Poland should see investment and production rebound in ‘25, but companies and consumers still pessimistic (opinion)

"A more significant rebound in investment and industrial production is possible in 2025. EU economies in 2025 could be helped by lower interest rates and cheaper raw materials," PKO BP experts assessed.

"However, fears and lack of confidence in positive developments still prevail among consumers and companies. If the most negative economic scenarios related to D. Trump's coming to power and developments in Ukraine do not materialise, the economies of the EU and Poland have the potential for growth, if only in the form of solid real income increases," they added.

The analysts see hope in the inflow of new EU funds to Poland.

"Perhaps the long-awaited broader inflow of funds from the Cohesion Fund and under the national recovery plan KPO will be give investment a shot in the arm and revive consumption," they wrote.

PKO BP economists point out that the mood among domestic companies is rather gloomy and their expectations for the near future have worsened.

"There was a marked decline in profitability in the third quarter of 2024 and expectations for the near future worsened during the fourth quarter of 2024. The most difficult situation is in the industrial sectors. Many of them are experiencing year-on-year revenue declines and profitability remains below historical averages," they stressed.

"In the service industries, the situation is much better, although increasing revenues are often accompanied by slightly lower margins. What is noteworthy is the return to positive annual revenue dynamics in trade and some of the TSL industries," the experts added.

The analysts pointed out that in the third quarter of 2024, revenues of medium and large companies were 0.4 percent higher than a year earlier.

"This marks the end of a four-quarter-long period of negative annual growth, although not in the case of industrial sectors, whose revenues continued to decline (down by 4.5 percent year on year). The biggest positive contributors to revenues were trade (up by PLN 11.3 billion year on year), information and communications (up by PLN 6.4 billion) and the food industry (up by PLN 4.2 billion)," they listed.

"On the other hand, energy (down by PLN 26.7 billion year on year), electrical equipment manufacturing (down by PLN 4.3 billion), automotive (down by PLN 2.8 billion) and coal mining (down by PLN 2.7 billion) dragged the results down the hardest," the experts added.

PKO BP analysts noted that corporate earnings were exceptionally low in the third quarter of 2024.

"The return on net sales (ROS) was only 3.1 percent, lower than a year earlier (4.1 percent) and than the average for the third quarter in the previous five years (4.7 percent)," they pointed out.

"Among the PKD [Poland's classification of business activities system - PAP ed.] categories for which data are available, 54 percent recorded negative annual ROS in the third quarter of 2024 (64 percent in the downturn peak in the first quarter of 2024)," the experts added.

The worst situation still prevailed in industrial sectors.

"In the third quarter of 2024, among large sectors the revenues lower by at least 10 percent year on year were recorded by energy, coal mining, electrical equipment manufacturing (including household appliances, batteries), among others. Also, equipment repair and installation, as well as the automotive, machinery, metallurgy, textiles and metal, plastic and wood products industries, were at least 2 percent," PKO BP report said.

"In contrast, the number of service industries reporting positive annual revenue growth increased compared to the previous quarter," it added.

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