Economic news

• INFLATION: CPI inflation declined in October to 2.8% yoy from 2.9% yoy in the previous month. The reading surprised to the downside relative to the consensus forecast (2.9%). The source of the surprise was primarily core inflation, which unexpectedly decelerated from 3.2% yoy to approximately 2.9%. Our detailed commentary on this release can be found here.
• INDUSTRY: The manufacturing PMI for Poland increased slightly in October to 48.8 points from 48.0 points in the prior month, in line with expectations.
• MPC OPINION: MPC members Ludwik Kotecki and Przemysław Litwiniuk have indicated that a rate cut remains possible at the November meeting of the Monetary Policy Council. According to Kotecki, such a decision would be justified if the NBP’s November projection shows a faster convergence of inflation toward the target compared with the previous edition. Nonetheless, he considers further easing to be a question of “when,” not “if.” Kotecki believes that policy rates should decline to around 4% or slightly below in 2026. Litwiniuk also linked the November decision to incoming data and the updated inflation projection, noting that recent macroeconomic releases have been supportive of further cuts. In his view, the MPC is likely to proceed cautiously in the coming months, but current information suggests that room for additional easing remains.
• GVMNT: Poland’s economy should accelerate visibly in 3Q25 relative to 2Q, according to Finance and Economy Minister Andrzej Domański. This assessment is consistent with our forecast, which assumes GDP growth of 3.9% yoy in 3Q, compared with 3.4% in the previous quarter.
• CREDIT DATA: The value of newly granted housing loans in Poland rose by 62.8% yoy in September, reaching PLN 10.67bn, according to data from the Credit Information Bureau (BIK). In nominal terms, this represents an all-time monthly record, exceeding the previous peak from January 2024—the height of the “Safe 2% Mortgage” support program—by PLN 336mn. According to BIK, the main drivers of such elevated activity are improving creditworthiness, supported by interest rate cuts and continued real income growth.

Delayed EU Funds – Poland’s Investment Boom Only in 2026

Investment has been, and remains, the cornerstone of forecasts for Poland’s accelerating economic growth in 2025 and 2026. However, recent quarters have been highly disappointing in this regard, and the anticipated investment revival has once again been postponed.

Investment growth (% yoy) vs. medium-term investment forecasts (+5 quarters)

Source: Statistics Poland, Parkiet Consensus, Pekao Research

As shown in the chart above, forecasting investment growth is an exceptionally difficult task. Without delving into the underlying causes, we wish to highlight the clear overestimation of investment growth by the market consensus for 2Q24 and 1H25. A pronounced acceleration during this period had already been forecast at the beginning of 2024. In reality, however, average investment growth turned negative, falling below zero and reaching more than –5% yoy in 4Q24. To understand this discrepancy between forecasts and actual performance, it is worth examining the pace of EU fund absorption—particularly within the Cohesion Policy framework, which includes both the Cohesion Fund and the Structural Funds. These instruments have long constituted the backbone of EU financial frameworks and are a key driver of investment activity in Poland.

The Cyclicality of EU Funds

Experience from previous EU financial frameworks shows that EU fund absorption follows a cyclical pattern. In the first two years of a given EU perspective, disbursements are largely related to the settlement of projects from the previous framework, while calls for proposals under the new perspective typically begin only in the third year. Each beneficiary must complete several stages: submitting an application, signing a funding agreement, and filing a payment request based on eligible expenses incurred. This staggered and repetitive process allows for forecasting the pace of EU fund absorption, which in turn serves as an important leading indicator of investment activity.

Gross fixed capital formation vs. utilization of EU funds under the Cohesion Policy

Source: Statistics Poland, Ministry of Funds and Regional Policy (MFiPR), Pekao Research

The relationship between gross fixed capital formation (GFCF) and EU fund absorption is particularly visible in public investment. According to the MFiPR, between 30% and 40% of public investment spending in recent years has been financed from EU funds. In the 2014–2020 perspective, as much as 55% of all payment requests originated from government and local government entities. External shocks have also played a role. The COVID-19 pandemic disrupted the natural investment cycle, halting many projects and delaying implementation, which is clearly visible in the data.

2021–2027 Financial Perspective: A Slower Start

Poland remains the largest beneficiary of EU Cohesion Policy funds in the 2021–2027 EU budget, with an allocation of EUR 76 billion, about EUR 6.5 billion less than under the 2014–2020 perspective. The challenge, however, lies in the slow pace of fund utilization. Compared to previous frameworks, the absorption of funds is delayed by roughly 3–4 quarters. After more than four years (18 quarters) of the current perspective, only around 10% of available funds have been disbursed. In comparable periods, the absorption rate stood at nearly 25% for the 2007–2013 framework and around 20% for 2014–2020. The reasons for this delay are well-known: the COVID-19 pandemic, which postponed EU-level negotiations; the energy and inflation crises; the war in Ukraine; and adjustment difficulties related to the new regulatory framework.

