Economic news    

• FISCAL POLICY: The newly established Poland’s Fiscal Council issued its first post-meeting statement. The body assessed that the fiscal consolidation measures presented and implemented by the government are insufficient to ensure public debt stabilization. It further noted that the imbalances accumulated in fiscal policy are substantial and that the budget deficit has a chronic and structural character, implying that its correction will require measures on both the expenditure and revenue sides. The Council is scheduled to meet on a monthly basis this year.
• MONETARY POLICY: The Monetary Policy Council member Marcin Zarzecki stated that a further decline in inflation this year is possible, however, strong domestic demand and elevated wage growth pose risks to the disinflationary scenario. At the same time, he argued that the expansionary stance of monetary policy in Poland is evidenced by declining real interest rates despite falling inflation expectations. In his view, a 25 bps rate cut could be justified, whereas a swift 50 bps reduction would not be appropriate under current conditions.
• LABOUR MARKET: In line with our expectations, January wage data in the corporate sector showed a marked deceleration in annual growth, to 6.1% yoy from 8.6% in December. The primary driver was base effects linked to elevated year-end bonuses paid a month earlier. Employment in the corporate sector declined by 0.8% yoy compared with a 0.7% decrease in December. However, this figure provides limited insight into the underlying trend, as the January reading is distorted by a change in the sample of enterprises surveyed by the Central Statistical Office. We discuss these data in greater detail in the comment.
• INDUSTRY: Industrial output fell by 1.5% yoy in January, following a 7.3% increase in the previous month and against a consensus forecast of 2.7% growth. As anticipated, January served as a correction to the strong reading recorded at the end of 2025. Meanwhile, construction output significantly underperformed plunging by 12.8% yoy. The magnitude of the negative surprise stemmed from an underestimation of the impact of severe frost on industry and construction activity. We provide a more detailed discussion of both releases in the comment.
• RETAIL SALES: Winter conditions did not freeze the Polish consumer. Retail sales growth moderated from 5.3% to 4.4% yoy in January, yet the result remains solid (consensus: 3.1%). Sales of clothing and footwear recorded strong growth, sales of furniture and consumer electronics and household appliances remained elevated. By contrast, car sales disappointed markedly. We wrote more about this data in the comment.

Housing prices in Poland fell in 2025

Last week, the National Bank of Poland (NBP) published data on real estate prices for 4Q25. The latest data are not revolutionary - they confirm the continuation of trends observed in recent quarters and provide support for our forecast of a decline in real estate prices.

We begin with the key conclusion – transaction prices declined in 2025. As at year-end, transaction prices in the primary market fell by 0.8% yoy, while in the secondary market decreased by 0.4% yoy. The period of stabilisation and/or marginal declines in transaction prices has persisted since mid-2024. When was the last time such a situation occurred? In the primary market – in Q4 2014; in the secondary market – in Q3 2016; and in both markets simultaneously – in Q2 2013.

Transaction real estate prices (% yoy)
 
Source: National Bank of Poland, Pekao Research

More important, however, is the decline in real prices (adjusted for inflation) and the improvement in housing affordability (i.e. the decline in prices relative to wages). Real prices fell by 3-3.5% yoy in the second half of last year. At the same time, housing affordability improved for the sixth consecutive quarter. The floor area of dwelling that can be purchased for the average monthly wage in the national economy (and it is worth noting that wages accelerated beyond expectations toward the end of the year) increased by 11-12%, depending on the market, reaching in Q4 its highest level since 2018.

Naturally, the majority of dwellings (particularly those intended for own use) are purchased using mortgage financing. Actual affordability is therefore a function of prices, wages, creditworthiness, and the average size of the purchased dwelling. More comprehensive indicators point to a more moderate improvement in affordability, partly due to interest rates remaining markedly higher than in 2018–2019. Nevertheless, interest rates continue to decline and lending standards are being gradually eased, which supports the view that broader measures of affordability will continue to improve.

Floor area (sqm) that can be purchased for the average monthly wage in the national economy (based on transaction prices)

Source: Macrobond, Statistics Poland, National Bank of Poland, Pekao Research

What’s next? Our baseline scenario points to an imminent, albeit moderate, rebound in residential property prices. In our November forecast update, we indicated that by the end of 2026 house prices could increase by approximately 5% yoy. A revision of this forecast will follow later this year. It is worth noting that the market is still grappling with a supply overhang, which has only recently begun to unwind. This also explains the relatively subdued activity in newly commenced residential developments in the second half of 2025. In our view, however, the consensus remains overly pessimistic. Demand will ultimately pull supply higher.

Listings of dwellings for sale (% yoy)

Source: nieruchy.pro

Financial market update

Last week was marked by a sell-off of Polish assets, although its scale was modest and it didn't violate trends and fluctuation ranges of previous months. This was particularly true at the end of the week, when the sell-off accelerated on the domestic FI market. Ultimately, we mark last week as one in which IRS rates rose by 1-7 bps, bond yields by 3-10 bps, and the zloty weakened against the euro by just over 2 gr. There was no fundamental reason for this. If anything, domestic data (weak production, low wage growth) should have encouraged more aggressive pricing of the path of future rate cuts. Since the market didn't react this way, there's a good chance that such scenarios were already priced in, and only inflation can move the market more. Generally, the direction of changes in domestic asset valuations was consistent with signals from abroad (although, for example, the curve shape evolved quite differently - steepening in Poland, flattening abroad). In the coming days, Polish market will remain under the influence of global factors.