Poland: Good prospects amid global uncertainty

Despite global uncertainty, which will be mentioned a few times throughout this edition of the Polish Macro Outlook, the prospects for the largest economy in CEE remain positive. Economic growth is expected to further accelerate from one of the highest rates in the EU. Inflation is anticipated to decline in the second half of the year, following the dissipation of base effects from one-off energy adjustments. The currency is projected to remain strong, particularly in the context of a cautious NBP.

Poland’s economy reported a 2.9% growth last year driven by household consumption and public expenditure despite challenges from a weak external environment and geopolitical issues. The projected GDP growth for 2025 is 3.3%, assuming no significant negative surprises. Household consumption is expected to remain an important driver of the economy, as consumers could shift from saving to spending despite slower real wage growth. Investment is projected to see a resurgence, with net exports expected to detract from GDP growth this year but improve in 2026.

Inflation trends in Poland have been influenced by rising energy, food, and service costs, with February’s inflation rate at 4.9%. The peaks in inflation are predicted for March and June, followed by a decline below 5% by the end of the year, implying an average inflation rate of 4.5% in 2025 and 3.1% in 2026. The outlook for monetary policy remains uncertain, with some MPC members considering rate cuts in July, while others believe there may be no cuts this year. Our baseline scenario predicts a 25 basis point cut in July, with possible two further cuts by the end of the year. The 10-year yield in Poland has fluctuated above 5.8%, influenced by factors such as uncertainty from the Ukraine peace deal and rising natural real interest rates.

The EUR/PLN exchange rate has recently fallen below the 4.20-4.30 range, reaching a peak of 4.12. The outlook for the exchange rate remains uncertain due to unpredictable global developments, particularly related to Ukraine, and postponed monetary policy rate cuts. Poland’s budget will be in a deep deficit also in 2025, with expected start of consolidation only in 2026. The presidential elections in Poland are approaching as the candidate supported by the Civic Coalition, Trzaskowski, is currently leading the polls.

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