September data points to a soft patch in Poland's economic recovery in the third quarter. Industry suffered from weak external demand, construction suffered from the slow absorption of EU funds and high rates, while consumption eased on weaker real wages. Experts estimate third-quarter GDP growth to be 2.8%YoY and 3% overall in 2024
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Industrial output struggled in the third quarter
The recovery in Polish industry has stalled, with industrial production in September declining by 0.3%YoY, compared to our forecast of a 0.8%YoY decline and consensus of +0.3%YoY. The previous month also saw a decline of 1.2%YoY. Seasonally adjusted output slightly declined too in the third quarter (around -1.0%QoQ). Domestic consumption alone, even if very robust (we estimate around 4.0%YoY in the third quarter) isn't enough for this sector of the economy to expand.
Table: ING.
Experts believe the production weakness is temporary. The investment impulse, associated with EU funds, is gradually gaining momentum. This year, beneficiaries will receive approximately PLN20bn from the Recovery and Resilience Fund (RRF), and around PLN60bn plus structural funds in 2025. This should also stimulate private investments, which have been subdued in recent years. Additionally, the German automotive industry showed some signs of recovery in August and continued improving in September.
The German economy faces significant structural problems, so analysts do not expect substantial support from this direction. To avoid industrial stagnation, as experienced by Germany and the Czech Republic, domestic growth factors are crucial. Poland has the opportunity to avoid the stagnation seen in neighbouring countries, as it possesses growth factors that can stimulate domestic demand.
The labour market remains in good condition but shows that the Polish economy hit a soft patch in the third quarter, after stronger-than-expected growth between April and June.
Data from the real economy confirms this view. Industrial production was stagnant and activity in construction contracted. Analysts expect that the third quarter was also somewhat less favourable for retail trade, especially in goods, however demand for services most likely remained buoyant.
They forecast that household consumption growth eased towards 4%YoY in 3Q24 from 4.7%YoY posted in 2Q24. They further estimate third quarter GDP growth of 2.8%YoY (3.2%YoY in 2Q24) and 3% for the whole of 2024.
More information:
ING
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