Coface forecasts Poland to stay on its GDP recovery path in 2022 (+5%), having returned to its pre-pandemic level in the middle of the previous year. Focus on consumption (58% of GDP) still remains a crucial part of the economy. Its acceleration will be supported by increasing incomes, declining household savings, which soared during the pandemic, as well as changes in the personal income tax for low earners that will likely boost spending. Apparently, the labour market has weathered pandemic disruptions relatively well, with the unemployment rate coming close to pre-pandemic levels in October 2021. Meanwhile, wage growth reached an 8.4% year-over-year increase in the same month due to labour shortages and inflation.

In effect, the gain in purchasing power will be limited by accelerated inflation, which prompted the Central Bank to tighten its monetary policy. Consumer inflation moderated to 8.5% year-on-year in February as new elements of the anti-inflation shield kicked in, but it is set to rise to 10% year-on-year in March amid upward pressure from gasoline and food prices. CPI inflation may average 10% in 2022 despite government measures to tame it. Higher prices for commodities, supply chains disruption and recovering demand, on the back of capacity constraints, have all fed it. Price pressure will remain high in 2022 with a further increase in energy prices, rising natural gas prices reverberating on food production costs, and overall high producer prices passed on to final consumers. The programme includes the decrease of value-added and excise taxes on energy and natural gas, a reduction in taxes on fuels as well as the decrease of value-added tax on certain food products for six months. Concomitantly, low-income households got a one-time benefit, which could increase inflation through higher consumption.

In 2022, the general government deficit-to-GDP ratio is expected to decrease further thanks to the phasing out of pandemic-related measures and the vivid economic recovery. Revenues from indirect taxes should increase despite the introduction of the costly new stimulus programme called the Polish Deal. This fiscal package focuses on lowering taxes for the middle-class and increasing health spending, as well as on infrastructural investments (a network of expressways, railroad lines, the New Central Polish Airport, cultural and sports infrastructure in municipalities and digital infrastructure) that should boost the economy. However, the increase in the tax burden for the wealthier part of the society will not balance out its alleviation for the low- and mid-income taxpayers.

The current account balance had turned positive in 2019 and, in Coface forecast for the current year, will remain in the green. This relies on the trade in services, which continues to post the largest surplus, supported by transportation services abroad, and the surplus in the trade in goods. In 2022, exports are expected to increase, however, supply constraints will be a drag on their acceleration. Moreover, increasing imports, supported by the domestic recovery, will limit the contribution of net exports to GDP growth. While the war in Ukraine may undermine exports to both Eastern and Western partners, domestic consumption should remain sound given spending on hosting refugees at 0.7-1.4 percentage points of GDP.