Poland's GDP in Q2 supported by consumption, weak investment performance unsustainable (opinion)
The Polish economy in the second quarter of 2025 was driven by consumption, with a reading above consensus, while the surprising decline in investment, which may be revised upwards in subsequent quarters, is not sustainable due to the contracting of Poland's national recovery plan KPO and EU spending, according to economists.
Monika Kurtek, the chief economist at Bank Pocztowy, noted that household consumption accelerated in the second quarter more strongly than average market expectations and, with a growth rate of 4.4 percent year on year, was the highest since the second quarter of last year.
"The biggest 'surprise' in the data published today is undoubtedly the 1.0 percent year on year decline in investment in the economy. Neither local government data nor private company data pointed to such a negative result, so it is very likely that these figures will be revised upwards in the near future,” she wrote in an e-mail.
Economists at listed lender ING BSK Rafal Benecki and Adam Antoniak pointed out that the Polish economy remains on a growth path, and in the second half of 2025 they expect GDP growth to accelerate to around 4 percent year on year, "which should allow for 3.5 percent growth to be achieved in 2025."
"This year is the second in a row when the economic situation in Central and Eastern Europe has been disappointing, and Poland stands out positively from other countries," they wrote in an e-mail.
Economists stressed that Polish industry is stagnating, as in other countries in the region, but the domestic economy is growing thanks to services, including trade, which is reflected in strong consumption, but also in important sectors such as transport and professional services.
"From the supply side, GDP growth was mainly generated by the service industries. Total value added increased by 3.0 percent year on year, including 5.9 percent year on year in trade and repairs, 4.4 percent year on year in transport and storage, and 6.1 percent year on year in professional, scientific, and technical activities. This was accompanied by a decline in construction activity (-...) and a slight increase in industry (...)," they added.
On the other hand, they emphasised the disappointment coming from the decline in investment, which contracted by 1.0 percent year on year after growing by 6.3 percent year on year in the previous quarter, "despite some improvement visible in the capital expenditure of large companies in the second quarter." As the experts pointed out, in the first quarter of 2025, investments grew mainly in the public sector, among other things due to deliveries of military equipment.
"As expected, private consumption was the main driver of the economy, contributing 2.6 percentage points to annual GDP growth, similar to the previous year. However, investment in fixed assets was disappointing, falling by 1.0 percent year on year. The slowdown in investment growth was expected, but its negative growth rate came as a negative surprise," economists at listed lender Millennium wrote on X.
They attribute the slowdown primarily to weaker investment demand from companies, which in Q2 operated in conditions of increased uncertainty regarding trade wars and future domestic and foreign demand.
"The published data fits in with the picture of an economy in a phase of cyclical recovery, driven primarily by consumer demand. The data does not affect our expectations regarding the Monetary Policy Council's decision at its September meeting. Strong individual consumption dynamics, combined with a high fiscal deficit and low unemployment, argue for cautious interest rate cuts in the coming quarters," they added.
Analysts at listed lender PKO BP pointed out that the structure shows an expected acceleration in consumption to 4.4 percent year on year from 2.5 percent year on year in the previous quarter.
"However, there was a negative surprise in fixed capital formation, which fell by 1.0 percent year on year after growing by 6.3 percent year on year in the first quarter of 2025, despite the return of growth in investment by enterprises 49+," they wrote on X.
"Inventories continued to contribute positively to GDP growth, although at 1 percentage point it was weaker than in previous quarters, and the negative contribution of net exports also decreased. The data is in line with the scenario of continued economic recovery, although the expected investment recovery is gaining momentum very slowly," they added.
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Poland's Gross Domestic Product grew by 3.4 percent year on year in the second quarter of 2025, against an increase of 3.2 percent in the first quarter, Poland's stats office GUS reported in its preliminary estimate. In quarterly terms, the GDP rose by 0.8 percent, following the 0.7 percent growth in the previous quarter. The reading is in line with flash estimate published on August 13.
According to GUS, Poland's investment in the second quarter decreased by 1.0 percent year on year against a 4.5 percent growth expected by the economists, private consumption rose by 4.4 percent year on year (versus an expected increase of 3.6 percent) and domestic demand grew by 4.0 percent year on year, below the analysts' expectations for a 4.7 percent increase.
tus/ nl/ ao/