Poland’s gross domestic product (GDP) grew by 5.3% in the second quarter, well below market expectations, according to new data from Statistics Poland (GUS). This means that the Polish economy has slowed down significantly after growing by 8.5% in the first quarter of 2022, compared to the 6% forecast by analysts.
On a quarterly basis, the Polish economy shrank in the second quarter by 2.3%. Excluding the second quarter of 2020, when the economy was paralysed by pandemic-related restrictions, this is the worst reading since 1996.
Detailed data on the structure of GDP will be released by the GUS, a state agency, at the end of August. It will show what has contributed to the slowdown in economic activity in Poland.
From the data that is already available, it is known that many of the key sectors of the Polish economy, such as construction and retail, grew in June, the last month of the second quarter, more slowly than analysts had expected, as the country is grappling with rising prices and a very tight labour market.
A manufacturing survey earlier this month also showed that a downturn in the sector worsened in July. Economists widely estimate that the current quarter will be even weaker than the previous one, and if these forecasts prove true Poland might be facing a technical recession, understood as two consecutive quarterly declines in GDP.
“The economy has already started to decelerate sharply in the second quarter of 2022,” chief economist at the bank PKO BP, Piotr Bujak, wrote on Twitter. “The decline in economic activity will deepen later in 2022…A further deep downturn would be more dangerous for the zloty than the end of the NBP [National Bank of Poland] interest rate hike cycle.
Gospodarka zaczęła ostro hamować już w 2q22. W dalszej części 2022 spadek aktywności gospodarczej pogłębi się. Policy-mix nie jest zbyt ekspansywne. Dla #PLN bardziej niebezpieczne byłoby dalsze głębokie pogorszenie koniunktury niż koniec cyklu podwyżek stóp procentowych NBP. https://t.co/RFX5CsA0jx
— Piotr Bujak (@pbujak) August 17, 2022
In recent months Poland has been dealing with record high inflation, which in July was at 15.6%, the highest since March 1997. In response to rapidly rising prices, the National Bank of Poland has embarked on a cycle of interest rate rises, which are now at 6.5%, the highest level since February 2005.
At the same time, Poland’s unemployment rate fell in June to 4.9%, the lowest figure since 1990, when the country was emerging from communism.
Poland’s unemployment rate is also among the lowest in the European Union, with the latest Eurostat data for May showing that only the Czech Republic and Malta have lower levels.
Poland's central bank has raised its benchmark interest rate by 50bps (less than forecast by analysts) to 6.5%, the highest level since February 2005.
The rise is the tenth in a row since last October, as the bank responds to Poland's highest inflation in 25 years pic.twitter.com/VJNBy8sZ6o
— Notes from Poland 🇵🇱 (@notesfrompoland) July 7, 2022
Main photo credit: Alexander Isreb / Pexels.com
Alicja Ptak is senior editor at Notes from Poland and a multimedia journalist. She previously worked for Reuters.
