Last update (13/02/2023)
Despite significant headwinds, the Polish economy continued on a strong growth path in 2022, supported by an expansionary fiscal stance, a favourable situation in the labour market and the large inflow of displaced persons from Ukraine. Data on the real economy suggests that economic growth in the fourth quarter weakened visibly, partly due to elevated inflation and tighter financing conditions. Nevertheless, a strong revision of historical data led to a significantly higher starting GDP level for 2022, lifting the real GDP growth projection in 2022 to 4.9% - i.e. 0.9 pps. higher than in the Autumn Forecast.
Elevated inflation and low consumer and business confidence are expected to keep weighing on economic growth in the coming quarters. In particular, declining real incomes amid an already low savings rate will likely put downward pressure on private consumption, which is projected to decrease slightly in 2023. Private investment, especially in construction, is expected to continue being affected by higher interest rates and elevated uncertainty. Still, a significant inflow of foreign direct investment and an expected rise in public spending (particularly on defence) are set to more than outweigh these factors, leaving total investment growth well into positive territory over the forecast horizon. Regarding foreign trade, the easing of supply bottlenecks will likely support export growth. Coupled with a weak import outlook, net exports are projected to contribute positively to growth in 2023 and, to a lesser extent, 2024. All in all, after decelerating to 0.4% in 2023, GDP growth is expected to bounce back to 2.5% in 2024 as inflation eases and global economic growth gathers pace.
HICP inflation has consistently surprised on the upside throughout 2022 due to increased prices of commodities, rising production costs and demand pressures, which allowed businesses to pass costs down to consumers. Going forward, despite the measures introduced by the government to limit the increase in gas and electricity prices, energy price inflation is expected to remain elevated due to the phasing-out of tax breaks on energy products in January 2023. While core inflation will likely be fuelled by strong wage growth and an expansionary fiscal stance, falling wholesale energy prices and some easing in the labour market are expected to gradually dampen inflationary pressures, especially towards the end of the forecast horizon. Consequently, after peaking in the first quarter of 2023 at almost 17.0%, HICP inflation is projected to decelerate to 4.2% in the final quarter of 2024, leaving yearly HICP inflation at 11.7% in 2023 and 4.4% in 2024.