Fitch: Poland’s potential GDP growth expected to slightly exceed 3% in 2025-2026

Poland’s potential economic growth is projected to slightly surpass 3% in 2025 and 2026, driven primarily by an increased inflow of EU Recovery and Resilience Facility (RRF) funds, according to Milan Trajkovic, Associate Director at Fitch Ratings. However, growth is expected to moderate in the following years due to various structural challenges.

According to Trajkovic, Poland faces medium- and long-term economic challenges, including unfavorable demographics, labor shortages, geopolitical risks, and subdued external demand. The country is also grappling with the financial burden of transitioning to cleaner energy sources, reducing its carbon footprint, and increasing military expenditures. Internal political dynamics and government cohesion will also play a crucial role in shaping future growth prospects.

In December 2024, Fitch revised its nominal GDP growth forecasts for most Central and Eastern European countries, including Poland. The growth forecast for Poland was adjusted downward to 3.4% for 2025 (from a previous estimate of 3.6%) and 3.2% for 2026 (down from 3.4%), largely due to the ongoing economic slowdown in Germany.

Despite these downward revisions, Trajkovic emphasized that the correction for Poland is relatively modest compared to other countries in the region. Poland’s economy remains resilient due to its relatively limited exposure to the German market and the automotive sector. Polish automotive exports to Germany account for less than 10% of total exports, compared to around 15% in neighboring countries. Additionally, the contribution of the automotive industry to Poland’s gross value added stands at below 4%, significantly lower than the nearly 10% seen in some Central and Eastern European countries.

Poland has managed to expand its share in global exports since 2021, increasing by more than 10%, while most other countries in the region have experienced stagnation or decline. This resilience, combined with the expected influx of EUR 20 billion annually from RRF and Cohesion Funds in 2025-2026, is expected to provide substantial support for economic activity.

Poland’s fiscal policy also remains relatively accommodative, with government initiatives such as social welfare programs, pension increases, and public sector wage hikes expected to boost consumption. Furthermore, lower inflation levels anticipated after 2025 are expected to enhance real disposable incomes, further stimulating economic growth.

The International Monetary Fund (IMF) has also provided its own projections, estimating Poland’s potential GDP growth at 3% in 2024 and 2025, with an acceleration to 3.2% in 2026 before slowing to 2.7% by 2029. This marks a slight downward adjustment from previous IMF forecasts, with the organization’s permanent representative for Central, Eastern, and Southeastern Europe, Geoff Gottlieb, stating in October 2024 that Poland’s potential growth is now estimated at just below 3%.

Potential GDP represents the level of economic output that a country can achieve under equilibrium conditions—without inflationary pressures and with full utilization of production capacity and labor resources. However, due to its theoretical nature, potential GDP estimates vary depending on the methodologies used by different institutions.

While Poland’s economic outlook remains positive for the next two years, policymakers and investors will need to navigate structural challenges and evolving global economic conditions to sustain long-term growth.

Source: Fitch Ratings and ISBnews