Experts: elections in Poland without affecting the currency market

Economists and experts agree: the results of parliamentary elections in Poland will not affect the currency market. Especially that the polls are unambiguous and indicate that the balance of political forces will not change in the Polish Sejm and Senate.

Parliamentary elections will take place on Sunday, 13.10.2019. Poles will vote in them for 460 MPs and 100 Senators. Political turmoil in the world's largest countries often has an impact on currency markets. Will this also happen this Monday? Everything indicates that it is difficult to expect a dynamic reaction of our currency and the stock exchange. Why? Economists argue that polls and a very likely election result that will change little on the current political scene have an impact.

“I do not expect any major reaction in the financial markets to the very result of the elections. Polls show that the likelihood of a party other than PiS winning is very small. The victory of the ruling party reduces the uncertainty about the directions of politics for the coming years. The main unknown is whether PiS will get enough mandates for independent governments. But even this does not generate a risk that would significantly affect the financial markets next week " - says Dorota Staruch, economist of Raiffeisen Bank International.

The PiS program is included in the price of the currency

A similar view is expressed by the chief economist Santander BP Piotr Bielski, who claims that the program of the ruling party is no surprise for the market and is already in the price.

“Polls show a high probability that PiS will win a simple majority in the Sejm, allowing it to rule on its own. But not enough to reject the president's veto, let alone amend the Constitution. The market reaction to such a result should be neutral " - writes the chief economist of Santander Bank Polska Piotr Bielski.

The main economist of ING Bank Śląski, Rafał Banecki, draws attention to the good condition of public finances, which is much more important for currency investors than, for example, the worldview of religion in schools.

“In 2020, the fiscal position is under control, thanks to over 30 billion one-off incomes, which will keep the deficit and borrowing needs low. The problem appears later, because in 2021 there is no one-off income. Then the recession from Germany will hit Poland, which is traditionally delayed. We will be behind the mountain of copious election spending and the peak of EU funds. The budget space has already been used up before the elections, so if the current team wants to maintain good economic conditions, it will be forced to exceed the 3% threshold. GDP for the deficit. In 2021, we expect a significant increase in net borrowing needs, while the inflow of deposits will slow down, which means that new issues will have to be financed with the participation of foreigners, which have long withdrawn from Poland. So if it is to return to the Polish market, it will demand a premium, and therefore higher profitability " - analyzes Rafał Benecki from ING Bank Śląski.

Parliamentary elections and the zloty exchange rate

According to analysts, therefore, we cannot expect nervous movements on the Stock Exchange as well as on the Forex market and pairs with the zloty on Monday. Currency and treasury securities will rather depend on the macroeconomic situation in other countries.

“In our opinion, the market expects Law and Justice to win the upcoming parliamentary elections. Obtaining a simple majority, however, will depend on the number of parties that will enter parliament and the turnout (...) If PiS won the elections but did not secure a parliamentary majority, we could observe a short-term reaction on the FX / FI market, because a coalition with the right-wing Confederation does not seem likely scenario "- says Małgorzata Krzywicka from Erste.

Since October 1, the market has seen a strengthening of the PLN position. The exchange rate of the zloty against the dollar strengthened by approx. 12 grosz, to the euro by 9 grosz, and to the Swiss franc by as much as 13 grosz.

Chart USD / PLN, D1 interval. Source: xNUMX XTB xStation