WARSAW (Reuters) – Poland’s central bank may cut interest rates further in the second half of this year as the damage caused by the coronavirus pandemic to the economy could be much worse than the government predicts, rate-setter Grazyna Ancyparowicz said.
The central bank cut rates both in March and April to support the economy, which is only just beginning to reopen after being in lockdown since mid-March. The benchmark rate is now at a record low of 0.5%.
“I do not rule out that rates may fall this year, but they will not be negative. I think that this will not happen at the next meeting. If so, in the second half of the year, ” Ancyparowicz told Reuters in a phone interview.
“It may turn out necessary, as in my opinion, the worst is ahead of us. For Poland, a crisis year will be mainly 2021,” she said.
The next Monetary Policy Council (MPC) meeting is due to be held on May 28.
Recent economic data releases have shown that Poland, the largest economy in the European Union’s eastern wing, has taken a hammering from the coronavirus pandemic, with manufacturing sentiment hitting a record low in April. [nL8N2CT3DK]
Ancyparowicz said the government’s forecast of a 4 percent contraction in gross domestic product this year was too optimistic. [nW8N2BO00S]
“If there was such a decline, it would mean that we are very lucky (…) I have a rather pessimistic attitude about this year. It seems to me that this fall in GDP in Poland may be very deep, much deeper than originally expected,” she said.
“Let’s wait what the July projection of the central bank will show us, but I think it will not be optimistic.”
As of Monday, Poland reported 18,746 cases of the new coronavirus, and 929 deaths.
Ancyparowicz said recovery for small and medium-sized companies, which have a significant share in Poland’s GDP, will not be easy, despite the help they are receiving from the government. Poland has allocated over 100 billion zlotys ($23.99 billion) to help companies affected by the coronavirus pandemic. [nL8N2BW46G]
“Certainly this is not a crisis that can be resolved within three months. We must be prepared that coming out of this collapse, rebuilding work places, will take at least several months,” Ancyparowicz said.
“In my opinion, next year may be a recession in Poland, or very low economic growth, and not only in Poland,” she said.
(Reporting by Pawel Florkiewicz; Editing by Raissa Kasolowsky)