Investment recovery in Q4 2024 stronger than expected

Final GDP reading in line with flash estimate

The final estimate provided by Statistics Poland (GUS) has shown that GDP growth accelerated from 2.7% YoY in Q3 2024 to 3.2% YoY in Q4 2024, in line with the preliminary reading released two weeks ago. Seasonally-adjusted quarterly GDP growth accelerated from 0.1% in Q3 to 1.3% in Q4. The economic growth structure for Q4 matched our expectations formed by 2024 GDP data released earlier (see MACROpulse of 30/01/2025).

Private consumption recovery boosting GDP growth

The main factor boosting the GDP growth between Q3 and Q4 2024 was the acceleration of private consumption growth from 0.3% YoY in Q3 to 3.5% in Q4. Consumption was boosted by a strong (though not as strong as in Q3) growth in households’ real wages. We expect the private consumption momentum to slow in the quarters to come due to a slowdown of nominal wage growth amidst the elevated inflation, although it will remain relatively high. Our assessment is underpinned by retail sales data for January, which indicates that the households’ propensity to save is decreasing (see MACROpulse of 24/02/2025).

A nice surprise from investments

Gross fixed capital formation was the second factor boosting the economic growth. Investments momentum accelerated from 0.1% YoY in Q3 to 1.3% in Q4, printing ahead of our expectations and market consensus (both 0.7%). In our view, the surprisingly strong investment growth in Q4 2024 was primarily driven by significantly higher-than-expected public investment. Our conclusion is underpinned by a strong acceleration of construction and assembly production growth in December 2024, including in particular in the “civil engineering works” category, where acceleration was reported despite an ultra-high December 2023 base (see MACROpulse of 23/01/2025).

Foreign trade still in the red

Net exports contribution towards GDP growth was negative again (-1.3 pp. in Q4 vs. -1.5 pp. in Q3), but still conducive to economic growth acceleration. Continuing domestic demand recovery (4.5% YoY in Q4 vs. 4.2% in Q3), boosted by total consumption and investments, translated into acceleration of imports growth from 1.9% YoY in Q3 to 3.3% in Q4. At the same time, exports growth accelerated from -0.7% YoY in Q3 to 0.5% in Q4. Exports growth was driven up by the easing of the high base effect of Q3 2024, which made up for the economic stagnation reported by Poland’s main trade partners.

Inventories contribution decline hampering economic growth recovery

Inventories contribution decline from 3.2 pp. in Q3 to 1.8 pp. in Q4 was the main drag on economic growth in Q4, which was consistent with PMI survey results. The readings showed that companies had begun to reduce their finished product inventories once again in Q4, while the rate of production means inventory reduction accelerated. Nonetheless, the increase in inventories was still the main driver of economic growth in Q4, just like in Q3. We expect the companies’ propensity to reduce inventories to ease in the quarters to come along with the domestic demand recovery, which will be reflected in the increasing contribution of inventories towards the GDP growth.

Good outlook for 2025

The economic recovery can be expected to continue in the quarters to come. Subdued as it was in 2024, the activity in investments is most likely to rise markedly in both public and private sector in 2025. Those investments will be boosted by the absorption of EU funds as part of the financial perspective for 2021-2027 and implementation of infrastructure projects as part of the Polish Recovery and Resilience Plan. Furthermore, we forecast that external demand will start to rebuild along with the moderate recovery in the Eurozone, including Germany. We can see a slight upside risk to our economic growth forecast of 3.5% for 2025. We will present our revised macroeconomic scenario in the next MACROmap.

Today’s Q4 GDP data is neutral for the PLN and yields on Polish bonds.