European Commission upgrades Polish GDP growth forecast
May 6, 2014
The Polish economy will likely grow by 3.2% year on year in 2014 and accelerate to 3.4% in 2015 from last year’s 1.6%, the European Commission said in its spring forecast, revising upwards its prior forecast for Poland yet again.
Poland is set to benefit from domestic demand picking up while public investment is rising, which will help offset threats related to the escalating conflict in neighboring Ukraine and a possible recession in Russia, according to the EU.
"The recovery that took hold in the second half of 2013 is expected to strengthen in 2014 as domestic demand overtakes trade as the main growth driver," the report reads.
Polish exports should rise in 2014, "despite the rise in recent geopolitical tension", which should have a positive impact on private investment, labor demand and, in turn, private consumption, according to the report.
Also public investment should benefit from new projects financed from new EU funds and add moderately to GDP growth this year.
In contrast, contribution of net exports to real growth will likely turn neutral in 2014 and negative in 2015, the commission forecasts.
The situation on the labor market should improve, with the LFS unemployment rate edging down to 9.9% in 2014 from 10.4% in 2013, and to 9.5% in 2015, according to the report.
Public finances "are set to recover gradually," the report reads pointing to the key impact of the reversal of pension reform, i.e. the transfers of assets from the second pension pillar.
The general government debt-to-GDP ratio will fall to 49.2% in 2014 from 57% in 2013, mainly thanks to the one-time transfer of pension-fund assets, before increasing again to 50% in 2015.
Poland will outperform the European Union’s largest post-communist members, the Czech Republic and Hungary, the commission writes.
The Czech and Hungarian economies are set to grow 2% and 2.3 % this year, respectively, according to the report.