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Macroeconomic scenario

Economic growth

Polish GDP grew by 2.9% in 2024 – above consensus and our last forecast, but about 3% we had a year ago. The details provided by Statistics Poland are hardly revolutionary: household consumption growth was significantly below income growth, investment slowed down massively, but eked out a small increase. In 2025 we expect GDP to accelerate to 4% due to improvements in external demand (as consensus is too pessimistic on Western Europe) and a jump in public investment. RRF funds will be hard at work in 2025.

Inflation

The year 2024 ended with CPI slightly below 5% yoy. At the beginning of 2025, we assume another acceleration of inflation with a peak in March of around 5.5% yoy due to the low reference base effect. In turn, at the beginning of the second half of the year, due to base effects we will see a downward dip below 4.0% yoy. We do not expect a jump in inflation in the fourth quarter caused by the unfreezing of energy prices for households. However, the "sticky" and long-term elevated core inflation (especially in the services sector) will be a nuisance. We will not return permanently to the NBP inflation target (understood as the range of permissible deviations from 2.5%) any time soon - in our opinion, this will be possible no earlier than in the first half of 2026.

Labour market

The domestic labour market ended 2024 rather weakly. Employment fell by -0.6% yoy, making it clear that we still have to wait for a rebound. In our view, by the middle of the year we should see direct signs of the labour market recovery. The reading of wage dynamics for December was also weak, despite this being a good news. For the first time in a year, it fell to a single-digit year-on-year dynamics, much to the surprise of analysts. Such levels of wage growth will be the norm this year, although it will still be relatively high (8-9%).

Monetary policy

Recent statements from the MPC indicate that the stable majority on the Council shares the hawkish turn in monetary policy stance demonstrated by A. Glapiński in December. This means that at least until March, and most likely until July 2025, monetary policy will keep its course. One will be able to constructively discuss timing of further rate cuts again only after publication of the next NBP inflation projection in March. We maintain our forecast that we will see four rate cuts (100 bps altogether) in the second half of the year.

Financial Markets

The art of the deal, by Donald Trump

At the turn of year, there were two competing views on US trade policy:

• It’s just a game, a negotiation strategy, and a short-term tool to force concessions in other areas
• This is a long-term instrument for building competitive advantage and shaping economic and political relations

Economists favored the first, markets were somewhere in between, and we felt like tilting towards the second. Since the first salvos of the global trade war were more like duds than cannon blasts, the market swung towards the first option. Investors assumed - not without good reasons - that the impact of tariffs on the economy would be less than feared and the necessity to maintain high rates due to uncertainty about the effects of tariffs less pressing.

However, this is a very, very early conclusion. Tariffs on Canada and Mexico have been deferred for 30 days, the second Trump administration is not yet complete (key positions in the Department of Commerce and USTR remain unfilled). Using tariffs in negotiation has clear benefits for the user only in a single-round game. In the next round, the US strategy will be well known to everyone, resistance will be greater, and the likelihood of forming anti-US coalitions higher. Consequently, the second option must regain credibility for the first to work. In other words – this is not the end and one should prepare for volatility. Nevertheless, at the end of this road, there are lower rather than higher rates, if only due to the negative impact of uncertainty on economic growth.

Polish assets back in vogue

In retrospect, the PLN turned out to be the winner of the post-election market differentiation. Between the end of September and the US presidential elections it lost twice as much against the dollar as the EM currency basket. However, since the elections, it has gained about 2.5% (the basket was unchanged). Looking more broadly, the złoty has experienced a period of significant nominal and (especially) real appreciation, bringing its levels close to all-time highs in real terms. Moreover, this happened in just two years. Thus, it is no surprise that further nominal appreciation will be difficult, and a drop below 4.20/EUR will be challenging, but not impossible. At the same time, it is worth remembering that a strong currency is not a reason for weakening on its own. There is no shortage of factors keeping the PLN at its current levels, but the most important one is probably restrictive monetary policy. The winner is not only the PLN – in recent weeks, benchmark stocks have outperformed indices from the Warsaw stock exchange. Yields on government bonds, on the other hand, have not changed significantly, both in absolute terms and relative to similar bonds from core markets. What’s next? All the arguments "for Poland" are still valid.