Poland Economic Forecast

The economy likely gained some steam in quarter-on-quarter terms in Q1, although activity seems to have remained underwhelming. The unemployment rate fell in the quarter, which, coupled with less downbeat consumer sentiment, should have lent some support to household spending, despite still-elevated inflation. Moreover, business sentiment recovered some ground, as did the manufacturing PMI, although both indicators remained in contractionary terrain. On the other hand, industrial production declined, on average, in the quarter, hit by subdued demand. Moving to Q2, available data paints a similar picture. Business and consumer sentiment improved in April, although the manufacturing PMI fell deeper into contractionary terrain. Meanwhile, in late April the government approved USD 2.4 billion in aid for the agricultural sector to cushion the effects of cheap Ukrainian food imports.

Inflation eased to 14.7% in April (March: 16.1%) but remained well above the Central Bank’s 1.5–3.5% target band. Falling transport prices and softer price increases for food and housing and utilities drove the slowdown. Inflation should continue to ease ahead, although it will remain elevated due to ongoing pass-through effects. Energy prices are a key factor to watch.