Poland's demand gap expected to be negative in 2026-27 - c. bank projection
The demand gap will rise to a slightly positive level in the fourth quarter of 2025, but then go below zero again in 2026-27, limiting inflationary pressures, according to Poland's central bank NBP's March projection.
"In line with the current projection, potential output growth in 2025-2027 will stand at an average of 3.1 percent year on year, i.e. slightly below its long-term average," the report said.
"The potential of the domestic economy will be positively affected by the staggered impact of investment growth in 2025-2026, boosting the growth of productive capital, as well as by the assumed inflow of migrants, increasing labour supply" it added.
On the other hand, changes in the demographic structure of Poland's population will
have a negative impact on potential GDP growth over the projection period. This is reflected in the assumed decline in the number of people of working age, restricting the number of economically active and employed people.
"The projected recovery in domestic activity in 2025 will contribute to an improvement in the currently negative output gap to a slightly positive level in
2025 Q4 (Figure 4.15). This means that the increased demand pressures expected in that period will constrain the decline in inflation," the NBP wrote.
"However, in 2026-2027, in the wake of a slowdown in GDP growth, demand pressures will ease again, increasingly supporting the disinflation process in the Polish economy" the report added.
tus/ han/ nl/