Poland: Growth eases in 2019 but remains resilient nonetheless
February 6, 2020
The economy grew 4.0% in 2019, according to a second estimate released by Poland’s Statistical Institute (GUS). The print was down from 2018’s 5.1% increase and came below market expectations.
Fixed investment growth moderated but remained robust nonetheless (2019: +7.8%; 2018: +8.9%), underpinned by sizable inflows of EU funds. In addition, gross capital formation, which includes also stock accumulation, slowed sharply, likely due to the frail performance of the German car sector and Brexit-related uncertainties. Meanwhile, household spending also eased but remained buoyant (2019: +3.9%; 2018: +4.3%), supported by strong wage growth, a tight labor market and substantial social transfers. Lastly, the external sector's contribution to overall growth improved to plus 0.4 percentage points from a null contribution in 2018.
Commenting upon the likely implication of weaker growth on the Central Bank’s future decision making, Rafal Benecki and Jakub Rybacki, economists at ING, noted:
“Weaker growth should reaffirm the central bank’s stable monetary policy. The committee is unlikely to react to higher CPI readings, even if price growth exceeds 4% YoY. The main argument is that lower activity should limit inflationary pressures.”
Economic activity will likely soften next year. A less supportive external environment and a diminished contribution to growth from EU-driven fixed investment will weigh on the economy, which already seems to entering the mature phase of the current business cycle. That said, consumer spending should stay strong, spurred by a tight labor market and sizable wage growth, and thus will continue to power the economy.