Domestic Demand in Poland

Poland - Domestic Demand

GDP growth cools further in Q3

GDP growth decelerated to 3.6% year on year in the third quarter, from 5.8% in Q2, amid notable decelerations in consumer spending and fixed investment growth. Meanwhile, on a seasonally adjusted quarter-on-quarter basis, GDP rebounded by 0.9% in Q3, swinging from the previous quarter’s 2.3% contraction.

The deterioration in the annual print was spearheaded by domestic demand. Private consumption growth slowed to 0.9% year on year in Q3, from a 6.4% expansion in Q2, due to soaring inflation outpacing wage growth and downbeat consumer sentiment due to the war in Ukraine. Fixed investment growth slowed to 2.0% in the quarter (Q2: +6.6% yoy) amid higher costs of work, weakening infrastructure investment and slumping demand for residential construction. Meanwhile, the contribution to growth from stock accumulation was higher than in the previous quarter due to falling demand and precautionary stockpiling amid global supply shortages. Meanwhile, public consumption growth decelerated to 0.1% (Q2: +0.6% yoy).

On the external front, growth in exports of goods and services gained speed and came in at 6.9% yoy in Q3 (Q2: +5.2% yoy), also thanks to a weaker zloty. Meanwhile, growth in imports of goods and services softened to 6.0% yoy in Q3 (Q2: +6.9% yoy) amid softening domestic demand. Overall, the external sector added 0.6 percentage points to the headline reading, swinging from a 0.7 percentage point subtraction in Q2.

Commenting on the release, Piotr Poplawski and Rafal Benecki, economists at ING, stated:

“Significant weakness in consumer demand bodes poorly for the turn of the year, with companies more likely to look to adjust inventories as price increases slow down. We still think GDP growth should be close to 5% YoY this year (mainly due to strong 1H22), with GDP slowing to around 1% YoY in 2023.”

FocusEconomics panelists forecast the economy to expand 1.0% in 2023, which is down 0.2 percentage points from last month’s estimate. For 2024, our panelists see growth at 3.1%.