Poland Quarterly by CRIDO

Poland Quarterly by CRIDO | January 25

Parliament has approved the 2025 budget, setting a spending cap of €219bn. Key priorities include defence, with €29.5bn allocated—a €1.4bn increase from 2024—representing 4.7% of GDP (up from 4.2% in 2024). Economic projections for 2025 include 3.9% GDP growth, 5.0% average inflation (up from 3.7% in 2024), and a drop in unemployment to 4.9%. Notable revenue increases are anticipated from VAT (€13bn+), CIT (€2bn+), and excise duties (€1.9bn+).

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The Centrist Civic Coalition (KO) of Prime Minister Donald Tusk came first in the European elections in Poland, with 37.06% of the vote. This result placed it narrowly ahead of the nationalconservative Law and Justice (PiS) party, Poland’s main opposition, which obtained 36.16%. These figures were released by the National Electoral Commission (PKW).

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In the first 100 days of their government, the ruling party coalition headed by the new Prime Minister Donald Tusk introduced a number of changes that are the basis for further reforms, including the replacement of staff in state-owned companies or government bodies, the restoration of the rule of law and the reconstruction of Polish foreign policy.

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After Law and Justice lost majority in parliament elections in last October, a new government has been sworn in. Leaders of governing coalition have signed a coalition agreement outlining their program priorities...

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In late August, the Polish government adopted a draft budget bill for 2023, projecting a GDP growth of 1.7% and an inflation rate of 9.8% for the upcoming year, as opposed to the previous year's expectations of 4.6% GDP growth and 13.5% inflation...

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According to Polish Statistical Office inflation in June was 11.5%. Estimates suggest that inflation will return to the target range of 1.5-3.5% no sooner than in 2025. At the same time, economic growth forecast has risen to 1.1% in 2023 from 0.9% expected earlier. Moreover, Fitch Ratings affirmed in June Poland's long-term foreign currency rating at "A-" with
a stable outlook...

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Prime Minister has announced the introduction of a „solidarity shield” to counteract the effects of high energy prices. The proposed solutions include (i) an
electricity price freeze for around 10 million households and (ii) large energy-consuming companies will be allowed to apply for subsidies from the government
if their spending on electricity and gas exceeds 3% of their production value. The introduction of the shield is expected to cost around PLN 30 billion.

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Over 4.39 million Ukrainian citizens have already entered Poland since 24 February 2022. It is estimated that between 1.5 and 2 million remain in Poland, mainly (80%) in key Polish cities. Studies show that 27% of refugees from war-torn Ukraine, who are currently in Poland, want to stay here once the war ends.

Poland's National Recovery Plan (KPO) had been approved by EU member states. Poland still needs to meet the indicated milestones to benefit from funding of approx. EUR 58.1 billion.  Apart from the rule-of-law changes, these include, i.a. labour market reform...

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According to a report prepared by Manpower Group Poland, in 1Q 2023, 24% of companies intend to hire new employees, 48% plan to leave their workforce
unchanged, and 24% of employers plan to cut jobs. Net employment in IQ 2023 is expected to fall by 2%.

According to Eurostat data published on 1 December 2022, the harmonized unemployment rate, calculated according to the definition adopted by Eurostat, was
3% in October 2022 in Poland versus 6% in the European Union, and 6.5% in the Eurozone. At the end of 2022, the Ministry of Labor and Social Affairs
estimated the registered unemployment rate at 5.2% - 0.6 percentage points lower than a year ago.

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Over 2,2 mln Ukrainian citizens already admitted to Poland since Feb 24, 2022, mostly women and children. Estimated employments’ market absorption at this
point is around 700k. But war in Ukraine poses risk of outflow of Ukrainian citizens from sectors traditionally dominated by man i.e. construction and transport
with 11% and 13% of Ukrainian workers respectively. Slowdown it those sectors may negatively influence the dynamics of GDP growth...

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