Polish economic growth accelerated to a seasonally adjusted 4.4% y/y in the second quarter, statistics office GUS confirmed on August 31.

The economy grew 1.1% q/q in seasonally adjusted terms, while unadjusted annual growth came in at 3.9% y/y in the second quarter, GUS also noted. Growth relied on household consumption yet again in the second quarter, while investment growth disappointed, as the expected surge in public investment is yet to happen.

The performance of the economy sat on the back of a 5.6% y/y expansion in domestic demand (unadjusted data), compared to the annual growth of 4.1% in the previous quarter. That included 4.9% y/y growth in private consumption, which gained 0.2pp against the annual reading in January-March. 

The expectations for a decisive rebound in gross fixed investment fell flat, however. Investment grew a disappointing 0.8% y/y, even if the growth marked an end to the investment lull that began in the first quarter of 2016. 

Analysts suggest the mediocre investment growth is largely the result of the prolonged difficulties in getting EU-financed public investment off the ground. With private investment doing fine, the protracted recovery in public spending midway through 2017 suggests “accumulation” of public investment in 2018 and 2019, mBank notes.

The slow growth in investment happened despite a 9.8% y/y pick up in the construction sector. Retail and industry also showed positive performance, while the negative contribution of export surprised, as it ran counter to the observed uptick in the economic activity in the Eurozone, Poland’s main export destination.

Despite limping investment, with consumption going strong, the outlook for the remainder of 2017 is positive.

“There are risks to the upside to our current 2017 forecast at 3.8%,” Erste admitted. The composition of growth is likely to shift in the second half of the year and into 2018, the Austrian bank forecasts.

“We expect private consumption to slow somewhat in the second half of the year and investment to recover further. We also see robust investment growth as a key factor for sustaining solid economic performance next year as consumption growth is likely to slow down,” Erste’s Katarzyna Rzentarzewska wrote.

Erste also noted a small risk to inflation overshooting the central bank’s target of 2.5% this year. That said, mBank described growth in Poland as having “a pro-inflationary structure”.

“With a high starting point, the November [inflation projection from NBP] will be interesting,” mBank noted.