The Polish Zloty (PLN) has been outperforming in recent months because of euphoria about the new Donald Tusk government implementing policy reforms and unlocking EU funds. However, economists at Commerzbank expect PLN to come under bearish pressure again.
Zloty to depreciate gradually over 2024-25
The risks are increasing that policy will be stuck until the presidential election of 2025. We may witness frequent no-confidence votes against the government and so on. The electorate may get frustrated from waiting for new policies. Hence, a return to power of opposition PiS always remains a possibility. New PM Donald Tusk scored a symbolic victory when the EU unlocked some frozen funds after his election. But, such easy wins are unlikely, going forward.
This heightened political risk does not seem to be priced into the Zloty’s valuation, because of which we see the Zloty depreciating gradually over 2024-25.
Source: Commerzbank Research
Source: https://www.fxstreet.com/news/polish-zloty-to-weaken-again-during-2024-commerzbank-202402231117