Recently published data by the Central Statistical Office (GUS) confirms that the economy accelerated in the second quarter of this year, growing by 3.2% year-on-year, with domestic consumption as the driving force. However, the structure of economic growth contains several surprises, and its pace, although higher, remains below the potential capabilities of Polish economy.
Previously published estimate data by GUS indicated that Poland was the country with the highest GDP growth among all EU countries in the second quarter of this year. Our domestic economy increased by 1.5% compared to the previous quarter and by 4% compared to the same quarter of the previous year (seasonally adjusted data). What do economists say about this?
What drives GDP growth?
Recently published data by GUS has shed light on reasons and structure of growth of the Polish economy.
“Consumer spending on products and services has been growing at a rate exceeding 4% since the beginning of this year. This is favored by the positive situation on the labor market with an ongoing low unemployment rate, rising wages, and inflation at much lower levels than last year,” said Grzegorz Sielewicz, Chief Economist at Coface in Poland and Central and Eastern Europe. “However, private consumption does not grow as dynamically as the real wage increase, indicating that households not only spend, but also direct part of their income to saving.”
Meanwhile, the growth recorded in the public consumption sector (+10.7% yoy in the second quarter of 2024), according to economists, results from higher wages in the public sector and a significant rise in defense expenditure. This latter factor also boosted investment, which, although no longer shrinking as in the first quarter, added 0.4 percentage points to economic growth this time. Their growth by 2.7% year-on-year is limited by the downtime of EU investments, and according to experts, will accelerate only after the start of the implementation of projects under the European Investment Project.
The investment stagnation was confirmed by earlier data – investment expenditures of medium and large companies decreased by more than 5% and were not only related to industry, which remains a weak link of Polish economy, but also to many other sectors.
What threatens the Polish economy?
A major threat to Poland’s economy is the situation in foreign markets. This affects, in particular, our main trade partner, Germany, and its structural problems. This negatively affects Polish industrial production, which still experiences limited demand.
“The price and quality competitiveness of our exports means that we continue to gain foreign markets, yet the export growth is much lower than in previous years. The global economy should gradually accelerate, however, the future quarters and 2025 will be still fueled more by domestic than foreign demand. Household consumption will stabilize, and investment will increase,” says Grzegorz Sielewicz. “In addition to the risk from foreign markets, the financial performance of firms is under pressure from lower margins, especially due to rising wage costs. The latter, although driving household consumption, has become a significant burden for companies.”
The latest surveys published by the National Bank of Poland suggest wage pressure is weakening, especially against the backdrop of lower inflation than last year. A continued dynamic increase in salaries without a proportional increase in labor productivity could lead to a reduction in the competitiveness of our economy.
In the above economic environment, economists expect Polish economy to grow by 3% this year and by 3.5% next year.
Source: https://ceo.com.pl/polska-gospodarka-przyspiesza-pkb-rosnie-o-32-ale-wciaz-ponizej-potencjalu-92617
