Economic news

• ELECTIONS: In the presidential elections, Rafał Trzaskowski, the candidate of the ruling centrist-liberal Civic Coalition (KO), won the largest share of the votes with 31.4%. However, Karol Nawrocki, the right-wing Law and Justice (PiS) candidate, finished a close second with 29.5%. The two will face each other in the runoff elections in two weeks. The first round delivered stronger-than-expected results for right-wing candidates — notably Sławomir Mentzen with 14.8% and Grzegorz Braun with 6.3% — compared to their center and left-leaning counterparts: Szymon Hołownia (5%), Adrian Zandberg (4.9%), and Magdalena Biejat (4.2%). 
• GDP: Poland’s real GDP grew by 3.2% yoy in In Q1 2025. This growth rate is fully in line with both the market consensus and our forecast. Compared to Q4 2024 (3.4% yoy), some deceleration can be observed, likely due to weaker industrial performance and private consumption at the start of the year. In our view, the strongest contribution to growth came from inventory buildup, which added 2.3 percentage points. We also expect that investments – which had been contracting in the second half of 2024 – returned to positive territory (1.1% yoy). Nonetheless, we will have to wait another two weeks for a full breakdown of the growth components. 
• INFLATION: The CPI inflation rate has been revised slightly upwards from 4.2 to 4.3% yoy in the second reading. The pace of service price growth remains elevated (6.3% yoy) despite gradual disinflation; meanwhile, disinflation in goods prices was driven by slowing food prices and increasingly deep declines in fuel prices – lingering effects of trade wars. 
• RATES: After the moderately hawkish turn of the president of National Bank of Poland a week ago, other members of MPC (e.g. W. Janczyk, H. Wnorowski) have followed his lead and suggested that the scope of the remaining interest rate cuts this year is close to 50 bps, in two steps starting in July the earliest.  
• TRADE BALANCE: The balance of trade has been in a deep negative territory in March 2025 scoring a deficit of 1.4 bn EUR – below consensus of forecasts which expected basically a balanced reading. The negative surprise was mostly caused by the acceleration of imports of goods. We have written more about this issue later in this report.  
• BUDGET: Between January and April, the state budget recorded revenues of PLN 176.4 billion (28% of the amount planned in the budget act) and expenditures of PLN 267.8 billion (29% of the plan), resulting in the realization of 32% of the projected deficit (PLN 91.4 billion). On a positive note, it’s worth highlighting the rebound in VAT revenues in April (up from PLN 20.7 billion in March to PLN 27.5 billion). However, CIT revenues still look very weak. After four months, they are 3% lower than in the same period of 2024, suggesting no improvement in corporate profitability in Poland. PIT revenues are harder to interpret this year, as a much larger portion is now directed to local governments compared to previous years, due to the reform of their financing model. 
• DEBT AUCTION: Last week, the Ministry of Finance sold six series of Polish government bonds worth PLN 9.8 billion in an outright sale auction, including PLN 0.8 billion in a supplemental auction. Investor demand reached PLN 12 billion. In April, the Ministry sold PLN 7.4 billion in retail bonds, up from PLN 5.4 billion in March. 
• REAL ESTATE: The growth in residential real estate prices in Poland is clearly slowing and is now below the rate of inflation (meaning that prices are falling in real terms). In Q1 2025, prices in the primary market rose by 4.4% yoy, according to data from the NBP, while inflation during the same period stood at 4.9% yoy. It can be expected that we will soon see nominal declines in property prices as well, although the scale of the drop will likely be modest. In the longer term, housing prices should stabilize due to rising demand, driven by falling mortgage interest rates. 

Poland's trade balance still in the red

Last week, besides the GDP data for 1Q 2025 (discussed here), we have received the balance of payments reading for Poland in March. While this may not be top-tier market mover, it is worth refreshing our understanding of what's going on in Poland’s foreign trade. 

March itself surprised analysts with a high deficit, both in the current account (EUR 1,419 million deficit) and in the goods account (as much as EUR 1,895 million). The particularly high volume of imports came as a surprise. The story of Poland’s trade balance has remained unchanged for some time now – the country has been running a deficit since mid-2024. In nominal terms, goods imports once again rose much faster in March (up 9.1% year-on-year) than exports (up 1.4% year-on-year). 

Export and import of goods in Poland (nominally, %yoy) 

Source: NBP, Pekao Research 

There are several reasons for this. One can no longer blame price effects (as was the case in 2021–2022, when the prices of imported industrial and energy commodities surged dramatically). On the contrary – prices of industrial and energy raw materials are currently at low levels. The challenges facing Polish exports have been known for some time (weakness of foreign trade partners, strong złoty), and now the issue of a trade war has emerged. Our direct exports to the U.S. may not be large, but indirectly (e.g., through the German economy), this will represent an additional channel weakening Polish exports. 

What weighed most on export growth rate was the continued weakness of the European automotive sector and a further decline in foreign sales of durable consumer goods. Moreover, since the beginning of 2023, the average monthly volume of Polish exports to EU countries has been decreasing. At the start of 2023, it stood at over EUR 23 billion, whereas now it has dropped to just over EUR 21 billion. Part of this (about ¼) has been redirected outside the EU (with growth over the same period from EUR 7.4 billion to EUR 7.9 billion). 

Export of goods from Poland to EU countries and outside of EU (EUR bn, SA) 

Source: NBP, Pekao Research 

On the other hand, imports are being driven by import-intensive private consumption, which is currently the main engine of Poland’s GDP growth. The largest increase in imports occurred in consumer goods, fueled in part by a double-digit rise in the value of imported durable goods. This is clearly visible in the structure of Poland’s trade balance – for many months now, the surplus in international trade in consumer goods has been steadily declining. 

Structure of Polish balance of trade, % of GDP 

Source: Eurostat, Pekao Research 

Financial market update

The initial reaction to the results of the first round of the presidential election was negative (EUR/PLN went up from 4.27 do 4.29), but it is difficult to get a reliable reading during the Asian trading session. We will learn more about how markets perceive Polish institutions and the policy mix after the elections once the Warsaw Stock Exchange opens. Nevertheless, valuations must now factor in a much tighter second round than previously expected just a few days ago – and, consequently, a lower likelihood of political stability over the coming years. 

The coming days will be interesting not only because of the final stretch of the presidential campaign but above all due to this week’s scheduled macroeconomic data releases. Among them, the most important will be the figures on wages and industrial production – since the Monetary Policy Council's (RPP) response function depends both on this year’s economic growth outlook and wage growth rate.