In accordance with the final data released by Statistics Poland (GUS), CPI inflation in Poland printed at 4.3% YoY in April, down from 4.9% in March and slightly above the GUS’ flash estimate (4.2%). Inflation decreased primarily due to slower growth in the prices of food and non-alcoholic beverages (5.3% YoY in April vs. 6.7% in March), which was largely due to high base effects stemming from the reinstatement of the 5% VAT rate on basic food products in April 2024. Falling prices of fuels (-8.3% vs. -4.7%), mirroring a recent global decline in PLN-denominated oil prices had a downward impact on inflation, too. A slightly slower pace of price growth in the “energy” category (13.1% vs. 13.3%; mainly due to a slower increase in the prices of heat energy) was also conducive to inflation fall. Core inflation, which we estimate to have edged down from 3.6% YoY in March to 3.5% in April, was another reason behind the headline inflation drop. Core inflation fell primarily due to a slower price growth in such categories as “furnishings, household equipment and routine household maintenance” (mainly due to a slower growth in the prices of furniture and furnishings and household appliances), “clothing and footwear” (mainly as a result of a lower clothing price growth momentum) and “recreation and culture” (among other things, due to a slower growth in the prices of package holidays abroad).
Strong wage growth momentum drives the prices of services up
Monthly core inflation in April came in at approximately 0.5-0.6%, which is close to its seasonal pattern (approximately +0.5% MoM for an April), but this has not made us change our view that inflationary pressures in the Polish economy are still rather strong, albeit easing. Core inflation is elevated and sticky due to continued, relatively strong growth in the prices of services (6.3% YoY in April vs. 6.4% in March), which substantially exceeds the growth in the prices of goods (3.5% vs. 4.4%). Wage pressures remain the primary driver of inflation when it comes to services prices. We forecast that nominal wage growth in the national economy will come in at 8.3% YoY in Q2 vs. 10.0% in Q1, and thus it will stay on a historically high level.
Risk factors for our inflation forecast offset each other
Our forecast of average annual inflation reaching 3.9% in 2025 vs. 3.6% in 2024 still stands. Although the fuels’ prices trajectory runs below our previous expectations, this is offset by a prospect of a stronger growth in the prices of food and non-alcoholic beverages in the quarters to come.
Economic growth in Q1 slightly slows
In line with a flash estimate published by Statistics Poland (GUS), GDP growth edged down to 3.2% YoY in Q1 2025 vs. 3.4% YoY in Q4 2024, but still it is pencilled in ahead of market consensus (3.1%) and our forecast (2.8%). Seasonally-adjusted quarterly GDP growth slowed from 1.4% QoQ in Q4 2024 to 0.7% in Q1 2025. The data published by the GUS is a flash estimate and the full GDP data including information on its structure will be published at the end of May.
Investments to stimulate GDP growth in the quarters to come
In our view, the slowdown of economic growth between Q4 and Q1 was mainly driven by lower contributions from change in inventories and consumption, with an opposite impact coming from a stronger contribution of net exports. At the same time, we anticipate a gradual recovery of economic growth in the coming quarters, driven primarily by a stronger contribution of investments related to projects co-financed by EU funds.
In our view, the overall impact of today’s final inflation data and flash GDP estimate is slightly positive for the PLN and yields on Polish bonds.