EU fund absorption by financial perspective (% of total allocation)

Source: MFiPR, Pekao Research

Nevertheless, the pace of disbursements is now accelerating. The cyclical pattern is once again apparent—projects financed from the previous perspective have been largely completed, and utilization of the 2021–2027 funds is steadily increasing. A further challenge will be the introduction of the “n+2” rule, which shortens the project implementation and settlement period by one year compared with previous frameworks. In practice, this means that all projects must be settled by the end of 2029, creating pressure for a rapid disbursement of funds in the coming years.

Cumulative EU fund disbursements by financial perspective (12-month rolling sum, EUR billion)

Source: MFiPR, Pekao Research

National Recovery Plan – A New Investment Impulse

EU funds today extend beyond the Cohesion Policy. Poland also benefits from the National Recovery Plan (NRP/KPO), under which the country was initially allocated approximately EUR 60 billion (PLN 255 billion)—of which EUR 25.3 billion (PLN 108 billion) are grants and EUR 34.5 billion (PLN 147 billion) are low-interest loans. These funds are intended to support climate goals, digital transformation, innovation, and other strategic areas of the economy. Recently, however, several parameters have changed. The loan component was reduced by EUR 5.1 billion, reflecting the government’s assessment that not all funds would be utilized and that the reduction would help limit Poland’s financial commitments to the EU. The implementation and settlement deadline was also extended to end-2026.

To assess the potential impact of the NRP on investment growth rate, several assumptions must be made. The Polish Development Fund (PFR), which is responsible for the technical disbursement of NRP grants, has already paid out PLN 30.9 billion, representing almost 30% of Poland’s grant allocation. According to current arrangements, the grant (non-repayable) component should be fully disbursed by end-2026, while the loan component can be drawn and implemented until 2030. Assuming full utilization of the NRP envelope, approximately PLN 65 billion from grants alone should reach the economy in 2026, with an additional PLN 35 billion from loans disbursed in that year.

Projected disbursement path of NRP funds – grants and loans (cumulative, PLN billion)

Source: MFiPR, Pekao Research

Investment Boom to Materialize Only in 2026

Based on our econometric model of the Polish economy, we estimate that the projected path of EU fund disbursements will result in a peak of investment growth in 2H26, exceeding 10% yoy. In 2027, growth will moderate but remain elevated. Overall, our analysis leads us to conclude that 2026 will mark a significant acceleration in Poland’s economic activity. Two growth engines will be at play: private consumption and a strong rebound in investment, particularly in the public sector, which will also stimulate private investment. As a result, we forecast investment growth of around 8% in 2026, with GDP growth approaching 4%—a scenario more optimistic than the NBP projection or market consensus.

Investment growth – Pekao forecast (% yoy)

Source: Statistics Poland, Pekao Research

Preview of upcoming data in Poland

November 5, NBP reference rate, Pekao: 4.25%

Despite maintaining a hawkish rhetoric, members of the Monetary Policy Council have consistently lowered interest rates in recent months, in line with macroeconomic developments such as moderating wage growth and declining fuel and energy prices. We believe that the NBP’s November inflation projection will confirm that there remains ample room for further monetary easing, and that MPC members are likely to make use of this space. We expect additional rate cuts in the early part of next year.

Financial Market Update

Friday's flash CPI inflation reading triggered a textbook reaction: a lower-than-expected figure, combined with a marked weakening of inflationary pressure in core prices, prompted investors to bet on a deeper fall in interest rates. As a result, we saw a sell-off of the zloty; USDPLN weakened by 0.02 PLN to around 3.69, while the movement on EURPLN was half as strong, amounting to 0.01 PLN, reaching 4.255. We have not yet seen stabilisation on the FI market. The yield on 10-year bonds was higher on Friday, with changes exceeding 10 basis points, and we expect POLGB prices to be higher today than before the weekend. We believe that we will not see a significant correction this week. Inflation data has measurably changed the information set available to investors – the key information value of the Friday's reading is that it brings certainty about the MPC's November rate cut. While before the publication the markets had been pricing in the possibility that the Council would leave rates unchanged in November, at this point it seems that a cut is a foregone conclusion. Therefore, the zloty will remain weak and SPW yields will remain low. On the other hand, however, there are cautious signs of optimism coming from the stock exchange. While the end of last week saw the WIG20 index in the red (bank valuations in particular proved sensitive to the prospect of monetary policy easing), partly due to unfavourable trends on the core markets (weakening of the PLN), the lack of fundamental reasons for a sell-off may suggest that we will return to growth in November. However, last week's correction clearly shows that above the level of 3,000 points the WIG20 needs solid arguments for further growth and becomes sensitive to all kinds of negative signals.