In praise of mediocrity – Polish GDP in 1Q25
Forecasts hit the mark this time – Polish GDP increased by 3.2% yoy in Q1’25 after growing by 3.4% in the previous quarter. This confirms the relatively weak start to the year, but compared to other EU countries (including in the region), it is a very good result. In the coming quarters, the Polish economy should accelerate.
In the first quarter, Poland's GDP grew by 3.2% yoy, in line with consensus and our predictions. As usual, at this stage, we do not know its structure (it will be published in two weeks), but we can say a thing or two about the state of the Polish economy at the beginning of the year. The slight slowdown in GDP (from 3.4% in the fourth quarter of last year) was telegraphed well in advance by disappointments in the monthly data from the beginning of the year. We wrote about this extensively in our comments (here and here). Based on monthly data, we assume that the mentioned 3.2% year-on-year was due to solid (but still disappointing) acceleration in investment, from -6.9% to 1.1% yoy, and lower private consumption dynamics (down to 2.2% yoy from 3.5% in Q4). We also expect a continuation of inventory buildup and a negative contribution of net exports (both strongly suggested by yesterday's balance of payments data).
Polish GDP (previous year prices, %yoy)
Source: Statistics Poland, Macrobond, Pekao Research
Seasonally adjusted GDP grew by 0.7% qoq, which is somewhat better than our assumptions, but in recent years, we’ve grown skeptical of this metric. However, it has two significant advantages. Firstly, it allows for historical comparisons – here the current episode of recovery is still very slow – after the first quarter, it is the slowest recovery in the 21st century. Secondly, it allows for international comparisons (this metric is preferred by Eurostat). Our query indicates that in the first quarter, only Ireland will definitely surpass Poland, with its massive GDP growth of 10.9% yoy, probably due to a surge in pharmaceutical exports before the introduction of US tariffs. Whether Croatia will do so as well, remains an open question.
Comparison of recovery episodes (cumulative change in seasonally adjusted GDP from the trough)
Source: Statistics Poland, Macrobond, Pekao Research
3.2% yoy is a slightly weaker result than we assumed at the beginning of the year (3.5-3.6% yoy). Therefore, the risks to our full-year GDP forecast (4%) are increasing. However, the shortfall in investment demand at the beginning of the year is relatively easy to make up for, so we are not giving up on this. A bigger problem may be the trade war and troubles with European exports, but here we are primarily dealing with uncertainty and waiting for it to clear up.
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