OECD Economic Outlook: Poland's GDP to grow by 3.4% in 2025

"Headline inflation should eventually return to target, but an expected withdrawal of energy support measures at the end of next year will slow down its decline. Inflation is expected to average around 5% in 2025 and decline to 3.9% over 2026. Significant spare capacity should reduce labour shortages, moderate wage growth and lead to a decrease in core inflation," the report states.

"Private consumption should grow, supported by real wage growth and gradually decreasing interest rates. After a slowdown in investment growth this year, the disbursement of EU funds will boost investment growth in 2025. GDP is projected to grow by 3.4% next year and 3% in 2026," the report adds.

Among the risks to the forecasts, OECD economists point to difficulties in absorbing EU funds, strong wage growth, and the war in Ukraine.

"Faster-than-expected absorption of EU funds could increase investment, but short timeframes and labour shortages could also hinder its implementation. Continued high wage growth could further raise consumption and lead to stronger growth and inflation. An escalation of the war in Ukraine or a broadening of the conflict could push inflation up and growth down," the OECD experts said.

The OECD predicts that Poland's general government sector deficit will be similar to this year's and will reach 5.8% of GDP in 2025. The report's authors forecast that by the end of 2026, the NBP's reference rate will be reduced to 4%.

"The budget deficit will worsen to 5.8% of GDP this year and is expected to be broadly similar in 2025. However, medium-term fiscal plans envisage a consolidation of around 1% of GDP per year during 2026-28 through a combination of higher income tax and excise duty revenues and lower spending in real terms, as well as a withdrawal of energy support measures," we read.

"The central bank has maintained interest rates at 5.75% this year given the strength in the domestic economy and concerns about the persistence of inflation. Monetary policy is assumed to remain restrictive, but ease slowly from mid-2025 with policy rates lowered towards 4% by the end of 2026 as inflationary pressures dissipate," the OECD adds.

OECD economists emphasize that due to the uncertainty regarding inflation, monetary policy should remain restrictive. They note that stronger fiscal consolidation from 2026 will have a negative impact on economic growth.

"Given the uncertainty around the pace of disinflation, monetary policy should remain restrictive and ease as inflation durably returns to target. The planned fiscal consolidation envisages an ambitious pace of fiscal adjustment from 2026 and will narrow the deficit substantially by 2028, but will have a dampening effect on growth. Energy support measures should be fully withdrawn next year and social benefits should become more targeted," the OECD states.

"Property and environmental taxes should be increased, the latter helping also to accelerate the green transition. Labour market policies addressing skill and worker shortages, such as adult training and lifelong learning programmes, raising the pension age, and implementing a targeted migration strategy, could strengthen growth," the report concludes.