Poland: Economy shrinks at record pace in Q2
A second reading confirmed that GDP fell at a record-breaking pace of 8.2% year-on-year in the second quarter, contrasting the 2.0% expansion recorded in the first quarter, as the full impact of the coronavirus shock took its toll on the economy.
Looking at the domestic economy, household spending plunged 10.9% in Q2, swinging from Q1’s 1.2% expansion as lockdown measures forced the closure of non-essential businesses and constrained consumption. Moreover, fixed investment contracted 10.9% in Q2, contrasting Q1’s 0.9% rise. However, public spending picked up pace in Q2, expanding 4.8% (Q1: +4.3% yoy) amid the government’s sizeable fiscal stimulus package.
On the external front, exports of goods and services dived 14.3% in Q2 (Q1: +0.6% yoy), reflecting a weak international trading environment and disrupted supply chains. In addition, imports of goods and services declined at a significantly sharper rate of 17.5% in Q2 (Q1: -0.2% yoy), marking the worst reading since Q2 2009.
On a seasonally-adjusted quarter-on-quarter basis, GDP fell 8.9% in Q2, well below the previous quarter’s 0.4% decrease.
Looking ahead, the economy is expected to contract markedly this year as the global health crisis and associated lockdown measures hit domestic and foreign demand. While the government’s substantial fiscal stimulus should mitigate the blow and lay the foundations for a rebound ahead, flare-ups of the virus and elevated economic uncertainty pose key downside risks.
Commenting on the outlook for the Polish economy, Rafal Benecki, chief economist at ING, reflected:
“The last data [shows] that private consumption should catch up quickly, especially in 3Q20 due to pent-up demand […] spurred by high fiscal stimulus and local holidays […]. Still, the consumption recovery should slow in 2H20 as the labour market adjusts to the ending of a government scheme aimed at stabilising employment. Investments are at risk, public outlays should keep progressing given strong dynamics of the EU money paid, but private investment recovery is likely to be sluggish.”