Poland: Growth momentum continues while inflation jumps

Investments surprise to upside.
Governor reconsiders hawkish position.
Larger deficits in '24 and '25.
Stable zloty for time being.

Erste Bank Research Team Erste Bank

The Polish economy continues its robust recovery, achieving a 3.2% growth rate in the second quarter. This growth was primarily driven by private and public consumption, with investments also exceeding expectations. Despite the pro-inflationary nature of this growth structure, inflation surged due to the deregulation of energy prices for households. Consumer prices rose above 4% in July, with an anticipated start of the return to the target only by mid-2025. The budget draft for 2025, which projects a deficit of 5.5% indicates that the pace of government consumption will not decelerate in the near future.

The response of the monetary policymakers has been rather moderate. In recent months, the NBP governor made several hawkish claims but changed the tone during the last press conference. Currently, we anticipate the first key rate reduction to occur around the middle of next year. It appears that the market shares a similar view, as the dovish turnaround from the governor did not unsettle the FX market. We expect the EURPLN rate to remain stable in the medium term. On the political front, both major parties are preparing for the presidential election, scheduled for May 2025.

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Erste Bank Research Team

Erste Bank

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