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Poland is in a phase of economic expansion, while Germany is facing a recession

ECONOMYPoland is in a phase of economic expansion, while Germany is facing a recession

In 2024, only a moderate pace of economic growth is predicted for Central Europe. In Poland, GDP growth is expected to be 2.8%. At the same time, according to analyses by the consulting firm Deloitte, the divergence in economic sentiment between Poland and Germany is widening, evident in consumer attitudes as well as in the construction and manufacturing sectors.

The economies of Central Europe in 2024 are expected to grow by an average of 2.1% (ranging from just 0.6% in Estonia to 2.9% in Romania), compared to 2.2% in the winter consensus. The result for Poland is a positive surprise, with expected growth higher by about 0.1% both in 2024 and 2025, and the second highest expected growth rate of 2.8% in 2024. This further distinguishes Poland from Germany, which is forecast to grow by 0.3% (previously 0.5%) and faces the risk of another recession. The estimates for 2025 are only slightly more optimistic—with an average growth of 2.9% in Central Europe and 1.3% in Germany.

Optimism in Poland, Pessimism in Germany

For the past year and a half, the disparities in the economic sentiment index of the European Commission (comprising assessments of industry, construction, services, retail trade, and consumer confidence) for Poland and Germany have been growing—improving in Poland and deteriorating in Germany. Poland has moved from a recovery phase to expansion, while Germany remains in a recession—barely higher than during the COVID-19 pandemic.

The component of the index that currently contrasts most sharply between Poland and Germany is construction sentiment. In Poland, it is 13% above the average from March 2020 to March 2024, while in Germany, restrictive monetary policy has pushed it 20% below the post-pandemic average.

Another distinct component between Poland and Germany is consumer confidence, which remains in Poland 18% above the post-pandemic average, while in Germany, it has only remained at the average level from March 2020 to March 2024. Strong consumer confidence in Poland is primarily driven by rapid real wage growth, which has outpaced inflation in recent quarters. Meanwhile, growth in retail trade remains slower than other components, likely due to the high stability of household consumption.

Negative sentiments in the German economy adversely affect orders for the Polish industry. Fluctuations in the percentage of manufacturing companies reporting insufficient demand in the foreign market over the past four years can be linked to changes in economic sentiments in German manufacturing.

De-inflation Accelerates Amid Slow Growth

Expectations for inflation in 2024 have shifted towards a moderately more optimistic outlook than the winter forecast. In Central Europe, compared to the average of 4.2%, the consensus is now 3.7% (ranging from 2.2% in Latvia to 5.8% in Romania) and 2.5% in Germany. Poland has seen the largest improvement in forecast revisions, from 6 to 5% currently. The year 2025 remains largely consistent with earlier assessments at 2% in Germany and an average of 3% in Central Europe (ranging from 2.3% in the Czech Republic to 4% in Poland).

As Deloitte analyses indicate, there is still uncertainty regarding the course of the Polish currency. In the spring consensus, the zloty has much wider differences between forecasts than other currencies, although the Hungarian forint will be in a similar situation in 2025. It should be noted that the Polish zloty is the only significantly strengthening currency in the region. The strong strengthening of the Polish zloty against the euro in recent months is a return to the pre-COVID-19 pandemic rate from early 2020. Just a year ago, the value of the zloty was nearly 10% lower.

Author/source: Deloitte Economic Analysis Team, based on the quarterly CE Economic Outlook.

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