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EBRD expects modest 2023 growth in Poland

By Nigina Mirbabaeva

  • EBRD expects gross domestic product (GDP) growth in Poland to be a modest 0.6 per cent this year
  • Growth projected to pick up to 2.7 per cent in 2024
  • Persistent high inflation and slow growth in advanced economies weigh on growth and projections

The Polish economy is expected to grow by a modest 0.6 per cent this year, according to the European Bank for Reconstruction and Development (EBRD)’s latest Regional Economic Prospects report. GDP growth is projected to pick up in 2024 to 2.7 per cent, a slight downward revision from its May 2023 forecast of 3 per cent.

The latest forecast reflects the sharp drop in Poland’s economic activity, which contracted by 0.8 per cent in the first half of 2023. The second half of 2023 is expected to be stronger, as real wages and consumer confidence recover with falling inflation, and public investment picks up.

While economic activity remained robust in 2022, persistently high inflation, which at 10.3 per cent was among the highest in the EU, has resulted in tighter household budgets and reduced investment by firms.

The National Bank of Poland’s larger-than-expected cut in the main policy rate, by 0.75 percentage points to 6 per cent in early September, will likely provide some relief to indebted households and companies, although disinflation is expected to be slower, also reflecting the depreciation of the zloty against the euro.

At the same time, weaker global demand for manufactured goods is hampering growth in advanced economies, with whom Poland is closely integrated through trade linkages. This has in turn weighed on its exports.

Nevertheless, several factors offset the negative trends.

While nominal wages increased rapidly in Poland amid high inflation, the increase has been matched by labour productivity gains, increasing its competitiveness in relation to other advanced European and emerging market peers. In June 2023 economy-wide real wage growth turned positive for the first time since the end of 2021.

At the same, like other emerging European peers, Poland saw a decline in gas consumption during the winter of 2022-23, following the reduced supply of gas from Russia, and much higher energy prices.

The bulk of the adjustment came from the shift in manufacturing from gas-intensive industries to less carbon-intensive industries, such as electrical equipment, car manufacturing and pharmaceuticals. Basic metal production declined by 18 per cent year on year, while electrical equipment production increased by 21 per cent year on year.

Combined with the recently stabilised energy prices, this has provided some relief to the current account, which turned to a surplus in the first half of 2023.

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