As the Polish economy continues to navigate post-pandemic adjustments, recent reports indicate a continuing trend of declining investments, with potential flat growth in investment dynamics forecasted for the remainder of the year. According to Piotr Bujak, Chief Economist at PKO Bank Polski, “Investment levels have dropped in the first quarter and are likely to decline in the second as well.”
This downward trend in investments is part of a broader economic reshuffle marked by a significant reduction in corporate inventory levels—a reversal from the inventory buildup during the pandemic years of 2021-2022. This change has been influenced by a rebound in domestic demand, especially in consumer spending, which contrasts with the weakening export growth and improved import dynamics.
Sectorial Insights and Economic Sentiments
The shift in economic dynamics is mirrored in the contrasting fortunes of various sectors. The accommodation and food services alongside the information and communication sectors are experiencing robust growth, with scores of 8.1 and 11.1, respectively, in recent economic sentiment indices. On the flip side, the industrial processing and logistics sectors are grappling with negative sentiments, as evidenced by scores of -9.8 and -3.3, respectively.
Bujak links the pessimism in the industrial and logistics sectors to the ongoing inventory reductions. “There was a real inventory boom in the years 2021-2022, with companies significantly increasing their stock levels and warehouse space. Now, we’re seeing a stagnation or even a clear decline in this area, leading to worsened economic conditions in the logistics industry,” he explained.
Impact of Inflation and Government Forecasts
With the Consumer Price Index (CPI) inflation rate reaching 4.2% in July 2024 compared to the same month last year, and a significant monthly increase of 1.6 percentage points from June, there are concerns about the potential impact on GDP growth. However, Bujak remains optimistic: “The government’s projection of a 3% GDP growth for this year is still achievable, and we might even see a stronger expansion.”
Despite rising inflation, the average annual inflation is expected to be lower than initially projected, contributing to strong real income growth and sustained consumer spending, which is anticipated to drive GDP growth by at least 3%, potentially reaching 3.5% by year-end.
Trade Dynamics and Policy Adjustments
The trade landscape shows a positive balance of $10.5 billion in 2023, a turnaround from the previous year’s deficit. This change is supported by a 4.4% increase in exports and a 4.0% decrease in imports. However, ongoing challenges in key trading partners, particularly Germany, may influence export dynamics and maintain the sluggish pace of investment in the economy.
On another note, government plans to increase excise taxes on alcoholic beverages, alongside tobacco products, may slightly impact Poland’s position as the third-largest beer producer in the EU. Bujak suggests that while the tax hike might dampen local sales, it is unlikely to significantly affect overall production given the substantial export share of Polish beer.