Poland’s economy should grow by 2.8 percent in 2024, a significant rise over 2023, which saw 0.2 percent growth; this will be propelled by rising consumption, higher incomes, and lower inflation, according to Palolo Gentiloni, the European commissioner for economic affairs,
The European Commission’s forecast for Poland predicts that investment will play a smaller role in growth in 2024 compared to last year. It also forecasts an increase in imports due to higher consumption, which will negatively impact the balance of payments. The commission notes that despite an economic slowdown in 2023, the labor market remained buoyant. Due to negative demographic trends, unemployment is unlikely to rise significantly, even though the number of jobs is likely to fall.
The commission also anticipates a sharp rise in incomes due to a 20 percent increase in the minimum wage and low unemployment. This means real incomes will rise markedly in both 2024 and 2025. Inflation, on the other hand, is expected to decrease to 4.3 percent in 2024 and 4.2 percent in 2025, provided the rise in energy prices is contained and the growth in real incomes is met with adequate supply.
The European Commission notes the deteriorating state of Polish public finances in 2023, leading to a rise in the public deficit to 5.1 percent of GDP. This was the result of higher defense spending, price subsidies in the energy sector, tax reforms, and the costs of hosting Ukrainian refugees.
The public sector deficit is expected to rise to 5.4 percent of GDP in 2024 due to higher social spending and pay increases in the public sector. However, as a result of higher economic growth, the commission expects the deficit to fall to 4.6 percent of GDP in 2025.
This indicates that the Polish economy will outperform the EU average by a significant margin. The European Commission forecasts economic growth in the EU to reach 1 percent this year and 1.6 percent in 2025. However, the commission is wary of geopolitical tensions that could easily disrupt these forecasts.
While inflation may be falling, the European Commission does not expect central banks to be ready for sharp interest rate cuts due to political and security uncertainties.
