Poland’s GDP to grow 3.1% in 2024 with rate cuts expected by March, EY forecasts

Poland’s economy is projected to expand by 3.1% in 2024, with growth accelerating to 3.6% in 2025 before moderating to 2.9% in 2026, according to EY economists. Inflation is expected to remain a challenge, with forecasts suggesting it will peak at 5% in 2025 — the highest rate in the EU. EY predicts the National Bank of Poland (NBP) will initiate an interest rate cut cycle in March 2025, starting with a 25-basis-point reduction.

“Central and Eastern Europe (CEE) is set to lead in GDP growth, driven by strong wage growth and inflation expected to stay below 5%,” EY noted. The region’s growth will be bolstered by EU fund absorption, relaxed monetary policies, and a rebound in Western European export demand.

Poland’s competitive labor market is enhancing productivity, as shown by a 9% rise in real GDP per hour in Q2 2024 compared to pre-pandemic levels. This outpaced gains in both the U.S. and Europe. The report highlights that Polish economic expansion is fueled by increasing real income, continued wage growth, rising investments, and robust exports supported by the EU Recovery Fund and defense spending.

Meanwhile, EY forecasts the euro area to see modest growth rates of 0.8% in 2024, 1.3% in 2025, and 1.5% in 2026. Germany faces particular economic challenges, with issues in key sectors and a restrictive fiscal approach dampening its recovery, according to EY’s Chief Economist for Europe and Central Asia, Marek Rozkrut.

Poland, Hungary, Croatia, and Slovakia are experiencing significant price pressures, particularly in services, driven by wage increases above 10%. EY anticipates Poland to record the highest inflation rate in the EU in 2025, with energy price deregulation adding to the pressure.

The National Bank of Poland is expected to introduce four rate cuts of 25 basis points from March to September 2025, followed by a larger 50-basis-point cut in 2026, aiming to curb inflation below 3.5% by that year. Interest rates are projected to settle at 4.25% by 2026, reflecting Poland’s strong economic momentum, EY concluded.

Source: EY and ISBnews