Economic growth slowed in Q3

GDP growth consistent with our expectations

In accordance with the flash estimate published by the GUS, Polish GDP fell from 3.2% YoY in Q2 to 2.7% YoY in Q3, printing below the market consensus (2.9%), but in line with our forecast. Seasonally-adjusted quarterly GDP growth slowed from 1.2% QoQ in Q2 (downgrade from 1.4%) to -0.2% in Q3. Consequently, in Q3, quarter-on-quarter GDP shrank for the first time since Q2 2023. This is, however, just a flash estimate. Full GDP data including information on its structure will be published towards the end of November.

Consumption and net exports as the main growth inhibitors

In our view, consumption declining from 4.7% YoY in Q2 to 2.1% in Q3 was the main factor contributing to the slowdown of economic growth. Consumption growth was curbed by a substantial slowdown of real wage growth in the national economy, from 11.9% YoY in Q2 to 8.6% in Q3, which in turn drove the real wage fund growth significantly down, and resulted in a slower growth in demand for goods and services. Consumption growth in Q3 was slowed down even further by a surprisingly strong decline in the sales of goods last September, which indicated that households’ propensity to consume was markedly depressed, even more so given the negative impact of the flood in Poland on households’ expenses (see MACROpulse of 22/10/2024). Furthermore, a lower contribution of net exports connected with the exports growth slowing more strongly comparing to imports, which in turn was connected primarily with recession trends in the global manufacturing sector also had a negative impact on GDP growth in Q3.

We assess that the evolution of investment growth between Q2 and Q3, resulting from a combined effect of slowdown in public investments and companies’ capital expenditure and acceleration in housing investments was broadly neutral for the evolution of the annual GDP growth in those quarters. However, a higher contribution of inventories connected with last year’s low base effects drove the annual GDP growth up in Q3.

GDP growth to reach a local minimum in Q4

We expect GDP growth to reach a local minimum at 2.5% YoY in Q4, driven down primarily by the continuing slowdown in public and companies’ investments. We expect the economic growth to slightly accelerate in Poland in the quarters to come, driven by the expected economic recovery in the Eurozone and an increasing absorption of EU funds under the National Recovery Plan and the Cohesion Fund. We have not changed our forecast of GDP growth in 2025 (3.5%).

Today’s Q3 GDP data, which is consistent with our expectations, underpins our economic growth forecast for 2024 (2.6% vs. 0.1% in 2023). At the same time, the data is slightly negative for the PLN and yields on Polish bonds.