Polish central bank forecasts inflation peaking at 18.8% in Q1 2023

WARSAW (Reuters) - Poland will see inflation peak at 18.8% and economic growth fall to as low as 0.5% in the first quarter of 2023, according to forecasts published by the central bank on Tuesday.

According to the projections, emerging Europe's largest economy is on track for higher inflation and lower growth next year in part due to the war in Ukraine, posing a headache for policymakers trying to sidestep what some economists say is a risk of stagflation.

The central bank targets inflation in range of 1.5-3.5%.

"The economic outlook and CPI inflation path in Poland depend to the greatest extent on the scale of disruptions to the world economy triggered by Russia’s military aggression against Ukraine," the central bank said.

The new inflation projections show a marked increase from a forecast made in March, when inflation of 11.7% was predicted for the first quarter of 2023.

Inflation in 2022 and 2023 is now forecast at 14.2% and 12.3% respectively, compared to the 10.8% and 9.0% forecast in March.

Gross Domestic Product (GDP) growth is seen bottoming out at 0.5% in the first quarter of 2023, compared to a forecast of 2.1% in March. The central bank forecast GDP growth of 4.7% for 2022 and 1.4% for 2023.

In March, the central bank forecast growth of 4.4% in 2022 and 3.0% in 2023.

(Reporting by Pawel Florkiewicz and Alan Charlish; Editing by Simon Cameron-Moore)