The Polish economy grew by 0.2% in 2023, slightly less than projected in the Autumn Forecast. Net exports contributed positively to growth as imports fell more than exports. Investment accelerated amid culmination of EU funding from the 2014-20 programming period. Private consumption contracted and the change in inventories had a large negative contribution to growth.
Economic growth is set to accelerate to 2.7% in 2024. Private consumption is expected to be the main growth driver, supported by rising real wages, additional government social support, and receding inflationary pressures. Public consumption is also set to contribute robustly to growth on the back of new additional fiscal support measures. However, net exports are projected to contribute negatively, as rising domestic demand is expected to fuel imports. Investment is set to be held back by a slower start of EU funds flows from the 2021-27 programming period. In 2025, GDP growth is projected to pick up to 3.2% due to strong private consumption and an uptick in investment fuelled by EU funds. Risks to the outlook relate mainly to possible delays in the implementation of EU-funded investment. The forecast for both years is unrevised compared to autumn.
Inflation peaked in early 2023 and eased rapidly in the second half of the year due to decelerating commodity and food prices. HICP inflation reached 10.9% in 2023 and is set to moderate over the forecast horizon. Lower energy commodity price assumptions are set to further curb inflation over the course of 2024 and 2025. HICP inflation is projected at 5.2% in 2024 and 4.7% in 2025. Compared to autumn, the forecast has been revised down for 2024, but up for 2025. In addition to lower commodity prices, these revisions are driven by the extension of the electricity and gas price freezes from January until June, and the zero VAT on food until March this year. The shift in base effects implied by this change reduces the inflation forecast in the first half of 2024, but lifts it in 2025, compared to the Autumn Forecast.