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Macroeconomic scenario

Economic growth

Two weeks ago we decided to revise our GDP forecast for 2026 and 2027 due to the effects of the Gulf war (lower household consumption and exports) and cold winter (delayed start to the investment cycle). At the moment we expect GDP to rise by 3.8% in 2026 and 3.6% in 2027 (compared to 4.0 and 3.8% previously). These days all forecasts are more provisional than usual, we are thus ready and willing to cut forecasts further if the war lasts for longer than we had anticipated or data turns sour.

Inflation

For now, an impact of the Middle East conflict on consumer inflation is directly visible primarily in fuel prices. It will be similar in April due to the introduction of the CPN program (the recently introduced government program reducing indirect taxes on fuels). The remaining components of the consumer basket have not yet responded to the energy shock, and core inflation remains stable.

However, in a scenario of a prolonged fuel crisis, second-round effects should be considered, which will gradually permeate other categories of goods and services. However, the current nature (dominant impact of fuels, with a smaller impact of other energy resources) and the scale of the current shock will have an incomparably smaller impact on inflation than in 2022-23. Therefore, it is possible that the 3.0% yoy in March will be this year's maximum.

Fiscal policy

The deficit of the entire general government for 2025 was 7.2% of GDP.  This is much higher than we had expected, taking the central budget outcome at face value. This means that a significant part of the deficit was placed in off‑budget funds, and Polish fiscal stance is worse than we had assumed. This increases the likelihood of a negative revision of Poland’s credit ratings in the autumn and, at the same time, pushes further away the prospect of a decline in the risk premium.

Labour market

Polish labor market remains on the back foot. Wage growth is well on its way to drop below 6% yoy (but not right now, likely in April), employment growth is holding at -0.8% yoy and unemployment is rising only due to seasonal and legislative factors (more on that further). Stagnation is the name of the game, labor demand remains low and will push wage growth downward.

Monetary policy

The Gulf war all but extinguished any appetite for rate cuts this year. Next year is a different beast, though. Direct impacts of the war (via energy prices) will mostly fade from CPI figures, second-round effects will be limited and economic growth will be weaker than this year (with various downside risks). This should create some room for resuming rate cuts. 3.25% is still within reach, but in 2027.

Financial markets

From escalation to deescalation in one day

The war is over, but peace has not yet begun. While we have a ceasefire and the announcement of U.S.-Iranian talks, we do not know what the post-war balance of power will look like or under what terms the war will end. Nevertheless, the ceasefire takes extreme risks and catastrophic scenarios off the table (for now. The reopening of the Strait of Hormuz, infrastructure repairs in the Gulf, and the restart of production where it had been suspended – all of this affects the future supply of crude oil, natural gas, and liquid fuels, and thus the trajectory of oil prices. We already know that prices won’t quickly return to the level seen at the turn of the year ($55), but it matters significantly for the economy whether they settle at $90 or $70 per barrel.

The war’s lasting legacy, market-wise

Nevertheless, for the markets as a whole, the effects of the war need not be permanent, and what matters for asset valuations is not so much the level of oil prices or GDP as GDP growth and  return to growth. If doomsday scenarios do not materialize, then from a macroeconomic perspective, the current episode will be remembered as a “soft patch” rather than a recession with an unpredictable and non-linear course and consequences. This also means that risky assets should return to their previous trajectory relatively quickly.

The interest rate market is interesting—rates hit local highs on March 27, and markets have since taken a step back in pricing in monetary tightening. In particular, the U.S. market no longer prices in a rate hike. In our view, the optimal macroeconomic response for central banks is a “wait-and-see” approach. However, risk management, reputational costs, and the experiences of recent years have shifted the consensus in central banking toward a hawkish stance. The plan, it seems, is to move interest rates higher within a broad neutral rate range. 

Will the NBP buckle under pressure? Surely not

Emerging markets adjusted to the oil shock primarily through interest rates rather than exchange rates. In Poland’s case, this meant a rise in market rates of 80–100 basis points and a shift from pricing in rate cuts to pricing in rate hikes. There is no domestic factor or historical precedent here—if anything, the first “war-related” inflation reading was quite mild. At the same time, the NBP assigns a low probability to rate hikes. Does the collision course between the markets and the NBP mean a clash? Not yet; in realistic scenarios, the moment when the market’s bet pays off is quite distant, and the deviation from the flat-rate scenario is small. The NBP has historically been able to withstand pressure like that.

Selected macro releases due this month

• Industrial production (our forecast March: 5.8% yoy) Business sentiment surveys point to higher input & output prices and delayed deliveries as the main effects of the Gulf war. The fallout has not yet spread to output and order. Based on that, one should treat March as a normal month, consistent with seasonal and cyclical patterns. Favorable calendar (+1 yoy in working day count) should facilitate that.
• Retail sales (our forecast March: 10.0% yoy) Several one-off and transitory factors will push retail sales up at the same time, creating a perfect storm for retail sales growth to reach a new cyclical high: early Easter, favorable working & trading day count, precautionary fuel purchases after the outbreak of the Gulf war, low base from the previous year and month. We therefore expect retail sales to have accelerated to 10% yoy.
• CPI inflation rate (our forecast March: 3.0% yoy) According to the flash estimate, Poland’s CPI accelerated sharply in March to 3.0% yoy, primarily due to rising fuel prices (+15.4% mom). For now, the impact of geopolitical factors is only visible in fuel prices. Core inflation remains stable and remained at the same level as in recent months, close to 2.5-2.6% yoy. It's possible that March inflation 3.0% yoy will be a local high this year.
• Wages in the enterprise sector (our forecast March: 6.3% yoy) In our view, slight acceleration in wage growth is to be expected in March (from 6.1 to 6.3%). We believe that wage growth is in a downward trend, but statistical factors can bump it temporarily. Such is the case in March – working day count was up and there was an additional trading Sunday (compared to none on March 2025).
• Unemployment rate (our forecast March: 6.1%) Non-economic factors are still messing with unemployment figures. Spending on active labor market policies was cut this year, pushing unemployment rate up in February and we are likely to see that again in March. Thus, seasonal decline in unemployment was arrested and we expect it to be stable relative to February.
• Current account balance (our forecast February: EUR 900 mn) The trade balance has passed its cyclical low and is gradually emerging from a deficit. Exports growth is improving but remains constrained by robust imports, fueled by import-intensive private consumption. The current account balance was positive in February due to a high surplus in services. Starting with the March data, nominal imports will be driven by high prices of imported energy resources, primarily fuels.
• NBP interest rate (our forecast April: 3.75%) The MPC will wait and see. Rates are unlikely to change this year.