The Polish economy will likely expand 0.6% in 2023 before rebounding to 2.7% next year, the European Bank for Reconstruction and Development (EBRD) said in the latest edition of its Regional Economic Prospects report on September 27.

The outlook for this year is the same as in the report’s May update, as economic activity remains subdued as household consumption has been hit with inflation while “increased financing costs and a further delay in transfers from the EU’s pandemic recovery fund have hampered investment,” the EBRD said.

The macroeconomic picture is about to get rosier in 2024, even though the EBRD’s forecast for next year was cut 0.3pp compared to May.

Still, “the expected return to positive real wage growth, low unemployment and an improvement in consumer sentiment” are expected to drive recovery.

The central bank’s larger-than-expected cut in the main policy rate – by 75pp to 6% in early September - will also provide some relief to indebted households and companies, though disinflation is expected to be slower than this year’s, also reflecting the depreciation of the zloty against the euro, according to the EBRD.

Poland’s inflation descended from 18.4% y/y in February to 10.1% in August and is expected to compress further to around 6%-7% by the end of the year. A return to the central bank’s target of 1.5%-3.5% could take until 2025, however.

While falling inflation, cheaper credit, and real wages’ growing again are all expected to revive consumption, risks related to investment are forecast to remain, according to the EBRD. 

“More delays in transfers from [the pandemic recovery fund] and uncertainty about potential increases in energy prices constitute main risks to improvements in investment,” the EBRD said.

Investment stood at 16.7% of GDP in 2022, below the EU-average level of 22.5%, the EBRD said.