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Macroeconomic factors potentially affecting the Group's performance

Internal demand will remain main driving force of Polish economy in year 2017
GDP growth by 3.2-3.5%

According to the Bank, the macroeconomic situation shall slowly but steadily improve in 2017, although external factors may cause uncertainty. The economic growth rate should increase to 3.2-3.5% of GDP. Domestic demand will continue to grow, while the Russian import ban on agricultural products and foods, slow economic growth in the Eurozone, initiation of the Brexit process and possible trade wars between the United States and other countries may limit the growth in exports of goods and services. An increase in domestic demand shall result from a growth in both consumption and investments. An advantageous situation in the labor market (an increase in salaries and wages and employment rate) and cash transfers to families with children under the Family 500+ program (ca. PLN 23 billion in 2017) are likely to drive consumption expenditure. Consumption may also be boosted by higher appetite for consumer loans among households due to their improved credit standing. Households may be also discouraged to increase consumption expenditure by inflation. Still, assuming that the inflation growth will be moderate only, it should not result in a considerable reduction of expenditure. After the decrease in 2016 resulting from delays in disbursements of funds under the EU perspective 2014-2020, investment expenditures are expected to grow in 2017. Record low interest rates should also positively affect investments in the economy. The Bank expects that at the end of 2017 the reference rate of the National Bank of Poland will remain at 1.50%.

In 2017 other challenges for the Polish banking sector and for the Group may include: