Broad macro conditions are still very favorable for Poland. On the external front Poland continues to gain European market share with outperforming exports, which in turn keeps the external economy in balance and the zloty stable. The domestic recovery is also on track, with strong credit growth, durable spending and corporate earnings momentum at home. The equity market has arguably already outrun the underlying story, but this is true for the rest of the emerging European region as well.

Meanwhile, the one imbalance that stands out in Poland is the dramatic widening of the fiscal deficit, driven by higher defense and social spending. This can't last over the long run - but with moderate overall debt levels and low external exposures there's still not a big impact on macro variables like inflation, rates or growth today. The only market where budget imbalances are already showing up is sovereign dollar/euro bonds, where favorable yield gaps are all but disappearing.