Polish economic growth has peaked
According to a flash estimate, GDP grew by 3.5% yoy in the third quarter of this year. This is a slight disappointment, but all forecasters had anticipated a slowdown in GDP growth due to relatively weak high-frequency data, particularly regarding the construction sector. We do not have the details of the reading, but we suspect that investment is to blame, as it was heavily impacted by the weakness in the construction sector in the third quarter. The peak in GDP and investment growth is likely behind us, but further revisions may change the final figures.
GDP (constant prices, s.a., Q4’19 = 100)
Source: Statistics Poland via Macrobond, Pekao Research
GDP rose by 3.5% yoy (previous year prices) and 0.8% mom (s.a., 2020 prices). While the Polish economy is losing momentum, this slowdown is generally mild. The question of what’s causing this leg of the slowdown is, of course, still open, and Statistics Poland (GUS) will provide an answer in about two weeks along with its next GDP estimate. We suspect it stems from investment. It is well known that construction output was a major disappointment in the third quarter. The reason is also clear now. The main factor was the performance of investments in railways and other rail infrastructure (excluding rolling stock), which slowed from +87% yoy in the second quarter to 8.5% yoy in the third. This subtracted approximately 5 p.p. from the growth rate of construction and installation output and 0.2 p.p. from GDP growth in Q3. The disappointing GDP data suggests that GUS had no doubts about the nature of the problems affecting the construction sector and interpreted this as lower outpit. We will, of course, continue to monitor the construction sector in the coming months, as a rebound from these losses cannot be ruled out.
Construction output: railways (% yoy)
Source: Statistics Poland
Have we already passed the peak in GDP and investment growth? We admit that we’ve put some color on the title of this commentary. GDP has remained very stable in recent quarters; the strong results at the end of last year (4.0% and 4.3% yoy) were driven by both a low base and the economy’s current momentum. 3.5 is, of course, less than 4.3, but in practice the difference isn’t that significant. However, there are reasons to believe that GDP will slow in the coming quarters (primarily in 2027): weak consumption, the winding down of investments financed by the nonrefundable portion of the National Recovery Plan (KPO), the spillover effects of tighter global monetary policy, and risks surrounding the AI boom. We therefore maintain that Poland’s GDP will grow by 2.9% next year.
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