Domestic Demand in Poland

Poland - Domestic Demand

GDP falls at slower rate in third quarter amid lifting of Covid-19 restrictions

According to a preliminary estimate, the economy contracted at a milder pace in the third quarter, with GDP decreasing 1.6% on an annual basis following Q2’s record-breaking 8.4% slump. The reading was broadly in line with market analysts’ expectations. On a seasonally-adjusted quarter-on-quarter basis, activity rebounded in Q3 with GDP growing 7.7%, contrasting the previous quarter’s 9.0% decrease and marking the best result since at least Q2 2002.

While a detailed breakdown of the result is yet to be released, available data indicates that the gradual easing of Covid-19 restrictions and sizable fiscal stimulus supported a firming of activity. Retail sales rebounded in the third quarter, pointing to resurging household spending. Moreover, industrial output bounced back, while business sentiment turned less pessimistic, suggesting an improvement in private sector activity.

After contracting notably this year on the hit from coronavirus containment measures, the economy is projected to rebound in 2021. Private consumption and fixed investment are seen expanding strongly, supported by fiscal relief measures. A high level of uncertainty due to the prolonged health crisis and subsequent further restrictions cloud the outlook, however.

Commenting on the recent resurgence of coronavirus cases and reimposition of lockdown measures, Rafal Benecki and Dawid Pachucki, chief and senior Poland economists at ING, noted:

“A new wave of Covid-19 across Europe suggests another GDP contraction in 4Q in QoQ terms. Based on the index, which is gauging the impact of the pandemic on the economy and encompasses mobility data and official new restrictions, we see that the economy freeze at the beginning of November reached the average level seen in 2Q. Also, banking transactions data revealed a strong collapse in sectors particularly affected by the restrictions - the same as those which suffered in 2Q.”

FocusEconomics panelists forecast the economy to expand 4.3% in 2021, which is unchanged from last month’s estimate. For 2022, our panelists see growth at 3.7%.