Poland: Impact of the new president not yet clear

The outlook for Poland in 2025 is generally positive, with the economy beginning the year with a GDP growth of 3.2% y/y in Q1, slightly exceeding our expectations. Domestic demand expanded by 4.6% y/y in the first quarter of 2025, with private consumption rising by 2.5% y/y and investment activity rebounding strongly. Household consumption and investments are expected to be the primary growth drivers, while government spending will play a limited role, and net exports are anticipated to subtract from GDP. The growth forecast for 2025 has been revised upward to 3.2%, with the 2026 projection remaining at 3.1%.

Inflation in Poland has been consistently below 4% in recent months, with a slight uptick expected in June due to rising fuel prices. The overall trend remains downward, with average annual inflation predicted to be 3.6% in 2025 and 2.6% in 2026. However, there is a risk of inflation rebounding if oil prices remain high. Monetary policy remains uncertain following recent rate cuts, with further cuts anticipated in the third quarter, but inflationary pressures may lead to their postponement. Poland's 10-year government bond yield has recently increased to around 5.6%, with a long-term outlook suggesting a gradual decline to potentially test the 5% threshold by the first half of next year.

The EUR/PLN exchange rate has shown a moderate reaction to the presidential elections, with a slight depreciation below the 4.3 threshold. Further short-term depreciation is possible due to global uncertainty, but restrictive monetary policy could act as a counterbalance. The government is expected to exceed its deficit target in 2025, with a forecasted deficit of 6.2% of GDP, reducing to 5.0% in 2026. Karol Nawrocki won the recent presidential election with 51% of the vote, narrowly defeating Trzaskowski, an ally of Prime Minister Donald Tusk. This victory complicates Tusk's efforts to consolidate power and advance reforms. The leading coalition party, Civic Coalition, maintains stable support above 30%, while the main opposition party PiS has stabilized around 30%. Smaller parties have experienced significant shifts, with the Third Way coalition seeing a sharp decline in support and the right-wing Confederation party gaining momentum.  

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