The big picture for UK and foreign investors interested in Poland. Key macroeconomic indicators updated monthly. [GUS = Główny Urząd Statistyczny – Statistics Poland]
| CPI inflation | (y/y, Dec 24, GUS, final) | 4.7% |
| Unemployment | (claimant rate Dec 24, GUS) | 5.1% |
| Unemployment | (econ. inactive, Eurostat, Dec 24) | 3.0% |
| GDP growth 2023 | (y/y GUS, final) | 0.1% |
| GDP growth 2024 | (y/y to Q4 24 preliminary, GUS) | 2.9% |
| GDP growth 2025 forecast | (Bank Pekao S.A., Jan 24) | 3.0% |
| Retail sales | (y/y to Dec 24, GUS) | 1.9% |
| Export of goods | (H1 24, down 3.3% on H1 23, GUS) | €174 billion |
| Import of goods | (H1 24, down 2.1% on H1 23, GUS) | €169 billion |
| Average wages (private sector, monthly, gross) | (GUS, Dec 24 – up 9.8% y-o-y) | 8,821 PLN (=€2,093 / £1,750) |
| Statutory Minimum Wage (full-time, monthly, gross) | (from Jan 25; up 10.0% from Jan 24) | 4,666 PLN (=€1,108 / £926) |
| NBP reference rate | (last changes Sep & Oct 2023, 100 basis-point cut in total) |
5.75% |
| Industrial output | (year-on-year, Dec 24, GUS) | 0.2% |
| Construction output | (year-on-year, Dec 24, GUS) | -8.0% |
| PLN as of 31 Jan, NBP rate | £1 = 5.0404; €1 = 4.2130; $1 = 4.0576 | |
| PMI | Jan 25: 48.2 (down from 48.9 in Dec 24) | |
Commentary
Poland did better than expected in 2024, with a preliminary estimate of GDP growth for the full year at 2.9%, up from the forecasted 2.8%. Looking ahead at this year, most forecasters are suggesting that it will nudge upward to 3.0% or above. Unemployment is the second-lowest in the EU; overall productivity has been growing much faster than in the Eurozone; and domestic consumption remains strong (though patchy). Inflation seems to have turned a corner though borrowing costs have yet to start coming down. Wage inflation remains stubbornly high; recruitment and retention is a major issue for employers. Manufacturing industry is experiencing the longest run of negative PMI readings (33 months in a row under the neutral score of 50). Germany – Poland’s largest export market – isn’t doing well economically.
Looking back at the past 20 years since Poland joined the EU, it is clear that Polish workers have done well over that time. Whilst inflation had doubled prices, wages have increased three-fold, representing an increase in spending power of over 50%. Contrast this situation with the UK, where real wages have not budged in 20 years.
Inflation is expected to peak around 5.2% in Q1 2025, before weakening in H2 2025, once the base effect of the ending of the energy price cap works through. Core inflation has already started falling, so by the end of 2025, the central bank should begin the cycle of lowering base rates.
Poland’s registered unemployment fell to a record low of 4.9% in October 2024 before returning to 5.1% in December. On the EU’s measure of economic inactivity, Poland’s is now the second-lowest in the EU at 3.0% after Czechia. Real wage growth, which has been a major macroeconomic factor since the mid-teens, though slower than in previous months – continues to put more money in consumers’ pockets. The politically driven minimum wage is seen as problematic by manufacturers with large blue-collar workforces. From 1 January 2025, the statutory minimum wage rose by a further 8.5% from 4,300 zł a month gross to 4,666zł (from 1 July 2024), and up 10.0% from the 4,242zł it was on 1 January 2024, while inflation rose by around 5%.
Although the Polish government, formed in Autumn 2023, is seen as more business-friendly in its rhetoric, it is still difficult to point to specific improvements in the overall business environment – other than ending the stream of unpredictable and poorly considered legislation pumped out during the previous parliament. However, given the fact that the government is, in effect, a coalition of three coalitions, and that the president represents the parliamentary opposition, this state of affairs is to be expected. The presidential election takes place this May.
Questions facing investors in Poland centre around the future of Russian aggression; an end to hostilities would signal a major reconstruction boom in Ukraine, with Poland a natural logistics platform and partner for that process. Another area of uncertainty is the state of Western Europe’s – specifically Germany’s – economic prospects, as Poland’s manufacturing depends heavily on those markets. Trade in goods for the first half of 2024 show Poland with a tiny surplus of €4.6 billion; the value of goods exported falling faster than that of imports. As of the first ten months of 2024, the UK is Poland’s only Top Five export market to be growing both in value and in terms of its share in the overall structure of Polish exports.
Demographics and the labour market
Unemployment is likely to stay near record low levels; while firms are less likely to be recruiting this year, fewer young Poles will be entering the labour market. Wage pressure is likely to continue as retention of skilled employees continues to be a big worry for firms. Poland’s largest age cohort, born in 1983, reaches the age of 42 this year (around 700,000 people); compare this demographic high-water mark to the number of 22-year-olds, born in 2003 – a mere 350,000. The number of labour-market entrants will continue to fall (fewer than 300,000 Poles were born in 2024).
Poland’s unemployment is lowest in the cities and highest in rural areas. More than half of the long-term unemployed live in villages. Big disparities exist between cities where unemployment is extremely low (Katowice 1.0%, Poznań 1.0%, Warsaw 1.4%, Wrocław 1.7%, Kraków 2.0%, and Gdańsk 2.5%), and small provincial towns where it remains in double digits. Szydłowiec district, 120km south of Warsaw, also in Mazowsze province, holds the record for Poland at 23.3%. Nearby Radom, a city of 200,000 people, also has high unemployment at 9.6%. New investors might wish to consider university cities such as Łódź (4.5%), Rzeszów (4.0%), Lublin (4.1%) or Kielce (4.4%). All data from November 2024.
Unemployment fell in December in Kielce, (down 0.1 percentage point), rose in Radom by 0.2% percentage points, and in Wrocław, Lublin, Łódź and Szczecin (up 0.1 percentage point). In remaining cities it remains stable.
The zloty
Although Poland notionally signed up to join the eurozone as part of its EU Accession Treaty, there was no mention of when, or at what rate. To do so, Poland must alter its constitution, which needs a two-thirds parliamentary majority. So Poland continues to linger on the fringes of the EU’s core – and – importantly for its manufactured exports – it can control the competitiveness of its currency. The Brexit referendum resulted in a dramatic fall in value of the pound against the zloty. From June to October 2016, the pound fell from 5.60zł to 4.80zł, a 14% drop. Since then, it has recovered; fluctuations result more from political turbulence than macroeconomic fundamentals. Over the past month, the zloty has continued to strengthen against the pound, trading in the band 4.99zł and 5.05zł to the pound.
A weaker zloty makes Polish exports more competitive as well as boosting Poland’s attractiveness as a location for inbound foreign direct investment.
UK-Polish trade
On the surface, Brexit has not hampered trade between Poland and the UK, with 2024 likely to have witnessed another record in the value of goods and services traded between the two economies. However, UK exports to Poland now include significant sales of fossil fuels substituting those Poland used to buy from Russia. Polish export growth to the UK mainly comes from larger exporters successfully replacing goods from Western European SMEs which no longer trade with the UK because of frictions arising due to the UK’s departure from the single European market and Customs Union. These have made it much harder for small business to trade profitably with a third country.
Links:
GUS (Statistics Poland) English-language pages
Central Bank of Poland English-language pages
Eurostat
