Economic news

• MoF-BUDGET: According to estimates by the Ministry of Finance, the budget deficit stood at PLN 89.294 billion as of April, representing 32.9% of the target. In the period January–April 2026, revenue amounted to PLN 187.000 billion (28.9% of the target), whilst expenditure stood at PLN 276.295 billion (30.1% of the target). We provide further details on the implementation of the state budget in April in the next part of this report.
• CPI: In its final estimate, the Central Statistical Office (GUS) confirmed that CPI inflation accelerated to 3.2% yoy in April, up from 3.0% the previous month. The data show a moderate impact of the spreading fuel crisis – the most notable price rises in April were in air transport (62% mom), package holidays, and energy, mainly via gas cylinders. These categories alone pushed up April’s inflation by 0.2 percentage points. Core inflation also rose to 2.9% y/y. We assume that, should the current state of affairs in the Persian Gulf persist, inflation may rise to 4% yoy by the end of the year.
• BoP: The current account deficit in March stood at EUR 234 mn, compared with a consensus forecast of an EUR 1.05 bn deficit. Exports rose by 7.4% yoy, whilst imports increased by 3.8% yoy. The National Bank of Poland (NBP) stated in a press release that higher prices had led to an increase in the value of exports of copper and raw silver. Meanwhile, the value of goods imports was most affected by a simultaneous rise in fuel prices and an increase in fuel stocks. Cyclically, the trade balance has already passed its trough and is gradually beginning to move out of deficit. Unfortunately, the outbreak of the fuel crisis and the subsequent sharp rise in the prices of imported energy commodities will push the trade balance back towards a deeper deficit (lower terms of trade). A high surplus in services continues.
• WAGES: The average monthly gross wage in the first quarter of 2026 rose by 6.7% yoy to PLN 9,562.88, according to the Central Statistical Office (GUS). The wage growth rate across the economy as a whole was slightly higher than in the enterprise sector over the same period (6.3% yoy), but for several quarters now we have been seeing a narrowing gap between these indicators.
• MPC-OPINION: M. Zarzecki of the Monetary Policy Council (RPP) stated that the baseline scenario for interest rates is that they will remain unchanged until the end of 2026. The likelihood of interest rate hikes may also increase should current and forecast inflation exceed 3.5% yoy. In our view, this condition will be likely met in the autumn, when inflation shall exceed 4% and the NBP’s projection will likely show CPI dynamics above 3% in the medium term. However, we believe that the MPC will not decide to raise rates. 
• MPC-OPINION: During the Impact’26 conference, two members of the Monetary Policy Council (RPP) spoke: L. Kotecki and P. Litwiniuk. Both indicated that, at present, the most likely scenario for the interest rate path involves rates remaining stable, at least until the end of 2026 or mid-2027. Council representatives assessed that scope for discussion on monetary tightening would only emerge following the publication of the NBP’s July macroeconomic projections – but on condition that the war in the Middle East continues to drag on. Both MPC members also agreed that the balance of risks currently leans more towards interest rate hikes (Kotecki: ‘we all agreed that we can forget about rate cuts’). L. Kotecki further noted that there are currently no signs of inflation spilling over, i.e. of so-called second-round effects; he also emphasised that the MPC cannot afford a repeat of 2021 and a belated response to rising inflationary pressures. We agree with L. Kotecki’s view that the potential for strong second-round effects is limited, primarily due to the weakness of the labour market. We also believe that the risk of a repeat of 2021 is low today, as before the outbreak of war in Iran, average annual CPI inflation in Poland was set to come in well below the NBP’s target.
• MPC-OPINION: H. Wnorowski of the Monetary Policy Council, speaking to Bloomberg, agreed with L. Kotecki and P. Litwiniuk that the reference rate should remain at 3.75% until July. Wnorowski also assessed that, from his perspective, the slowdown in economic growth resulting from the oil shock would be a more significant problem for Poland than accelerating inflation, and the MPC should therefore act with the utmost caution.
• IMF-OPINION: Speaking at the Impact’26 congress, IMF Managing Director Kristalina Georgieva stated that the oil shock linked to the war in Iran is not temporary, and that governments should use fiscal tools sparingly to mitigate the inflationary shock, as there may be a need to apply them over a longer period. In her remarks, Georgieva also devoted considerable attention to the issue of public finance consolidation in Poland. She emphasised that protective measures related to rising fuel prices should be targeted, and that Poland will need to carry out effective consolidation to remain on a path of sustainable development. The IMF chief noted the specific nature of the defence sector, which is highly import-intensive and has a low so-called multiplier (meaning it has a limited impact on economic growth). Georgieva also highlighted the challenges associated with Poland’s underdeveloped capital market and the lack of effective venture capital financing for innovation.
• PRICES: The “Ceny Paliwa Niżej” (CPN, Lower Fuel Prices)  programme has been extended until the end of this month, the Ministry of Finance has announced. The Minister for Energy, M. Motyka, pointed out that the current legal basis for the programme remains in force until the end of June and that a decision on its possible extension will be taken this month. Meanwhile, MoF A. Domański announced that detailed information on the proposed windfall tax, intended to finance part of the costs of the CPN programme, would be published within the week.
• TAXES: Minister of Finance A. Domański has announced that his Ministry will be involved in the work on the 3% digital tax proposed by the Ministry of Digital Affairs. The government plans to adopt the relevant legislation in the next quarter.
• GDP: According to a flash estimate by the Central Statistical Office (GUS), GDP rose by 3.4% yoy in the first quarter, close to the consensus but below our forecast of 3.8% yoy. The slowdown primarily reflected the weakness in investment in the first quarter, caused by the unfavourable weather conditions. We discuss these figures in more detail in a separate commentary.

