ING confirmed Poland’s fourth-quarter GDP growth at 3.2% YoY, stronger than the 2.7% YoY growth in the third quarter. The seasonally adjusted data indicates that the economy gained some momentum, expanding by 1.3% quarter-on-quarter vs an increase of 0.1% QoQ in the third quarter of last year.

Household consumption rose by about 3.2% YoY, public consumption jumped up by some 3.4% YoY, while fixed investment increased by around 0.6% YoY. The picture is complemented by a negative contribution from net exports (-1.1ppt) and a positive impact of change in inventories (about 2.0ppt).

Analysts expect Poland’s economic recovery to continue in 2025, with a forecast of 3.2% (from 2.9% in 2024). This year should bring a breakthrough in investment activity, supported by projects financed through the Recovery and Resilience Fund (RRF) and faster absorption of the EU cohesion funds. Purchases of military equipment will also support fixed investment.

After a surprising downturn in September, likely due to floods, consumption began to recover. January showed particularly encouraging signs with a rebound in durable goods sales, which had been declining throughout 2024. Sales of furniture, electronics, and household appliances surged by 13.6% YoY in January, following a 4.0% YoY decline in December. Clothing and footwear sales also saw an 8.8% YoY increase, compared to a 12.2% YoY drop in December. Pharmaceuticals sales experienced high growth, rising by 12.8% YoY, up from 1.7% YoY the previous month. Car sales remained buoyant, growing by 21.9% YoY. However, food sales remained subdued with a 0.6% YoY increase, likely due to rising prices.

The start of 2025 has shown promising signs in retail and a resurgence in household purchasing activity (3.5% YoY from 3,2% YoY). January’s data suggests a positive outlook for private consumption in the first quarter of 2025. However, ING remains cautious due to slower growth in real disposable income, driven by slower wage growth, lower pension indexation, and higher inflation. Thus, maintaining the consumption growth rate observed in 2024 will likely require households to tap into their savings from last year.

Construction output jumped by 4.3% YoY in January after 12 months of annual declines, with strengthening signals of a long-awaited improvement in investment activity. Analysts believe that projects financed from the RRF and EU cohesion funds will help to achieve a 9.5% increase in total fixed investment in 2025 vs. 1.3% growth in 2024.

Wages rose by 9.2% YoY, posting single-digit growth for the second month in a row. This will translate into a slower improvement in real disposable income in 2025 vs. 2024 but is unlikely to jeopardize consumption growth as households rebuilt savings last year and may utilize them to finance 2025 spending (consumption smoothing). However, the growth of real disposable should slow this year, so if consumers remain frugal, the role of private consumption in driving economic growth may fall short of expectations.

Only a sound money mindset easing wage pressures alongside monetary tightening could reduce cost pressures, especially in the services sector, allowing for a gradual decline in core inflation over the medium term.

Industrial output fell 1.0% YoY, confirming that manufacturing remains generally stagnant at the beginning of 2025 amid poor external demand. Fortunately, Poland can still outperform the rest of the EU due to rising domestic demand. However, given the poor performance of the German economy, the foreign trade balance is expected to deteriorate further. The contribution of net exports to 2025 growth will be more negative than in 2024 when it amounted to one percentage point. Previously, based on a solid production economy the export sector drove the recovery. This time, it will still depend on mere domestic demand.

A systemic change is of utmost urgency before it’s too late.