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Polish growth should be set to continue, even with inflation

Poland's GDP in the first quarter of the year grew by 1.9%, compared to 1.0% YoY in the final quarter of 2023. The data was slightly above the consensus of 1.8%. ING projects that the GDP recovery will continue in the course of this year.

'We assume that Poland's GDP recovery will continue over the course of this year. The second quarter should see a further improvement in consumer demand, thanks to record high growth of real incomes (the highest since the late 1990s). Also, alternative data sources suggest an ongoing recovery in consumption in April and May. We also do not believe that exceptionally weak production in March means that the recovery in industry has collapsed, with logistics data suggesting that both Polish and German industry are continuing their gradual rebounds. We therefore maintain our full-year GDP growth forecast of 3.0% YoY.'


The very high increase in core inflation remains a major problem, though. While in year-on-year terms it has slowed from 4.6% to around 4%, in month-on-month terms, it increased by 0.5% (the National Bank of Poland's core inflation estimate will be released tomorrow). Companies also continue to pass on high wage growth to consumers. Consumer demand should grow over the coming months, mainly due to high household income growth (in real terms, higher than before the pandemic) This will most likely mean that core inflation will remain high in MoM terms.

Analysts expect core inflation to stabilise or even increase to around 4.5% YoY at the end of 2024. Headline inflation should rise to around 5.5% YoY at the end of 2024 and to 6.5% in the first quarter of 2025 – again, largely on base effects, but also with the gradual return of market electricity prices for households.

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