A cold summer for the Polish economy
The forecasts were accurate, and Poland's GDP slowed from 3.2% year-on-year in Q2 to 2.7% in Q3 of this year. On a quarterly basis, the economy experienced a slight contraction (-0.2% quarter-on-quarter, seasonally adjusted). In our view, the primary driver of this weakness was private consumption. Looking ahead, 2025 is expected to show improvement.
A cold summer for the Polish economy
Economic growth slowed in the third quarter from 3.2% to 2.7% yoy, exactly as forecasted. This comes as no surprise, as the weakness of the Polish economy during the summer months had been signaled for some time by monthly data, in particular by the infamous September retail sales print. We believe that consumer spending is to blame for the lower GDP growth in the last quarter. This is due to a combination of cyclical weakness and the aforementioned somewhat puzzling drop in September. Our estimates also point to a slight slowdown in investment (which, however, still eked out a small increase) and a negative contribution from net exports. Detailed data will, as usual, be available in two weeks.
GDP growth (constant prices, yoy)
Source: Macrobond, Statistics Poland, Pekao Research
How bad was the third quarter? After excluding seasonal and calendar factors, the Polish economy contracted by 0.2% qoq during the summer months, for the first time since the spring of last year.
GDP (constant prices, 2019q4 = 100, seasonally adjusted data)
Source: Macrobond, Statistics Poland, Pekao Research
We would advise against over-analyzing this number, as subsequent revisions will probably change it significantly. However, it is clear that the return to the long-term growth path remains bumpy. In the 2022-24 period, this already was the fourth quarter in which the Polish GDP has fallen, whereas in the entire earlier history of quarterly national accounts, there were only eleven such episodes. It is therefore not surprising that with so many steps backwards, the current recovery is historically slow. Indeed, it is the slowest recovery episode (barely surpassed by the one from 2001-2003) found in the 30-year history of Polish quarterly GDP. This was influenced by factors such as weak external demand, restrictive monetary policy, the EU funds spending cycle, and the prolonged consequences of the energy crisis.
Comparison of recoveries (constant prices, s.a., quarters from bottom)
Source: Macrobond, Statistics Poland, Pekao Research
What’s next? The third quarter was more of an accident than the beginning of a longer trend. Nevertheless, in the short term, mediocre economic growth should be expected to continue. In our opinion, neither domestic demand nor exports have the potential to significantly accelerate the Polish economy in this horizon. Consequently, the average annual GDP growth will likely be around 2.8-2.9% this year - a minimal difference from our forecast (3.0%) that has been in place since the beginning of the year. 2025 already looks better due to the projected acceleration of economic growth among major trading partners (from 0.9 to 1.5%), the resumption of interest rate cuts, and the start of investments financed by EU funds. Here, we maintain that the Polish economy could grow by 4% next year.
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