Macroeconomic situation

The key operating market for the Energa Group companies is the domestic market. Therefore, market cycles, expressed by means of the rate of GDP changes, inflation, or unemployment rate, have a bearing on the prices of electricity, heat and gas and development of demand for products supplied to end customers.

According to a preliminary estimate by the Central Statistical Office (GUS), gross domestic product (GDP) in 2018 grew by 5.1% year on year in real terms (vs. +4.8% in 2017). What is particularly im-portant, national economy performed so well despite a global economic downturn, as the adverse impact of the external environment was outweighed by domestic demand, together with its two main compo-nents: consumer demand and investment demand.

The growth of marketed production between January and December 2018 was 5.8% faster compared to same period last year. Relative to 2017, growth was seen in all main industrial sectors, the highest in production and supply of electricity, gas, steam and hot water (9% yoy), and the lowest in the mining and quarrying sector (1% yoy).

Despite the good performance of the national economy, the PMI (leading indicator for the Polish indus-try) decreased constantly in the second half of 2018. The December figure of 47.6 points was the lowest recorded since April 2013. The slump in the industrial sector can be largely driven by the declining external demand for Polish products, due to the economic slowdown experienced by Poland’s key trade partners, resulting in fewer new export orders.

The Polish economy continues to be driven by domestic demand, and in particular by individual con-sumption, which increased by 4.5% yoy. The growing household income, all-time-low unemployment rate and low interest rates encourage increased consumer spending. In 2018, the current consumer confidence index, a synthetic measure of the current tendencies in individual consumption, increased by 3.3 pp yoy to 5.7%. According to analysts from Santander Bank Polska SA, the risk to private consumption this year lies mostly in increasing costs of living. Although electricity bills have been frozen by the law, the question of rising prices of gas, heat, solid fuels and an additional fuel charge remains open. The disposable income of households will be additionally diminished by the gradual implementation of Employee Capital Plans.

In 2018, the economy was additionally supported by investment demand. Gross fixed capital formation increased by 7.3% yoy (vs. 3.9% in 2017). Increased investment spending was recorded mostly in the area of public investments, mainly infrastructure, due to the implementation of EU-funded investment projects.

Key figures from the labour market in 2018

3,5 %

the increase of the average employment in the business enterprise sector in 2018

7,1 %

the rate of increase of the average monthly salary (gross) in the enterprise sector

3,1 %

the increase of the labour productivity in the industry

5,8 %

the unemployment rate registered at the end of December 2018

The prices of sold industrial production in 2018 grew somewhat slower than they had done in 2017. According to preliminary data, the price index of sold industrial production in the period from January to December 2018 increased by 2.1% yoy. Prices across all sections increased relative to the previous year, with the most growth seen in mining and quarrying (by 2.9%). As regards the production and supply of electricity, gas, steam and hot water, the prices increased by 0.5%.

The inflationary pressure in the Polish economy remained low in 2018. The average annual consumer price index in 2018 vs. 2017 was 1.6%. The main inflation volatility components were supply factors, mostly in the food and fuel market. According to analysts, prices of energy products, including oil and gas, will remain the main source of inflationary pressure this year. Developments in electricity prices remain the main factor of inflation uncertainty.