The Emerging Markets Report - November 2020

By Daria Parkhomenko & Daniel Rico
Published November 16, 2020 | 6 min read

A new monthly audio series where our experts sit down and discuss current trends, investment strategies, and government policies in emerging markets around the world.

This month, Daniel Rico, Vice-President-Latin America FX Strategy, sits down with Daria Parkhomenko, FX Strategist, to discuss the Polish zloty.


1) What is your view on the Polish zloty into year-end and into next year?

  • In the short-term, we think EUR/PLN will end the year at around 4.55 and our view for PLN to trade with a relatively weak bias is mainly driven by COVID developments and their impact on economic activity.
  • Looking ahead to next year, our forecasts imply a gradual trend lower in EUR/PLN towards 4.30 by the end of 2021. It is built on the assumption that COVID concerns will begin to abate, and if that’s the case, that should support growth. Poland will also benefit from an absorption of EU funds.
  • Externally, EUR/PLN will be vulnerable to the global backdrop, including developments related to fiscal stimulus in the US, Brexit, and progress on COVID vaccines.

2) Are there any risks that you are watching?

  • The extent of the positive impact on economic activity from the EU funds will depend on how quickly they are absorbed, and in particular, any delays to the approval of the EU recovery package (Next Generation EU) would pose a downside risk to PLN.

3) Poland has had negative real rates for a while now. Has this been a concern for the central bank?

  • The policy rate adjusted for core CPI inflation has been negative since April 2019. Since then, according to NBP’s minutes, there have been meetings where members pointed out the negative real policy rate and expressed their concerns about this development, with a few members voting in favor of a motion to raise rates in July 2019 and January 2020.
  • However, since the pandemic started, the minutes have not been mentioning the negative real policy rate,* suggesting that this is currently not a concern despite an acceleration in core CPI inflation and that the real policy rate is likely to remain negative next year.

*This podcast was recorded on November 9, before the November Inflation Report and minutes for the November meeting were available.

Daria Parkhomenko & Daniel Rico