Poland’s budget shows no breakthrough after April

On Friday, Poland’s state budget execution data for April were released. Unfortunately, there is little positive to say about them. The budget deficit in April alone amounted to just under PLN 20 billion which is PLN 1 billion less than in March, but PLN 4 billion higher than in April last year. The weaker performance was primarily driven by stagnation in VAT and excise tax revenues. Despite nominal consumption in Poland increasing by approximately 6% yoy, central government revenues from indirect taxes remained virtually unchanged.

This should not be attributed to the CPN programme (the reduction in VAT and excise duties on fuels), because although the measure entered into force in April, its impact on public revenues will only become visible in May, once companies submit their VAT declarations for April. The Ministry of Finance did, however, announce a shortening of the VAT refund period from 60 to 40 days in connection with the implementation of KSeF — the electronic VAT invoice registry. This temporarily reduces state budget revenues from VAT but balances out in the longer term, although it is not yet possible to assess the magnitude of this effect. It is therefore still too early to draw definitive conclusions. What is already clear, however, is that indirect tax revenues will fall short of the assumptions set out in the Budget Act due to the CPN programme as well as cooling of Polish economy. Only an unexpectedly effective tightening of the tax collection system through KSeF could still preserve the budgetary assumptions in this respect.

Other tax categories, by contrast, surprised positively. Corporate income tax (CIT) revenues amounted to PLN 11.1 billion, up as much as 28% yoy - largely reflecting the increase in the effective tax burden on the banking sector. Personal income tax (PIT) revenues were also strong, reaching PLN 7.4 billion, representing a 21% annual increase. However, the rise in tax revenues was more than offset by higher budget expenditures, which totalled PLN 81.5 billion in April - PLN 8 billion higher than in April of last year.

Source: Ministry of Finance

Despite the increase in the deficit in April, the condition of the state budget has been improving modestly over recent months. This is consistent with our view that the peak of fiscal pressures is now behind us. Nevertheless, there is little room for optimism, as the situation of off-budget funds remains challenging and they continue to contribute to rising public debt levels. Moreover, higher energy costs not only generate additional fiscal burdens for the state budget, but also weaken economic activity in Poland, thereby slowing the growth of tax bases. In our assessment, the general government deficit will remain only slightly below 7% of GDP this year, and there are currently no signs of a meaningful reduction next year. Financial markets and rating agencies have so far reacted calmly, but the risk of a rise in yields on Polish government bonds remains significant.

Financial market update

Global concerns about rising inflation and the potential for interest rate hikes have not spared Poland. The yield on the domestic 10-year bond closed at 5.96% on Friday. This is a high level (last seen during the height of the US-Iran conflict in March), and what is more, there are no significant resistance levels left below a yield of 6% (the last technical resistance was at 5.95%). Such high yields were accompanied by increased trading volumes in the fixed income market, particularly in interest rate derivatives (IRS), which may suggest that investors were attempting to hedge against rate rises or simply speculating on further rate hikes. At the same time, there were some signs of a relaxation in the foreign exchange market – Friday’s gains in EURPLN were halted by resistance at 4.25, whilst USDPLN is weakening this morning by 1 grosz from 3.66 to 3.65. Looking ahead to the coming week, we see grounds for very cautious optimism: in absence of adverse geopolitical innovations, global risk aversion and demand for the dollar should get slightly reduced. In such a scenario, we might see some correction in domestic asset prices (appreciation of the zloty, a fall in government bond yields, and gains on the stock market), but it must be reiterated that such a correction would take place against a backdrop of still-elevated POLGBs yields and concerns about the stability of the global debt market. In such conditions, it would not take much to prompt investors to engage in a sudden sell-off of bonds, which could push government bond yields upwards – even above 6%.