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Macroeconomic scenario

Economic growth

Polish GDP accelerated to 4% y/y in the fourth quarter of last year, driven mostly by exports and consumption – confirmed Statistics Poland recently. A long and severe winter (almost two months) reduced activity in construction and thus slowed the Polish economy in the first quarter of this year. A precise estimate will be provided once February data are available; however, the first quarter of 2010 should be treated as the worst‑case (and at the same time unlikely) scenario. At that time, GDP slowed from 4% to 1.5% y/y.

Fiscal policy

The central government budget surprised to the upside at the end of 2025. Despite tax revenues being significantly below plan (by PLN 42bn), the Ministry of Finance stayed well within the deficit limit (PLN 288bn), leaving a substantial buffer of PLN 13bn. The decline in revenues was fully offset by a large reduction in expenditure, mainly due to a lower transfer to the Social Insurance Fund and savings across special-purpose reserves. Importantly, there was no need to delay VAT refunds. This suggests that the condition of the central budget is stronger than previously assumed, with more fiscal buffers available. We believe that the gg deficit in 2025 will turn out lower than our earlier projections—closer to 6% than 7% of GDP. This also increases the likelihood of a more favorable deficit outcome in 2026. The most fiscally challenging period for Poland is likely behind us.

Labour market

The most notable development in the domestic labour market concern wages. The magnitude of the downside surprise in January’s wage growth has tempered analysts’ expectations regarding the persistence of wage pressure—expectations that we did not share. The wage growth will decelerate the 6% threshold – in our opinion – driven by an stronger position of employers on labor market. Labor demand remains weak, although it is difficult to draw any conclusions about its trajectory in January—the decline in employment to -0.8% yoy was driven solely by annual revision of the survey sample of firms, while the unemployment rate followed its seasonal pattern. Thus, the Polish labor market can be summarized as follows: wage growth - declining; employment - likely weak but stable.

Monetary policy

Just a week ago, a rate cut at the March (today’s) MPC meeting appeared almost certain, having been pre-announced by several Council members. However, the conflict in the Middle East has complicated the situation. The PLN depreciated markedly, energy prices increased, and uncertainty rose. Despite this, Poland’s macroeconomic conditions (e.g. subdued wage growth) justify further monetary easing. We maintain our forecast that the MPC will cut rates today, and that the terminal rate will reach 3.25%, i.e. 75 bps below the current level.

Financial markets

War never changes

We are facing a war in the Middle East and most likely the largest energy‑market shock from the region in 15 years. Market consequences are well known. The macroeconomic effects will depend on the durability of the shock, the duration of the conflict, and the capacity of key maritime routes linking the Persian Gulf with Asia and Europe.

It is worth remembering that within the next month the entire situation may already come to an end, just as the previous 12‑day Israel‑US aggression against Iran in 2025 did, and prices of key assets may return to their starting point. They may—but there are currently many unknowns. Markets, however, have a natural tendency to seek arguments for a return to the status quo. Some signals suggesting that the inflection point may already be behind us can be identified:

• Iranian armed forces—especially the navy, air force, and air defence—appear to have been completely neutralised. Iran no longer is able to fully block the Strait of Hormuz.
• The US and Israeli forces have achieved full air and maritime dominance.
• The intensity of Iranian missile attacks on neighbouring countries has declined.
• The United States has announced convoying of vessels passing through the Strait of Hormuz and subsidising insurance for ships using this maritime route.

This does not mean that the war will have no long‑term consequences. Iran has been humiliated and deprived of leadership, which makes negotiating a ceasefire difficult. At the same time, without a ground invasion it is hard to speak of capitulation. Having lost its conventional forces, Iran may resort to asymmetric actions, such as attacking vessels transiting the Strait of Hormuz using cheap and hard‑to‑counter drones. Even if the situation stabilizes, the risk of renewed escalation has increased. Insurance costs for shipping in the region will remain structurally higher, and energy markets will begin to price in a permanently higher risk premium.

Market consequences

While last year there was much discussion (somewhat exaggerated) about the loss of US exceptionalism, the current crisis shows that the United States is still perceived as a safe haven. The dollar is stronger and is likely to remain so in the coming weeks, months, or even quarters - depending on how long the war in Iran and its consequences persist.

Europe is quite heavily exposed to the risk of higher energy prices, which explains the underperformance of European assets. Emerging markets have been hit indirectly, as they are generally perceived as risky regardless of their actual exposure to developments in the Middle East. Poland’s exposure is moderately low (10% of LNG supplies come from Qatar), but it should be assumed that the zloty will remain somewhat weaker in the foreseeable future and Polish government bonds cheaper. Nevertheless, in Q2 2026 they should return to their previous trajectory.

Selected macro releases due this month

• Industrial production (our forecast February: 2.5% y/y) Strong activity in December, weak performance in January, and an average outcome in February — the working‑day effect should provide a modest boost to industrial production, which is likely to result in a reading above 2% yoy.
• Retail sales (our forecast February: 7.0% y/y) The low base from last year, combined with a slightly positive working‑day effect, should, in our view, lead to a marked acceleration in retail sales growth. Low temperatures likely disrupted seasonal patterns once again, although this should not prevent retail sales from increasing by our forecasted 7% yoy.
• CPI inflation rate (our forecast February: 2.1% y/y) We assume that CPI inflation edged down slightly in February to 2.1% y/y from 2.2% in January. This estimate is based on the existing consumer‑basket weights, which will be updated together with the publication of February data. The change in weights will most likely lower the inflation path, although it is difficult to precisely estimate the scale of this effect. In February itself, inflation processes were relatively calm. Core inflation should remain close to 2.6% y/y.
  The effects of higher energy and fuel prices triggered by the Middle East conflict will not yet be visible in the February inflation reading.
• Wages in the enterprise sector (our forecast February: 6.5% y/y) After the substantial downside surprise in wage growth recorded in January, in February we expect the growth rate to remain below 7%. In our view, wage growth rate will accelerate slightly compared to January, reaching 6.5% yoy versus 6.1%, primarily due to a relatively low base from the previous year, although we see downside risks to our forecast.
• Unemployment rate (our forecast February: 6.0%) In our view, the unemployment rate in February will remain unchanged from January, at 6.0%. Nevertheless, there is a risk of a slightly higher reading, as February has historically at times been a month in which a modest increase in the unemployment rate was observed (e.g., in 2025, 2023, and 2021).
• Current account balance (our forecast January: EUR -300 mn) Deficits continue to dominate the balance of payments, both in the trade balance and the overall current account. Export dynamics are improving, but still‑strong imports—driven by import‑intensive private consumption and a strong zloty—prevent a return to a trade surplus.
• NBP interest rate (our forecast March: 3.75%) Domestic macroeconomic factors and recent statements by Monetary Policy Council members indicate that the MPC is likely to cut interest rates by 25 bps in March. Nevertheless, rising uncertainty related to the conflict in the Middle East has introduced some risk that monetary policy parameters may remain unchanged.