Poland Economic Forecast

The economy contracted in annual terms in Q2. Softer wage growth, still-elevated price pressures and deeply entrenched consumer pessimism weighed on household spending, while a weak Eurozone took a toll on exports. The economy should rebound in the current quarter, according to our panel, although momentum will likely be underwhelming. The labor market remained tight in July, while inflation fell further in July-August. However, industrial production shrank in July, and the manufacturing PMI averaged lower in July-August than in Q2. Meanwhile, in late August, the government approved the 2024 budget, which includes a 4.5% target for the fiscal deficit and ensures funding for key social assistance projects. In other news, in mid-August, Parliament approved the holding of a referendum on illegal migration on the same day as the general election on 15 October.

Inflation fell to 10.1% in August (July: 10.8%). The reading was the lowest since February 2022 but remained well above the Central Bank’s 1.5–3.5% target band. Inflation should continue to decline ahead this year but will remain above target, fueled by pass-through effects and a higher minimum wage. Volatile commodity prices are a factor to watch.