Surprising acceleration of GDP growth and investment in Q4

2024: The year of inventories recovery and consumption growth acceleration

In accordance with the GUS data published today, Poland's GDP increased by 2.9% all over 2024 comparing to a 0.1% growth in 2023, printing slightly above market expectations (2.8%) and our forecast (2.6%). Last year’s GDP growth was driven primarily by enterprises replenishing their inventories in H2 2024 after a significant reduction of excessive stocks in 2023. We estimate that the contribution of inventories to GDP growth increased from -5.7 pp. in 2023 to 0.5 pp. in 2024. The second strongest booster of economic growth in 2024 was consumption, which went up to 3.1% vs. a 0.3% drop in 2023, driven by a marked decline in inflation amidst strong (and continuing) acceleration of wage growth. A significant decrease in the net exports contribution, down from 3.2 pp. in 2023 to -1.0 pp. in 2024, driven by a substantial acceleration of imports growth amidst a slight slowdown in exports had the opposite impact. GDP growth in 2024 was also hampered by a strong slowdown in total investments, from 12.6% in 2023 to 1.3% in 2024, which in turn is most likely to have been slowed by a weaker growth in public investments following the completion and settlement of projects carried out within EU’s multi-annual financial framework (2014-2020), and by highly subdued investment activity of businesses.

A rise in inventories as the main driver of economic growth in Q4

Based on the data published by the GUS, we estimate that the real GDP growth in Q4 2024 stood at 3.4-3.6% YoY vs. 2.7% in Q3, which is markedly better than we expected (2.5%). However, it should be noted that our assessment is based on the assumption that the data for Q1-Q3 has not been revised by the GUS. No revision would mean that economic growth in Q4 in Poland accelerated substantially, driven by stronger-than-expected consumption growth (from 0.3% YoY in Q3 to 3.3% in Q4 vs. our forecast of 2.5%), a slight acceleration of investment growth (from 0.1% in Q3 to 0.7% in Q4 vs. -5.8% that we expected to see in Q4) and a stronger contribution of net exports (up by 0.5 pp. between Q3 and Q4 vs. 0.8 pp. that we forecast). An opposite impact came from a lower contribution of increase in inventories, which we estimate to have dropped from 3.2 pp. to 2.0 pp. Nonetheless, the increase in inventories was still the main driver of economic growth in Q4, just like in Q3.

Investment growth acceleration comes as the greatest surprise

Particularly noteworthy about the Q4 2024 GDP data breakdown is the slight acceleration of investment growth mentioned above, which came as a huge surprise in the light of subdued investment activity of businesses showing through a number of released data. In our view, markedly-better-than-expected public investment results were the reason behind such a surprisingly strong growth in investments in Q4 2024, and in fact also the main reason behind the incorrect GDP forecast for Q4. Our conclusion is underpinned by a surprisingly 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 the ultra-high December 2023 base (see MACROpulse of 23/01/2025). It will be possible to analyse the Q4 GDP growth structure in more detail when preliminary data on economic growth in that period is released (27 February).

Today’s release of better-than-expected GDP data for 2024 is slightly positive for the PLN and the yields on Polish bonds in our view.

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