent quarters (where they go half of Polish exports in the eurozone).
For the first time this year, the value of exports (volume and prices combined) expressed in euros fell by 2.2% year-on-year in August, after a slight increase of 0.2% year-on-year in July, with a slightly smaller appreciation of the zloty against the euro (5.6% year-on-year in August compared to 6.9% year-on-year). At the same time, the 12.3% year-on-year drop in the value of imports was significantly deeper than in July (-7.3% year-on-year). The drop in trade value was driven by both a significant year-on-year drop in prices (deeper in imports due to the explosion in energy prices in the summer of 2022) and volume drops in both aggregates. The National Bank of Poland reports that August was the third consecutive month of falling export prices and the fifth month of falling import prices.
Exports are affected by weak economic conditions in Western Europe, while imports are affected by weak domestic demand, as indicated by retail sales and real wage figures, among other data. This year’s positive trends in global energy markets (particularly oil and natural gas) began to reverse in August, and this will affect trading performance in the coming months. The NBP statement indicates weak performance in five of the six major commodity categories. Growth was recorded in the transportation equipment sector, driven by higher sales of commercial vehicles and highway tractors. In imports, the deepest falls were observed in purchases of fuel, supply goods and capital goods. Growth in imports of new passenger cars continued, but imports of auto parts weakened, due to lower growth in auto exports.
Today’s data is moderately negative for the zloty, as noticeably weaker than consensus results are related to the revision of historical data, but overall the current account balance remains close to balance. The zloty is most influenced by monetary policy decisions and expectations about the national policy mix after Sunday’s elections. Before the data revision, we expected a current account surplus of 1.5% of GDP at the end of 2023, following a deficit of 2.4% of GDP in 2022 (revised upward from -3.0%). Geopolitical tensions and the increase in oil prices with the risk of recession in Germany could translate into a smaller surplus close to 1% of GDP.
