Poland Economic Forecast

GDP rebounded at a robust quarter-on-quarter pace in the first quarter of this year. The economy benefited from a sharp rebound in public consumption as well as from accelerating fixed investment growth. Moreover, household spending declined at a softer clip, while imports fell at a more pronounced pace than exports, supporting the performance of the external sector. Moving to the current quarter, momentum should have waned. Industrial production fell month on month in April, and the manufacturing PMI was stuck in contractionary terrain in April-May. That said, in April-May, business confidence averaged higher than in Q1, and inflation continued its downward trend. Moreover, consumer confidence moved into optimistic territory. Meanwhile, in mid-May, the government approved a bill granting pensioners a permanent annual cash boost, which should support spending.

Inflation eased to 13.0% in May (April: 14.7%), although it remained well above the Central Bank’s 1.5–3.5% target band. A softer increase in prices for food and non-alcoholic beverages and a sharper fall in fuel prices were behind the reading. Inflation should continue to decline this year, but remain elevated amid ongoing pass-through effects. Volatile energy prices pose risks.