Poland’s GDP will increase by 0.7 percent in 2023 and by 2.2 percent in 2024, according to an analysis of the Polish Economic Institute. According to PIE, the average price increase in 2023 will be 12.6 percent, and next year CPI inflation will fall to 7.9 percent.
“Activity in the Polish economy is starting to improve. We still maintain the forecasts from the first quarter. We believe that the economic growth rate in 2023 will amount to 0.7 percent. The bottom of the slowdown is probably behind us – in the first quarter GDP fell by 0.3 percent. The results in the second quarter will be close to zero, while in the second half of the year they will exceed 1%. The results in 2024 will be below Poland’s economic potential – we forecast an increase of slightly above 2.0 percent, according to the PIE report submitted to PAP.
The economists of the Institute expect that in 2024 GDP will increase by 2.2 percent, and in 2025 by 3.3 percent.
According to PIE’s forecasts, GDP growth this year will be reduced, among others, by a decline in inventories and economic growth will be driven in part by public spending. Next year, on the other hand, household consumption will be more important – it will start to grow at a stable pace.
PIE estimates that the investment growth rate in 2023 will be 4.1 percent, and the expenditure growth rate is likely to slow down in the coming quarters. This will be a direct consequence of the economic slowdown and growth interest rates. In turn, for 2024, PIE forecasts an increase in investments of 1.3 percent.
According to PIE, the average price increase in 2023 will be 12.6 percent. Economists pointed out that the prices of services are still growing very dynamically, and the prospects for changing this trend are slim, which is why – according to PIE – in 2024 CPI inflation will amount to 7.9 percent. The beginning of the year will bring high growth energy pricesand then the main role will be played by a sustained increase in core inflation.
The PIE forecast assumes that core inflation will average 11.0% this year. This will be mainly the effect of a slower growth in the prices of industrial goods caused by the strengthening of the zloty and lower freight costs. On the other hand, the high dynamics of salaries means that the prices of services will continue to grow rapidly – the decrease in the annual index in the coming months will be mainly due to statistical effects.
The economists of the Institute also predict that unemployment rate will increase to 5.5 percent. at the end of this year. Fewer seasonal jobs and lower demand for labor will result in a slight increase in unemployment in the last quarter of this year. PIE expects that in 2024 unemployment will be close to the current year’s level.
What about salaries?
As indicated in the forecast, in the current quarter wage growth will outpace inflation. By the end of the year, wages will grow at a double-digit rate. In January 2024, the minimum wage will increase by 22%. y/y This will translate into higher overall wage growth next year. PIE economists expect wages to increase by an average of 11.7 percent in 2024.
According to PIE, the increase in wages above inflation and productivity growth will be possible thanks to the increased importance of labor costs in the total costs of companies. The last two years have brought a decrease in the share of wages in the total costs of companies from 15.7% to 15.7%. in 2019 to 13.6 percent. in 2022. Currently, the lower level leaves room for a greater increase in salaries at the expense of lower profitability compared to previous years.
“In such conditions, a noticeable increase minimum wage will not result in negative employment consequences.
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