Polish GDP expanded 3% on the year in unadjusted constant prices in the first quarter, the country’s statistical office reported in flash estimate on May 13.

The reading should not have been too big a shock given the softening data releases in recent weeks. However, while the flash estimate did not offer a breakdown of the growth drivers, the reading was clearly below consensus expectation for 3.4% y/y growth. Analysts now see greater concerns over the prospects for the economy throughout the year, but generally believe results can still turn around, especially as the government's loosened fiscal policy kicks in.

“We are concerned about the level of investment, which fits poor readings from the construction sector recently. However, private consumption may still be a strong element of growth,” BGK bank writes.

“That said, we consider the poor result of the first quarter a reaction to a very strong fourth quarter, when many projects financed by the EU saw completion," the analysts continue. "We remain optimistic as to the upcoming quarters because growth in private consumption will pick up speed thanks to the good situation on the labour market and looser fiscal policy."

The positive outlook for the remainder of the year is also shared by Capital Economics. noting tailwinds to consumption are likely to continue for the next 6-9 months, and again, the likely effects of fiscal policy.

In adjusted terms in constant prices, the economy expanded 2.5% y/y and contracted 0.1% on a quarterly basis.