Polish economy may tank this year, shrink again in 2021 -c.banker

If this pandemic situation develops in the coming weeks, and it certainly will, the forecast in (my) most pessimistic scenario will be more likely - a fall of 8%-10% this year," Ancyparowicz told Reuters in a phone interview. She said she also expected the economy to shrink in 2021.

Poland's economy may shrink up to twice as fast as the government forecasts this year and then fail to grow as expected in 2021 if COVID-19 continues to spread there at a rapid pace, a central banker said.

With the country's health system under strain from a succession of record daily coronavirus case and death tallies, Grazyna Ancyparowicz said gross domestic product could drop by up to a tenth in 2020. "At the moment I assess the situation rather pessimistically ... If this pandemic situation develops in the coming weeks, and it certainly will, the forecast in (my) most pessimistic scenario will be more likely - a fall of 8%-10% this year," Ancyparowicz told Reuters in a phone interview.

She said she also expected the economy to shrink in 2021. "It could be 2%-3%, maybe a little less. Only in 2022 there may be a slight rebound." Her predictions are far bleaker than the government's.

Its budget assumes GDP will fall 4.6% this year, and it has said it expects the economy to grow 4.0% next year. To contain the pandemic, the government has urged citizens to stay at home and ordered gyms and pools to close, restaurants to limit opening hours and universities and secondary schools to shift to remote teaching.

"We will likely see in the next months that people will be afraid to leave their homes, work normally, and most of all, they will refrain from consumption, because psychological factors are at work here," Ancyparowicz said. She said inflation may accelerate to around 3.5%, above the central bank's 2.5% target, mainly due to higher prices for services.

However interest rates are likely remain at their current level until 2022 when the term of the bank's monetary policy council (MPC) - where she is considered a moderate - ends. That view matches the consensus of market analysts.

The central bank has cut borrowing cost three times since the start of the pandemic, and the base rate is at a record low of 0.1%. "In my opinion, the (main) rate will remain at the (current) level ... because we achieved what we were supposed to achieve," Ancyparowicz said, referring to the spur to economic activity generated by the rate cuts.