Economic news

• RATES: Contrary to widespread speculation that the war in the Persian Gulf would derail rate cuts, the MPC decided to cut interest rates by 25 bps during the March meeting. However, the governor admitted that the war was a relevant factor for rate setters. This is a clear upside risk for inflation. In addition, the Governor expects the war to be a long one, leading to another pause in the easing cycle. This sentiment was echoed by Henryk Wnorowski who expects the Council to hold rates until the war ends. It is worth noting that for the MPC rate cuts are still a matter of “when?”, not “if?”, i.e. the Council does not expect rate hikes and does not see terminal rates as altered by geopolitics. Last week the NBP also published the new staff projections. The NBP slashed its inflation forecasts for 2026 and raised GDP growth forecasts for 2026 and 2027. However, the exact numbers are irrelevant at this point – due to the war in the Gulf the projections are dead on arrival.
• GDP:  The second estimate of Q4’25 GDP confirmed that GDP accelerated to 4% in the final quarter of the year and averaged 3.6% in 2026. There are several interesting details that we decided to shed light on in the next section. However, the Iran war is likely to upend macro scenarios for the next several quarters.
• NBP: The NBP governor and the president discussed a financing scheme for military expenditures as an alternative to EU’s SAFE programme. The proposal assumes in one version that the NBP would take profit on its gold holdings without selling them and send the proceeds to the state budget.
• CREDIT: Recent data from BIK showed that the total value of mortgage applications rose by 49% yoy in February and their numer increased by 35% yoy over the same period. This continues to show the positive impact of monetary easing on the credit market.

Some additional thoughts on Q4 GDP

Last week Statistics Poland released the preliminary GDP estimate for Q4 of last year. At this stage, this is hardly a novelty for economists—essentially, it is the same information made public for the third time, following the annual data and the flash estimate for Q4. Instead of reviewing the GDP structure once again, we opted for a different analytical format. What, then, have we learned about the Polish economy from these data?

Exports return from a long slump

Annual data make it particularly difficult to derive export and import figures for Q4, as the Statistical Office only reports the yearly contribution of net exports. This contribution is consistent with an infinite number of possible combinations of export and import growth in the final quarter. Such was the case in 2025 as well— we learned that exports rose by 7.7% yoy and imports by 8.7% yoy (in constant prices), considerably above our assumptions. More than half of this growth was recorded in the second half of last year.

Exports from Poland, 2015 = 100

Source: Macrobond, Statisces Poland, Pekao Research

This is noteworthy as exports were weak throughout 2024 and at the beginning of 2025—unsurprising in theory, given the subdued GDP growth among Poland’s major trading partners during that period. Nevertheless, Polish exports underperformed even relative to their fundamentals. This may have been driven by sector specific factors or the initial effects of the sharp appreciation of the złoty, but export growth was as weak as during periods when other EU member states were in recession.

This weakness, however, has now been overcome, and that is highly significant for the overall growth outlook. In 2024 and 2025 we questioned how fast Polish GDP could expand relying solely on domestic demand, concluding that the economy was close to its ceiling. In the second half of 2025, consumption and investment accelerated (their combined contribution to GDP growth rose from 2.5 to 3.1 pp), inventories shifted toward destocking, and exports strengthened. As a result, the structure of Poland’s economic growth now appears broadly healthy.

Public consumption remains a puzzle

Public consumption accelerated to 7.4% yoy in the second half of the year, and its drivers remain unclear. Historically, the main component has been wages in the broadly understood public sector; however, unlike in 2024 (when a one off surge in public sector wages took place), 2025 should have been a year of fiscal restraint. What offset this effect? Possibly higher healthcare expenditure (part of which consists of personnel compensation), or perhaps certain defense related outlays other than equipment purchases. This will be difficult to verify.

An unusually smooth investment cycle

Investment fell in 2024 and rebounded in 2025. The local peak thus occurred in 4Q23, which was also the final moment to settle EU funds from the 2014–2020 programming period (according to the now-defunct n+3 rule). Eight quarters have passed since that peak, and investment is currently around 2% above that peak. Is that a lot? Counterintuitively, yes. Historically, at this point in the investment cycle, investment levels were still below the peak—sometimes moderately, sometimes substantially. This time, the investment cycle has been exceptionally smooth, likely due to defense spending and the inflow of Recovery and Resilience Facility (RRF/KPO) funds bridging the gap between two standard EU budget cycles.

Comparison of investment cycles (cumulative in investment relative to the peak)

Source: Macrobond, Statistics Poland, Pekao Research

2025 was a year of disinflation

National accounts provide information on price developments across the whole economy—measures of inflation that differ from CPI but remain useful. At first glance, the disinflation narrative appears ambiguous: the GDP deflator slowed from 3.8% to 2.9%, but this entire shift occurred at the turn of 2024/2025. In practice, however, the GDP deflator in Poland is highly sensitive to changes in the terms of trade. Early last year, the foreign trade price relationship was unfavorable (export prices fell while import prices rose), but by year end the pattern reversed, with export prices declining more slowly than import prices. Deflators for private consumption or domestic demand show what CPI had already indicated— consistent disinflation.

Rear-view mirrors only get us this far

As interesting as 2025 data were and as bullish as we are on Polish economic growth, the undeniable truth is that forecasts now need to be updated to account for the effects of the Iran war. This constitutes a classic negative supply shock in the energy space (oil, LNG, to a lesser extent refined fuels). This will push inflation upward due to first- and second-round effects. Unexpected inflation is clearly negative for private consumption and, hence, GDP. As a result, one should expect higher inflation in Poland (by roughly 0.5 p.p.) and lower consumption and GDP growth (the latter by 0.4-0.5 p.p.). We will present updated forecasts later this week.

Financial market update

The main difference in the mechanics of the current energy  crisis between Poland and the core markets is the behavior of the FI market. Indeed, if we analyze the PLN exchange rate, after Tuesday's sell-off, both key currency pairs moved roughly sideways (USDPLN in the range of 3.675-3.700, EURPLN in the range of 4.26-4.29). Similarly, on the stock exchange, WIG20 closed the week slightly above 3250 points, i.e., above the weekly lows. However, investors are closing their long positions on SPW on a large scale; as a result, Polish bond yields rose throughout the week and today. It should be noted that this is an impressive increase on a weekly basis, and on February 26, a yield of 4.90 was still within reach. So, in one week 10Y bonds jumped by 100 bps.

Perhaps part of the investors' aversion to POLGBs is due to the announcement of the SAFE 0% program. Although the program itself should not lead to an increase in bond supply, investors may fear that the implementation of any of the alternative SAFEs may ultimately be delayed, which would mean that the modernization of the Polish Armed Forces would have to be financed by standard wholesale issues. However, perhaps SAFE is not the issue at all, as the increase in yields on the FI market in Poland does not differ significantly from the situation in the region: for example, the yield on Czech 10-year bonds has risen by approx. 14% since the end of February, which is basically the same as that on Polish 10-year bonds.

In this situation, we believe that the FI market will be the most interesting this week; in particular, we do not rule out that the Ministry of Finance will intervene (at least verbally) to stop the sell-off of treasury securities. Investors will also have to reconsider the path of interest rates in Poland. While the growth path in Poland is largely secure (domestic growth drivers, including investment, remain strong), rising living costs may slow down private consumption, while the price impulse coming from the oil market may prompt the Monetary Policy Council to end its monetary easing earlier than planned.