The World Bank lowered its GDP growth forecast in Poland in 2021 to 3.3% against 3.5% expected in October 2020, according to the latest report of the institution. In 2022, the Polish economy is to grow by 4.2%. CPI inflation in 2021 is expected to slow down to 2.6%.
The Polish economy may grow at a rate of 3.3% in 2021. Despite the resurgence of the pandemic at the end of 2020 and the latest increases in new cases, the economic situation will be supported by a recovery in trade in the euro area, improvement in moods and a rebound in private consumption, according to an announcement on the latest World Bank report on the economic situation in the region of Europe and Central Asia.
The release also notes that the currently expected growth in 2021 is “slightly weaker” than forecast in October – when the forecast for 2021 was a 3.5% increase – due to “greater uncertainty about the COVID-19 pandemic and vaccination process in Europe.”
“Although Poland’s GDP fell in 2020 for the first time in 30 years, the diversified Polish economy turned out to be one of the most resistant to the COVID-19 pandemic in Europe,” said the World Bank representative for Poland and the Baltic States, Marcus Heinz.
“In the short term, it is a big challenge to continue supporting those industries most affected by the pandemic, while ensuring balance and transparency in public finance management. Poland still needs to strengthen its institutions to prepare for a new wave of EU funds, a large part of which will be dedicated to low-carbon and green projects, added Heinz.
World Bank experts also forecast that after “moderate growth” in 2021, economic growth in 2022 will accelerate to 4.2%. This means an increase in the forecast versus October 2020, when an increase of 3.4% was expected in 2022 – partly due to a rebound in domestic demand, mainly in the area of investment. In 2023, the growth rate is also expected to amount to 4.2%.
The table with forecasts for Poland, included in the World Bank’s report, shows that the average annual CPI inflation in 2021 is expected to amount to 2.6% in Poland, compared to 3.4% in 2020. In subsequent years, prices are to increase by 2.5%, respectively % and 2.4%.
Public debt in relation to GDP in the 2023 perspective is to remain below the level of 60%. After 58.2% in 2020, this year it is expected to increase to 59.5%, and then decrease to 59% and 58.1%, respectively.
On the other hand, the fiscal deficit, also in relation to GDP, amounted to – according to the World Bank – in 2020 7.2% and this year it will decrease to 3.8%. In 2022 and 2023, the fiscal balance will remain negative and will amount to -1.6% of GDP and -1.4% of GDP, respectively.
World Bank analysts forecast that the budget deficit will decline from 2021 onwards as “the economy recovers and support measures will be directed to the hardest-hit industries and the most vulnerable groups.”
The World Bank report indicates that a key challenge in the short term is to continue supporting the sectors most affected by the pandemic, while ensuring the servicing of public debt.
“The unprecedented response to the COVID crisis has limited the available fiscal space,” it wrote.
“Increased spending efficiency is needed to rebuild fiscal buffers for future counter-cyclical actions and to prepare for the increasing fiscal burden of an aging population,” it added.
Referring to the medium-term perspective, World Bank analysts indicated that the key challenge for sustainable growth was the shrinking labor supply, including the aging of the population. The next challenge for Poland was also “meeting decarbonisation commitments”.
Strengthening institutions at both national and sub-national levels is a necessary component of sustainable and inclusive economic growth and reducing regional disparities.
In the commentary to the report, it was noted that the forecast takes into account the uncertainty arising from new COVID-19 strains and the current pace of vaccination campaigns across Europe. It is expected that in 2021 in Poland – and more broadly in the EU – the policy of exceptional measures will be maintained, including near-zero interest rates.
At the same time, it was added that the baseline scenario assumes that the pandemic is under control and that the vaccine was successfully introduced in 2021.
The persistence of the crisis is expected to continue to burden poor working households, who are at a higher risk of reducing hours worked and losing their jobs. Therefore, the at-risk-of-poverty rate is expected to remain high until 2021, then in 2022 it will gradually bounce back.
Cumulated domestic demand, especially for capital and durable goods, and stronger demand for Polish exports from the EU’s key trading partners will support recovery in the industrial sector and exports.
Moreover, the World Bank expects that, inter alia, an increase in imports will contribute to a reduction in the current account surplus.
The report shows that the dynamics of imports this year will amount to 2.4%, and exports 2%, and next year both indicators will accelerate to 6.1% and 5.1%, respectively.
