Polish economy started to slow down
In Q1’26 Poland's GDP slowed to 3.4% yoy, matching consensus, but coming below our rather optimistic forecast (3.8% yoy). At this stage, we do not know the details of Q1 GDP, but we assume the main reason for the slowdown was a sharp drop in construction investment caused by a harsh winter. These figures, in our opinion, were not meaningfully affected by the Iran war – we expect to see these effects in the coming quarters, though. In our view, Poland's GDP will rise by 3.5% this year and by 2.7% next year.
Poland's GDP (previous year's prices, % yoy)
Source: Macrobond, GUS, Pekao Research
The beginning of the year was a bit weird for the Polish economy: one of the main measures of economic activity grew at a steady, solid pace (3% yoy), second accelerated the most in four years, to 6.3% yoy, while the third dropped by over 8% yoy. These indicators are, respectively, industrial production, retail sales and construction output. The behaviour of Q1 GDP therefore does not bear the hallmarks of a cyclical slowdown, but rather is the result of delays in construction investment, which will be made up in the coming quarters. In our opinion, total investment at the start of the year fell by 1.5% y/y. Why our optimism regarding overall GDP did not materialise, we do not know, but we suspect that consumption was not as buoyant as the retail sales data had suggested.
In the coming quarters, we should expect investment to return to regular paths, set, among other things, by the schedule of absorption of EU funds. On the other hand, private consumption has passed its peak and will be under pressure due to rising inflation and further slowdown in real household income. This process will be stretched over time – we expect the inflation to peak at the end of the year, with household consumption will bottom out at the beginning of next year. Apart from weak consumption, the oil shock will affect Polish GDP indirectly, through lower demand from foreign customers. This is also yet to come. The slowdown in Polish GDP in the first quarter fits the European landscape – in the eurozone, GDP slowed from 1.3% to 0.8% y/y (excluding Ireland, from 1.2% to 1.0% y/y) – but is modest overall.
Eurozone and Poland GDP (chained, s.a., % yoy)
Source: Macrobond, GUS, Pekao Research
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