Poland’s external current account surplus declined in November, falling to 0.2% of GDP on a 12-month rolling basis, down from 0.4% in October, according to data from the National Bank of Poland (NBP), ING reports.

The deterioration reflects a combination of sluggish foreign demand and a recovering domestic economy, exacerbating trade imbalances.

The overall external current account posted a €521mn deficit in November, well below market consensus expectations of an €8mn surplus and significantly wider than the €66mn deficit forecast by ING.

The primary driver was a sharp increase in the trade deficit for goods, which expanded to €1.646bn in November from €571mn in October.

On a rolling 12-month basis, Poland’s trade balance also weakened, moving to a deficit of -0.7% of GDP from -0.6% the previous month. Exports in euro terms fell by 4.7% y/y, while imports declined 0.4% year on year, with the appreciation of the zloty amplifying the decline in export values when expressed in zloty terms.

November marked the seventh consecutive month of a merchandise trade deficit for Poland. Export activity continued to be hampered by weak demand from key trading partners in the eurozone, particularly Germany which has fallen into recession and accounts for 27% of Polish exports. Germany’s economy is projected to contract by 0.2% in 2024 following a 0.3% decline in 2023, and is poised for its first back-to-back annual recession since 2002–2003.

The NBP noted a decline in export values across five of six major categories, with the steepest drops in transport equipment, including passenger cars, truck tractors, buses, and automotive parts, ING reports.

Agricultural exports were the sole exception to the bad news, buoyed by price increases that kept values steady y/y.

Imports similarly fell across five of six categories, most notably in transport equipment, although passenger car imports remained robust, likely driven by a rush to meet tightening EU emissions standards effective from 2024.

Structural shifts in trade

Despite the overall trade weakness, Poland surpassed China in 2024 to become the fourth-largest destination for German exports, capturing a 6% share. It now ranks behind the United States (10.4%), France (7.5%) and the Netherlands (7.1%) as a key market for German goods. However, Poland’s trade ties with Germany leave it exposed to potential tariffs on EU goods if a Donald Trump-led administration in the US imposes trade restrictions.

Energy prices also surged late in the year, further pressuring import costs and complicating the trade outlook.

While the trade deficit worsened, Poland’s traditionally strong services surplus of €3.177bn provided some offset, albeit slightly lower than in October. The income balance deficit widened to €1.523bn due to the cessation of seasonal payments to farmers, while the secondary income deficit increased to €529mn.

The zloty remained relatively stable despite these challenges, supported by Poland’s interest rate differential with the eurozone. The European Central Bank’s continued rate cuts in late 2024 have bolstered the zloty, though further monetary easing by Poland’s central bank is not anticipated until 2025 or later.

Additionally, EU funding under the Recovery and Resilience Facility (RRF) has offered crucial support. In December, the European Commission disbursed €9.4bn to Poland, with another €7.3bn payment request submitted by the government for disbursement in early 2025.