Poland: No stagflation here

Erste Bank Research Team Erste Bank

Despite a lower-than-expected 1Q GDP at 3.5% y/y, Poland remains among the best performing economies in Europe. The 1Q growth slowdown was weather-related and should be followed by the catch-up effect in 2Q. Yet, we have recently adjusted our 2026 GDP growth forecast from 3.8% to 3.6%, taking into account slower start of the year and the impact of uncertainty related to Iran war. An expected acceleration of investment growth in the final stage of RRF absorption should be one of the most important factors behind stronger GDP growth in the remainder of the year, especially if helped by some precautionary inventory buildup. The investment path, linked to the utilisation of regular and special EU funds, is also going to be one of the reasons for Polish economy to slow down to around 3% next year.

The flash May inflation reading, 3.1% y/y, was quite intellectually refreshing, coming below any of the forecasts collected by Bloomberg and below the April 3.2% y/y print. It also implied that core inflation stayed in place instead of going further up. It does not mean Poland is immune to the oil price shock, but suggests more cautious estimates of its impact. We now see it less likely that CPI will escape above the NBP tolerance band for an extended period, reducing the pressure on the MPC to move to rate hikes this year. We expect no monetary policy change this year.

Despite the geopolitical and economic uncertainty, Polish labour market stays in good shape and the zloty hovers in horizontal trend despite global market mood swings. Fiscal situation remains a weak spot of the economy, but in spite of the EC placing Poland at the bottom of EU members’ fiscal balance ranking, the market does not seem eager to punish the government with a clear change in positioning in Polish bonds.

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Erste Bank Research Team

Erste Bank

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