Economic News

• INDUSTRY: In September, industrial production surprised strongly on the upside, with a 7.4% year-on-year growth, compared to 4.7% yoy expected by the consensus of forecasts and 5.9% yoy expected by us. The surge in production was driven by a low statistical base from September 2024 and calendar effects (more working days). However, the overall performance of manufacturing was strong in its own right – particularly in the automotive sector, which was the main contributor to the upside surprise. A detailed comment on the data can be found here.
• LABOUR-MARKET: Wage growth in the enterprise sector in September was 7.5% yoy – in line with both our and the consensus forecasts, and slightly up from 7.1% year-on-year in August. The acceleration was mostly driven by one-off factors (e.g., more working days) and does not significantly alter the broader trend of easing wage pressures. Employment in the enterprise sector declined by 0.8% yoy in September – the same as in August and in line with expectations. A detailed commentary on the data can be found here.
• INFLATION: Statistics Poland confirmed that consumer prices rose by 2.9% yoy in September. Our comment on the flash release is thus still valid. In the coming months we expect the inflation to stay between 2.5-3.0 yoy and thus create space for interest rate cuts.
• INTEREST RATES: Several MPC members made public statements last week, all of them urged caution and restraint. According to Ireneusz Dąbrowski, the MPC is willing to cut interest rates further, but not necessarily on the next meeting (November). Henryk Wnorowski does not rule out a November cut either, but he sees this as the less likely scenario. Finally, Gabriela Masłowska sees limited room for further monetary easing this year. We continue to forecast interest rate cut in November 2025.
• GDP: Statistics Poland has revised quarterly GDP figures for the first half of 2025. The overall growth rate for 1Q25 remains unchanged at 3,2% yoy and the figure for 2Q25  was revised slightly down from 3,4 to 3,3% yoy. The structure of growth in both quarters changed towards (slightly) higher contribution of private consumption, less negative contribution of investments (in 2Q25) and more negative contribution of net exports.
• BALANCE OF PAYMENTS: Current account deficit surged to EUR 3 bn in August, more than twice the amount that was forecast by market consensus. Some reasons for the surge were understandable: the decline in exports and imports can be explained by working day effects and seasonal retooling pauses in car factories. The main source of the surprise thus lies in highly volatile primary income balance – in August there was a major increase in outward FDI income. Thus, we do not see the data as negative. On the contrary – trade balance should be bottoming out right now.
• DEBT: The Ministry of Finance sold PLN 11.3 bn of Treasury bonds (including the supplementary aution). The demand was very strong, at PLN 17.7 bn.

Some positive news on Polish fiscal stance

In September, the budget deficit increased by another PLN 29 billion, surpassing PLN 200 billion since the beginning of the year. While these figures may raise concerns, they are not surprising and do not indicate a deepening of the country’s fiscal problems.

Let’s start with government spending. In September, expenditures amounted to PLN 82.2 bn – about PLN 15 bn more than the average for previous months in 2025. However, this increase was entirely due to the redemption of maturing bonds issued by Polish Development Fund at the height of pandemic worth of PLN 15.2 bn. This was the third such redemption this year (totaling PLN 50 bn) and reflects the Ministry of Finance’s deliberate policy of transferring off-budget debt servicing costs to the state budget (due to lower financing costs).

On the revenue side, September showed an improvement compared to previous months. The biggest positive surprise came from non-tax revenues, including proceeds from the sale of CO₂ emission allowances and dividends from state-owned companies. These revenues amounted to PLN 7.8 bn in September – the highest so far this year and 66% more than a year earlier. VAT and excise tax revenues rose by 12% yoy – the highest growth since May 2025. CIT revenues also performed well, increasing by 13% compared to the same period last year.

Altogether, these developments point to an improvement in the state budget's situation relative to our earlier forecasts. However, they are not sufficient to fully offset the shortfall in VAT revenues compared to assumed in the budget bill, accumulated since the beginning of the year. The Ministry of Finance still needs to make savings of around PLN 20 billion to stay within the deficit limit set for 2025. Part of this amount will likely be covered by so-called natural savings (e.g., unused general reserves in the budget), but some expenditures will also likely be shifted to off-budget funds, managed by the Polish Development Bank, which has already announced plans to issue an additional PLN 10 billion in new debt this year.

Growth of tax revenues, % yoy of 12-month rolling sums

Source: Ministry of Finance, Pekao Research

Financial Market Update

Friday’s movements in the Polish złoty reflected developments on the core markets. The Polish currency initially weakened against the euro but began to appreciate in the second half of the day. The momentum was strong enough for EUR/PLN to break through the entire support zone in a single move and approach the lower boundary of that range. The next stop for EUR/PLN is 4.23. If this level is breached, we may finally erase the effect of the so-called "Liberation Day" and return to exchange rate levels typical for the first quarter — for the first time in many months.

From our perspective, this would be somewhat surprising, as we had expected a return to the long-term upward trend in EUR/PLN. Perhaps that trend will still materialize, just from a lower starting point. Without getting ahead of the facts, it's worth noting that the increase in volatility on the local FX market is likely to be short-lived. In a few days, markets will begin to enter holiday mode, which typically does not support large, directional moves.

Meanwhile, the fixed income market has been uneventful in recent days. However, several important events lie ahead. Upcoming macro data releases for September could move the markets (with wage growth having the greatest potential), and on Thursday, another POLGBs outright sale auction is scheduled.