Polish consumer spending to drive strong economic growth this year and next

Poland’s economic growth appears set to end this year on a stronger note. The economy was quite weak in the first half of 2016; however, stronger momentum is expected towards the end of 2016 and going into 2017, as consumer spending continues to be strong and as investment rebounds. The Polish economic growth is expected to come in just below 3 percent in 2016 and almost 3.5 percent in 2017 and 2018, according to Nordea Bank.

The labor market continues to be the key to the continued domestic demand-led growth. Employment grows at a rate of over 1 percent year-on-year, while the jobless rate is at present below 9 percent, the lowest level since 1991. Furthermore, wage growth is expected to stay around 3 percent – 4 percent year-on-year, added Nordea Bank.

With no or even negative inflation, consumers experience a sharp rise in their combined purchasing power. In turn, consumer spending is expected to continue driving strong growth across the forecast horizon, stated Nordea Bank.

Meanwhile, investment has shrunk for three quarters through the second quarter in 2016 in spite of strong demand growth domestically as well as from abroad. The new government’s harsh talks on bank might be one explanation; however, the main reason is slow utilization of EU funds. Utilization of EU funds was quite slow in the first half of 2016; however, it is expected to rebound considerably in the future based on the new government’s plans. If this happens, the Polish economy would end on a strong note in 2016, said Nordea Bank.