MACROscope

No, Poland will not become the European champion in football, but in terms of GDP growth in the next two years it should be among the leaders. We certainly have a chance for the first place in 2025 when it comes to the lowest unemployment and the highest inflation. A high fiscal deficit will also place us close to the top of the EU.
Despite the exceptionally high volatility visible in high-frequency data, in our opinion the Polish economy remains on the path of gradual economic recovery. Exactly a year ago we put forward the hypothesis that the economy is at a turning point and GDP growth in the second half of 2023 should start to recover, accelerating to about 3% in 2024. In retrospect, we think that this was actually a good call and a scenario, assuming the leading role of consumption in this year's economic recovery, but also a break in the downward trend in industry, remains valid. (...)

While the decline in inflation in major economies has slowed and the market expects fewer rate cuts in the US and the euro area, inflation in Poland once again surprised on the downside and fell to 1.9% y/y, below target for the first time since May 2019. The next few months are likely to bring higher inflation readings, while core inflation is likely to remain elevated, in the 4-5% range until the end of 2025. Real wage growth accelerated to nearly 10% in February, the strongest since the late 90s, and nominal wage growth will remain in double digits in our view. This will contribute to the acceleration of consumption, which will be the main driver of growth. Activity data for February showed positive surprises in sales and industrial production. The prospect of a recovery in GDP (we expect 3% this year) and continued elevated core inflation and will make it likely that the MPC will not change rates until mid-2025.