Poland’s GDP expanded just 0.2% in 2023 (chart), the country’s statistical office GUS said on January 30.

Growth eased sharply compared to a robust expansion of 5.3% in 2022. The key source of the negative surprise was household consumption, which fell 1% last year, following a 5.2% increase in 2022, analysts say. 

“Consumption significantly suffered due to high inflation and interest rates,” Bank Millennium said in a comment on the GUS release. 

Inflation came in at 11.4% in Poland in 2023, more than four times the National Bank of Poland’s (NBP’s) target of 2.5%. Interest rates have lingered at their two-decade high of 5.75% after having been cut by 100bp in September and October.

Elsewhere, investment picked up expansion, growing 8% in 2023, compared to a gain of 4.9% the preceding year, GUS data also showed. Overall, domestic demand suffered a decline of 4.1% in 2023 after growing 5.2% in 2022. 

The economy is now expected to grow around 3% in 2024. "Green shoots in the survey data have emerged recently and we think that activity will bounce back over the coming months, driven by domestic demand,” Capital Economics said in a comment.

"Consumption revival is only a matter of a (short) time,” PKO BP said in a comment.

“Our full-year forecast of 4% consumption growth [in 2024] factors in a recovery in savings and is rather conservative, given the expected strong real wage growth. We believe that investment will remain on a growth path, as the financing gap associated with the end of the traditional EU financial perspective will be filled by the money from the EU’s pandemic recovery fund,” PKO BP also said.

In the fourth quarter alone, GDP growth likely accelerated to around 1% y/y from 0.5% y/y in the preceding three months, according to analysts. That is below expectations, primarily due to the weakness in household consumption.

Detailed fourth quarter data will be released in mid-February.

The slowdown in 2023 means that the National Bank of Poland is unlikely to change its monetary policy, as weak domestic demand will drive a gradual easing of price growth to low double-digits by December.