In Poland, the third quarter brought a slowdown in economic recovery. Seasonally adjusted data indicate a GDP decline of 0.2% quarter-on-quarter, following a 1.2% QoQ growth between April and June.

The slower growth was primarily due to poor developments in retail trade. Retail sales of goods fell by 1.5% YoY in 3Q24, industrial production remained nearly stagnant (0.6% YoY growth), and construction was in recession (-6.8% YoY).

ING reports that household consumption growth moderated to around 3.0%YoY from 4.7%YoY in the previous quarter. Investments likely fell slightly in annual terms, and this was accompanied by a negative contribution from net exports.

The slowdown in consumption stems from slower real disposable income growth since mid-2024, caused by a rebound in inflation. At the same time, a gradual slowdown in nominal wage growth is being observed. Following the partial unfreezing of prices, the increase in electricity and gas bills likely limited consumer spending on other purchases.

Forecasts see 2024 economic growth amounting to 2.7%: Without a clear recovery in Europe, achieving 3% GDP growth this year is unlikely. Stagnation in Germany prevents a significant rebound in Polish manufacturing and exports. At the same time, high interest rates and delays in the implementation of projects financed by the National Recovery Plan (KPO) and EU structural funds translate into low investment activity.

Polish consumer purchasing activity also slowed in the second half of 2024. In 2025 around 60 billion PLN from the KPO will reach final beneficiaries, compared to around 20 bn in 2024. Economic growth is expected to accelerate to 3.5% in 2025.

Meanwhile, the National Bank of Poland kept interest rates on hold (5.75%) and remains reluctant to cut rates in the near term. However, the Bank presented a less hawkish bias over the medium term, while policymakers expect wage growth to ease and signaled easier policy in 2025.

In September, Poland’s current account closed with a deficit of €1434m after a deficit of €2731m in August. According to ING estimates, on a 12-month basis, the current account surplus narrowed to 0.4% of GDP after September from 0.8% of GDP. September was the fifth consecutive month with a trade deficit (€690m), with exports up 0.5% YoY and imports rebounding by 5.1% YoY. A traditionally high surplus in services (€3028m), a large deficit in the income balance (€-3235m), and a significant deficit in secondary income (€-537m) were the main components.

In the trade balance, exports are suffering from weak external demand from the euro area, Germany in particular, whose GDP growth is oscillating around 0%. Import spending is driven by domestic demand (particularly consumption) and is still related to military spending.

The deepest declines were seen in capital goods, means of transport, and intermediate goods. Export declines were dominated by the automotive sector, with sales of electric batteries and passenger cars weakening considerably. As for imports, which decreased by 2.1% YoY in PLN terms, a downward trend was recorded in the supply of goods and capital products. On the other hand, imports of consumer goods increased – in particular, imports of durables and new and used passenger cars.

The flash estimate of October confirms CPI inflation at 5.0% YoY. Prices of goods went up by 4.3% YoY, while services prices jumped up by 6.7% compared with 4.2% and 6.8% respectively the previous month. The increase in the annual inflation rate compared to September was mainly driven by food and fuel prices.

Core inflation, excluding food and energy, moderated to 4.1% YoY in October from 4.3% YoY in September, but the upward pressure on core price increases persists, with a monthly increase at around 0.4%. By the end of 2025, CPI inflation is projected to remain around 5% YoY. Authorities announced they plan to continue freezing electricity prices for households in 2025, suggesting that the expected local peak of inflation in March 2025 should not exceed 6% YoY.

Hope dies last, as a decisive slowdown in wage growth is necessary for a decline in core inflation.