Polish GDP expanded 1.7% year on year in the third quarter, slowing sharply versus a gain of 3.6% y/y in the preceding three months, seasonally adjusted data from the Central Statistical Office (GUS) showed in a flash estimate on November 14 (chart).

The data appears to show that the Polish economic recovery might be sputtering in the wake of rising inflation and the weakening of real wage growth, analysts say. 

“Monthly data indicates that consumption may already be the source of weakness, as consumers postpone spending due to uncertainty and positive real interest rates,” PKO BP said.

Details of the GDP structure will be published at the end of November.

In seasonally-adjusted quarterly terms, the economy contracted 0.2% in Q3, following a gain of 1.2% q/q in April-June, GUS data also showed. 

Unadjusted, annual GDP growth eased to 2.7% y/y in the third quarter after an expansion of 3.2% y/y in the preceding three months.

Some analysts remain positive that the coming quarters should bring about better growth dynamics.

“A weaker Q3 result is more of a temporary disruption to the growth trend than a signal of a lasting slowdown. High-frequency data from the coming months will be key to verifying that,” Santander Bank Polska said.

Still, disappointing growth in Q3 will likely affect Poland’s economic performance in 2024 overall, with full-year expansion now considered unlikely to exceed 3%.

“We forecast that in 2024 economic growth will reach 2.7%, but without a clear recovery in Europe, achieving a 3% GDP growth this year seems unlikely,” ING said pointing to the ongoing stagnation in Germany that is preventing a marked recovery in Polish manufacturing and exports.

“In 2025, we expect consumption to maintain a pace similar to that in the latter half of 2024, but with a noticeable increase in investment, as EU funds finally begin flowing into the economy,” ING also said.

Some PLN60bn (€13.88bn) from the EU’s pandemic recovery fund is expected to reach beneficiaries in 2025, compared to PLN20bn in 2024, with structural funds also accelerating. 

That should push growth to 3.5% in 2025, thanks to Poland having domestic growth drivers that could help it withstand stagnation in the Eurozone and the risks posed by Donald Trump’s protectionist policies.

The GDP data for Q3 does not change much in the monetary policy outlook.

“With rising inflation, the NBP will keep interest rates unchanged, with space to ease monetary conditions emerging in March, when the CPI inflation has peaked,” Bank Millennium said.

“In our view, the first rate cut will likely occur in the second quarter of next year, once inflation begins to decline,” Bank Millennium also said.

The NBP’s reference interest rate has remained at 5.75% since October 2023.