Poland: Growth slows to over-two-year low in Q1
June 1, 2016
Poland’s economy started the year on a soft note according to recent data released by the Central Statistical Office of Poland. The economy grew 3.0% over the same period last year in Q1, which was notably below the 4.3% expansion tallied in Q4 2015. The result marked the slowest growth rate since Q4 2013 and came amid an almost-broad-based decline in the economy.
On the domestic side of the economy, a sharp slowdown in public investment on the back of reduced EU development funds hampered growth in Poland. Fixed investment swung from a 4.4% increase in Q4 to a 1.8% contraction in Q1, which marked the worst result since Q2 2013. Government spending also deteriorated, slowing from an 8.7% expansion in Q4 to a 4.4% increase in Q1. However, private consumption improved slightly and grew 3.0% (Q4: +3.0% year-on-year). Private consumption has been the driver of Poland’s solid growth in recent quarters and is expected to pick up going forward amid improving labor market conditions, tax breaks and the government’s new child benefit program. In addition, inventories contributed positively to GDP.
Surging import growth, which expanded at the fastest pace in over one year, led to a larger drag from the external sector in Q1. Import growth rose from Q4’s 8.6% to 9.3% in Q1, as strong household demand translates into increased demand for foreign goods. Exports, however, decelerated in Q1, growing 6.9% (Q4: +8.2% yoy).
Despite the weak reading in the first quarter, Poland’s economy is expected to grow robustly this year driven by strong fundamentals. Jakub Rybacki, Economist at ING, points out:
“We remain optimistic about the second half of the year. Consumption should accelerate strongly in 3Q16 as the child benefit programme would fully impact the economy. Moreover, we expect increased tourist inflow due to the World Youth Day (Jul-16 in Cracow). Thus we see GDP growth around 3.7% YoY in 2H16.”