Poland outlook: Consumption takes a hit, consolidation moved to 2026

In the third quarter, the annual GDP growth rate reached 2.7%, driven by inventory buildup rather than household consumption, which is against our baseline for 2024. Despite this, there is optimism for a better end to the year due to recent slightly more positive industrial and retail data. The growth forecast for 2024 has been revised to 2.8%, with an anticipated economic expansion of 3.3% in 2025. Inflation rose to 4.6% in November following the unfreezing of energy prices, with a forecast of 4.1% for 2025. However, energy prices remain a source of uncertainty, despite the government’s promises to keep them frozen in 2025. The NBP Governor views the upward inflation risks as severe and has stated that no target rate reductions will be made next year, which contradicts our forecast and the consensus. The zloty is expected to fluctuate within the 4.35-4.25 range against the euro, supported by anticipated inflows of EU funds and higher growth prospects compared to the Eurozone and most CEE peers.

The Civic Coalition is leading in polls ahead of the Law and Justice party, with the margin slightly increasing. Early polls for the presidential elections put the coalition’s candidate visibly ahead, but it is still too soon to make definitive judgments. The fiscal situation remains challenging, with large deficits persisting and significant consolidation expected to start in 2026. Defense spending is projected to be the highest in NATO, with 4.7% of GDP allocated to military expenditure in 2025. The debt-to-GDP ratio is expected to peak at 61% in 2026, with a decline expected after the four-year adjustment period.

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