According to the forecasts prior to the spread of the Covid-19 pandemic, the Polish economy was expected to slow slightly in the course of 2020 (up 3%): while investment and exports are expected to fall, private consumption growth is expected to remain supported by the increase in jobs, wages and social transfers (see the 500+ childcare scheme, now also extended to the first child). However, it’s not all gold.

After deflation in 2015-16, consumer prices began to rise again during 2017, driven by wage increases. Inflation is expected to rise above 2%: monetary policy has so far been accommodative and the Central Bank has kept the benchmark interest rate at 1.5%. Government debt is moderate and amounts to about 50% of GDP, while the budget deficit has decreased since 2017 thanks to increased tax revenues and better tax collection. However, public spending has again increased due to the lower pension age, the continued social spending, and the public investments ahead of the October 2019 elections, which reconfirmed the outgoing majority.

It’s not all gold that glitters. Due to the further tightening of the labor market, the tightening of the labor market is becoming more and more of a problem, especially in the manufacturing sector. Analysts say labor shortages could weigh on potential economic growth, exacerbated by the early retirement of a large proportion of the workforce by lowering the retirement age to deliver on the pre-election promises of the current government majority.

Concerns about the impact of external factors such as tariffs on US imports and uncertainty over Brexit developments on exports and investment should also not be underestimated. In Central Europe, the Polish economy seems to be the most vulnerable to the financial and economic consequences of Brexit: the annual remittances of Poles living abroad amount to around EUR 4 billion, much of which comes from the United Kingdom. In addition, the process of separating London from the rest of the EU could affect the same European structural funds, which play an important role in Poland’s economic progress. Not forgetting that the UK is the second-largest destination for Polish exports after Germany and, once the Brexit process is complete, PiS (the ruling majority party since 2015) could be without its most powerful ally in the European Parliament.