Economic news

• ELECTION: Karol Nawrocki, supported by the right-wing political party Law and Justice (PiS), wins the presidential election, receiving 50.89% of the votes in the second round. The Civic Coalition candidate Rafał Trzaskowski received 49.11% - the National Electoral Commission reported today, providing data from 100% of the districts. Below we wrote more about the result's potential economic implications.
• INFLATION: Consumer inflation (CPI) in Poland once again surprised with a stronger-than-expected rate of decline. According to the flash estimate, it fell to 4.1% yoy in May (we assumed 4.2%, consensus forecast 4.3%). It is worth noting that prices fell by 0.2% month-on-month - this is the first price drop since September 2023. Inflation will very likely reach the inflation target (2.5%) as early as the third quarter of this year. We wrote more about this reading in our commentary. 
• RETAIL SALES: Retail sales surprised strongly on the upside, increasing by 7.6% yoy in April, more than twice as fast as the consensus has predicted. This significant acceleration is half the result of late Easter and an increase in the propensity to consume in many areas (from cars to construction materials). We cannot rule out the influence of temporary and one-off factors here, so we recommend caution. Nevertheless, the Polish consumer is looking better and better. We wrote more about this data in our commentary. 
• PMI: The PMI for manufacturing in Poland unexpectedly fell sharply in May to 47.1 pts from 50.2 pts in April. The May level signals the sharpest deterioration in manufacturing sentiment since June 2024.
• FINANCIAL RESULTS: In parallel with retail sales, the StatOffice published data on the financial results of enterprises in the first quarter of this year. In light of this data, the beginning of the year brought an improvement in the profitability of companies - the gross financial result increased by about 14% yoy due to decreases in operating costs with stabilization of revenues and profitability indicators increased by 0.4-0.6 percentage points year-on-year (however, they remain lower than multi-year averages). It was also reported that investment expenditures of companies fell by 3.6% yoy, which means an improvement in relation to previous quarters (decreases by 8-10% yoy). The structure of investment expenditures is consistent with what we saw in the detailed data on construction output. Expenditures of private companies, primarily processors, look weak (maintaining double-digit declines), expenditures in the energy, water supply and transport sectors are recovering (although slower than initially assumed). On the other hand, investments by construction companies were significantly positive (+41% yoy), which suggests that the sector is preparing for an increase in investments in the coming years. All in all, these data confirm a slightly slower than expected start to the investment cycle this year. However, this has not borne out in national accounts data. 
• GDP: Statistics Poland confirmed that GDP rose by 3.2% yoy and 0.7% qoq. However, there are surprises in the details of the release. Investment surged to 6.3% yoy, well above our updated assumptions. This puts our forecast of double-digit investment growth in 2025 back on track and suggests that machinery and equipment made up for the weakness in construction output. Apart from strong investment figures, there were no major surprises. Household consumption rose by 2.4% yoy and exports increased by 1.1% yoy, close to our assumptions.  

Suprising presidential election results

The official results of the runoff of Polish presidential elections are in. Karol Nawrocki, supported by the current opposition, won with 50.9% of the vote, beating Rafał Trzaskowski who represented the ruling coalition. The result was well within the polling margin of error, but markets (see Polymarket and betting odds) generally assumed that the coalition candidate had a modest edge. It is therefore not a surprise that Polish assets sold off today. There are several macroeconomic and financial market implications of the election, although few of them are immediate.  

First, the president’s main prerogative is the ability to veto bills. The veto can then be overruled by the parliament with 3/5 majority but ruling coalitions in Poland rarely command such a majority and neither does the current one. In addition, the president appoints several key government officials, including the NBP governor and three MPC members. 

Second, the current parliament is unlikely to pass meaningful legislation going forward, and it is even less likely that major new laws will come into effect, absent a broad political consensus. Such a consensus applies to a limited set of issues such as national defense and major infrastructure projects. This means that fiscal tightening will not be accelerated, and the current baseline will involve only modest measures (scheduled excise tax hikes and freeze on public sector wages and PIT income thresholds).  

Third, Poland is now entering the period of elevated political risk and higher uncertainty. The likelihood that the next parliamentary elections will bring a different coalition into power has increased. It is also possible (though not very likely – the parliament decides that) that the next elections will be called early. It underscores, however, the idea that yesterday’s election cannot be seen in isolation, but rather as a part of a broader political cycle that will play out over the next few years.  

Fourth, it is now virtually certain that the next NBP governor will be appointed and confirmed by the same political party as the current one. The degree of continuity in monetary policy will thus be unprecedented. It is worth noting that the new president will appoint one MPC member this year already (C. Kochalski’s term is not synchronized with the rest of the Council).  

Finally, investors should assume that the NBP will become more hawkish over the medium term as the balance of risks to fiscal policy is shifting towards easier fiscal policy. Since the short-term inflation outlook is overwhelmingly dovish, it would be very difficult for the Council to drop interest rate cuts altogether. 2026 and 2027 seem to be a different story and the return to a neutral level of interest rates (3.5%) will be delayed considerably.  

Financial market update

PLN weakened by 0.6%, WIG20 dropped by 1%, bond yields rose by 8-10 bps. It is not a political earthquake, but markets have been surprised by the results of the elections. We are discussing its ramifications in the previous segment, but it is important to note that it will be a long process. Poland is, however, entering a new political cycle. Political factors are likely to move into the background this week as monetary policy takes the center stage. It is unlikely that the MPC will cut rates this week, but the near-term inflation outlook has become very favorable, and this might shift the odds towards a July cut. The governor’s press conference on Thursday will be very important since the NBP tends to announce such decision with one month advance. Apart from local factors, US data will also be relevant.