EU Commission forecast: war in Ukraine to curb Poland's GDP growth

"The war is projected to have a sizeable impact on economic activity over the forecast horizon," the EU Commission said, listing a collapse in trade with Russia and Ukraine, and increased inflation, as main factors.

The Commission estimated that Poland GDP growth would reach 3.7% in 2022, against the 5.5% forecast previously, and 3.0% in 2023 (against 4.2%).

"In particular, higher uncertainty about the economic outlook and elevated inflation are expected to lower households’ propensity to spend, although the large inflow of people fleeing from Ukraine will provide a boost to consumption and somewhat offset these factors. Private investment, particularly in equipment, is expected to remain subdued in the remainder of 2022, as lower confidence results in a postponement of firms’ investment decisions. Elevated cost pressures and rising interest rates are expected to have a negative impact on investment, too, especially in construction," the EU executive said.

"The collapse in trade with Russia and Ukraine is set to weigh on export and import growth. Still, weaker domestic demand and a projected depreciation of the zloty should also have a significant impact on imports, leading to a positive contribution of net exports to growth in 2022 and 2023" - we read in the Spring 2022 forecast.

The Commission also estimates that Poland GDP in 2021 increased by 5.9%, against 5.7% mentioned in an earlier forecast.

According to the Spring 2022 forecast, inflation in Poland will be at 11.6% in 2022, and decrease to 7.3% in 2023. An estimate released in February mentioned 6.8% and 3.8% respectively.

"Rising commodity prices, booming demand and supply-side bottlenecks have contributed to a steady and marked rise in HICP inflation in recent months. Despite a number of policy measures introduced to lower tax rates paid on certain goods, strong price dynamics are forecast to persist in 2022, mainly due to surging global energy and food prices, which are likely to increase further following the war," the Commission argued.

"Rising unit labour costs and supply-chain disruptions are also expected to put upward pressure on core inflation, especially in 2022. HICP inflation is thus expected to continue increasing strongly and to peak in 2022-Q3, leaving the annual inflation rate at 11.6% in 2022. Inflation is then projected to decelerate to 7.3% in 2023 due to an easing of global commodity prices, wage pressures and supplychain disruptions," we read.