Poland: GDP growth is 1.6% y/y in Q1 this year, will reach 3% in 2024 as a whole

GDP growth was 1.6% y/y in Q1 and will accelerate in subsequent quarters this year until it reaches 3.7% y/y in Q4, the Institute for Prospects and Economic Analysis (IPAG) has forecast. The organisation reiterated its full-year GDP growth forecasts of 3% in 2024 and 3.5% in 2025.

According to estimates by the Institute for Business Forecasting and Analysis (IPAG), the gross domestic product growth rate in the first quarter of 2024 was 1.6%. Although this rate was not high, it is worth noting that this was the third consecutive quarter in which the economic growth rate was higher than that recorded a quarter earlier. In the following quarters, the GDP growth rate will continue to increase gradually: from 3% in the second quarter of 2024, through 3.4% in the third, to 3.7% in the last quarter of the year. For the whole of 2024, the GDP growth rate will be 3%, increasing to 3.5% in 2025, according to the Institute's quarterly report.

According to IPAG, the increase in gross domestic product in the first quarter of 2024 is mainly due to the positive impact of the foreign trade balance.

Domestic demand, although registering growth for the first time after four quarters of decline (+0.8%), continued to expand at a lower rate than GDP growth. In the second quarter, the growth rate of domestic demand will continue to be lower than the GDP growth rate, but this situation should change in the second half of the year. The dynamics of domestic demand will then accelerate more markedly and domestic demand will begin to grow at a faster rate than gross domestic product. For the whole of 2024, domestic demand will increase by 3.1 per cent, and by 3.3 per cent the following year, it further reported.

According to the Institute's estimates, the main component of domestic demand, household sector consumption (i.e. consumption), grew by 2% in Q1, which is slightly faster than the GDP growth rate estimate.

It is worth noting that this increase follows a 1% decline in consumption in 2023. In the following quarters of the year, the rate of growth in household consumption will pick up to reach 3.3% for the full year, influenced by significantly lower inflation than in 2023. In 2025, the rate will be even higher at 3.8%, IPAG reported.

Between 2024 and 2025, total consumption will grow slightly slower than private consumption. The growth rates of total consumption over this period will be, according to IPAG, 2.8% and 3.2% respectively.

Higher dynamics than in consumption were recorded in the first quarter of 2024 in gross fixed capital formation (i.e. investment). This relationship will continue throughout 2024. Although investment growth rates will be lower than in the previous year, gross fixed capital formation will become an important driver of economic growth. Their quarterly growth rates will also exceed GDP growth rates, IPAG reported.

As in 2023, the ratio of gross fixed capital formation to GDP (i.e. the rate of investment in the national economy) will therefore improve. For the whole of 2024, gross fixed capital formation is expected to increase by 4.5%. In the following year, the investment rate will increase even more, as investment growth is forecast at 7%. Investment growth will be supported by lower inflation and interest rates than in previous years, as well as by the expected inflow of financial resources foreseen for it from the European Union (under the NIP, the FEnIKS programme or for energy transition), the report concluded.

Source: IPAG and ISBnews