Macroeconomic environment

In 2019, the economic growth rate slowed down systematically. The preliminary data published by the Polish Central Statistical Office (GUS) indicates that the rate of growth of GDP decreased to 4.0% from 5.1% in 2018. Private consumption continued to be the main GDP growth driver. It was stimulated by the increase in wages and salaries, which remained high, and optimistic consumer moods. Investments, which considerably contributed to GDP growth at the turn of 2018 and 2019, decelerated mid-year mainly due to an expiry of public projects financed from the European funds. Still, their annual growth reached a solid 7.8%. Polish exports also went up despite the slowdown in the world trade, their resilience stemming from geographical diversification, considerable share of consumer goods in exports and the previous inflow of foreign investments. Poland’s importance as a services exporter continued to grow.

The unemployment rate registered in December 2019 dropped to 5.2% compared with 5.8% at the end of 2018. During the year, the unemployment rate maintained its downward trend and reached a record low of 5.0% in October, despite signs of a slowdown in demand for labour and continuing supply constraints (lack of qualified employees). The same factors also contributed to deceleration in the rate of employment growth. The growth rate of wages and salaries in the enterprise sector in the second half of 2019 also slowed down, which could reflect the suspension of salary increases before the minimum wage rise of more than 15% planned for 2020.

Since May 2019, CPI inflation has stood above the National Bank of Poland’s (NBP) target of 2.5% y/y. In December, CPI inflation went up to 3.4% y/y, and was therefore close to the top limit of the allowable target deviations’ bracket. It was the highest CPI inflation level since 2012. Average annual CPI inflation stood at 2.3% compared with 1.6% in 2018. Core inflation (CPI excl. food and energy) accelerated from 0.8% y/y in January to over 3.0% y/y in December. The clear upward trend reflected the tensions on the domestic labour market over the last years, and changes in administered prices.

The deficit of the public finance sector in 2019 (according the EU ESA2010 methodology) stood at 0.7% of GDP compared with 0.2% of GDP in 2018. Public debt went down to 46.0% of GDP according to the EU methodology and 43.8% of GDP according to the domestic methodology. Over the entire year, the central budget maintained its very good situation – at year-end it recorded a deficit of PLN 13.7 billion against PLN 28.5 billion anticipated in the budget. Compared with 2018, the deficit increased only marginally by PLN 3.2 billion, despite the start of a new fiscal package (payment of new pensions totalling approx. PLN 10 billion and the start of paying out the Family 500+ benefits for first child). The government’s ambitious plans to balance the budget for the first time in history in 2020, have been undermined at the beginning of 2020 by the coronavirus pandemic, and the resulting economic crisis, which led to an introduction of a fiscal stimulus.

In 2019, the Monetary Policy Council (RPP) did not change the National Bank of Poland’s base interest rates. During the year, there were requests for both an increase and decrease of interest rates among the council’s members. At the end of 2019 NBP interest rates stood at: