Macroeconomic overview, end-May 2025

The big picture for UK and foreign investors interested in Poland. Key macroeconomic indicators updated monthly.  [GUS = Główny Urząd Statistyczny – Statistics Poland]

Commentary

How’s Poland’s economy likely to fare by the end of 2025? As of the end of May, forecasts have settled into a range around 3.3%, suggesting strong growth compared to Western European economies.

The economy showed strong signs of recovery in the beginning of Q2, with strong growth in wages and retail sales, with industrial output returning to positive territory — all exceeding expectations. Growth is projected to remain strong for the full year, driven by rising consumer spending, public- and private-sector investment, and EU-funded industrial modernisation in defence and green energy.

Poland’s economy did better than expected last year, with GDP growing by 2.9%. Inflation peaked at 5.0% in March, dipping by May to 4.1%. The National Bank of Poland responded to the faster-than-expected fall in inflation by lower borrowing costs (down 50 basis points to 5.25% on 8 May).

Wage inflation remains stubbornly high; recruitment and retention is a major issue for employers. However, rising real wages are making their way through to retail sales.

Manufacturing industry, however, has returned to a negative PMI reading after three months with a score above 50. The EU’s decision to massively boost spending on military production and green energy infrastructure has raised manufacturers’ spirits.

Unemployment is stable; by Eurostat’s economic inactivity-based data it is 3.2% whilst the Polish government’s data based on registered unemployment shows 5.2% in April. Overall productivity continues to grow much faster than in the Eurozone.

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.

Core inflation has already started falling, so by the second half of this year, the central bank should be able to continue to lower base rates (assuming no black-swan events).

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 4,300zł 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 has risen 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. Victory of a presidential candidate from the opposition bloc suggests that ongoing legislative stasis is more than likely to continue, raising political uncertainty.

Questions facing investors in Poland centre on the future of Russian hostilities in Ukraine and the possibility of a ceasefire. An end to the shooting war 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 German customers, in a supply chain that has a significant exposure to the US market.

The US is Poland’s seventh-largest export market and third-largest import source; last year, Poland had a $5.9 billion deficit in trade in goods with the US. How this will ultimately be affected by the unpredictable tariff war is as yet incalculable.

Overall 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. In 2024, the UK was Poland’s only Top Four export market to have grown both in value (up by 5.5%) and in terms of its share in the overall structure of Polish exports of goods (up from 5.0% to 5.3%); this trend continued into March 2025.

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 1.2%, Poznań 1.2%, Warsaw 1.5%, Wrocław 1.8%, Kraków 2.2%, and Gdańsk 2.7%), 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 21.9%. Nearby Radom, a city of 200,000 people, also has high unemployment at 9.7%. New investors might wish to consider university cities such as Szczecin (3.6%), Łódź (4.8%), Rzeszów (4.1%), Lublin (4.3%) or Kielce (4.9%). All data from April 2025.

Unemployment has risen since March in Łódź (up by 0.3 percentage points) Warsaw and Kielce (up by 0.1 percentage point), and has fallen in Szczecin (down by 0.1 percentage points). In Wrocław, Kraków, Katowice, Poznań, Kielce, Rzeszów and Gdańsk it has remained 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. The outcome of the presidential election on 1 June nudged the value of the złoty downward slightly, moving it from 5.00zł toward 5.07zł 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 witnessing yet 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 its 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