A tougher year ahead?

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

Industrial output and consumption in Poland are growing at more than 3% year over year, while inflation has fallen to the upper limit of the central bank’s target band. Financial markets are becoming more nervous, however: the zloty is weakening, and political risk has returned.

At the beginning of each month, we assess the health of the Polish economy, focusing on the main macroeconomic indicators and financial market developments. The real-economy data are from September 2026, while the financial market observations cover October 2026.

The economic data released over the past month have been fairly positive. Retail sales and industrial production both rose by 3.3% year over year, a solid result. This suggests that consumers and industry, respectively, have so far remained reasonably resilient to higher energy prices. Double-digit export growth in recent months is also encouraging: exports rose by 12% year over year in the June–August period.

The real economy: industry and consumption remain strong, construction struggles

One blemish on the otherwise healthy economic picture is the weakness of the construction sector. Construction and assembly output fell by 7.2% year over year in September, with activity declining across all three areas of the sector.

On the one hand, this reflects deteriorating conditions in the real estate market and weaker demand. On the other, many of the large infrastructure investments that have been announced remain stuck at the planning stage. For now, instead of a construction boom, we are seeing stagnation.

Inflation falls, rates likely to remain unchanged

Another piece of positive news from the real economy is the decline in inflation. In October, according to a flash estimate by Statistics Poland (GUS), it stood at 3.5% year over year, placing it at the upper edge of the National Bank of Poland’s (NBP) inflation target band. That was down from 4.1% in September. The decline was the result of the reactivation of the Ceny Paliw Niżej (CPN), or Lower Fuel Prices, program, which provides for lower VAT and excise rates on fuel, as well as price caps.

Core inflation, which excludes energy and food prices, fell to 2.8–2.9% in October. This means price pressures in other categories of goods and services are gradually easing.

Wage growth data also suggest there is currently no sign of a developing wage-price spiral. Nominal wages in the enterprise sector rose by 5.9% year over year in September, a pace similar to that of previous months. In other words, employers are not yet inclined to offer larger pay increases in response to higher inflation. That is good news for price stability, as it leaves less room for higher prices to spread through the economy.

All of this gives the Monetary Policy Council (RPP) plenty of reasons to keep interest rates at their current level for now.

The outlook for 2027

The Polish economy remains in good shape, although there are many signs that next year could be more difficult. Energy prices remain very high: Brent crude currently costs around USD 105 per barrel. Meanwhile, natural gas on the Dutch exchange, a benchmark for European prices, is approaching EUR 100 per MWh — its highest level since the end of 2022. This will add to inflationary pressure in Poland, even if the CPN support program remains in place.

Weaker domestic demand could compound the problem. Moderate wage growth, while helpful in containing inflation, means real wages are rising slowly. This leaves households with very limited room to increase consumption. The public finance deficit is also already planned at a level similar to this year’s, so there will be no additional stimulus from that source either. The economy should continue to grow, but the pace may slow.

Financial markets: a weaker zloty and political risk

Signs of nervousness are visible in financial markets. In October, the zloty continued to weaken: the euro gained 1% against the Polish currency, while the dollar rose by 2.5%. Major stock indexes moved sideways, and the sWIG80 index of small companies fell by 3.3%.

Political risk returned to the domestic scene at the end of the month. On Friday, October 30, after markets had closed, the dispute over the Constitutional Tribunal escalated. The October data therefore do not yet show the market reaction. On Monday, the euro traded above PLN 4.42, its highest level in almost three years, while the WIG20 index closed 0.7% lower. The bond market has so far reacted calmly.

The dispute’s direct effect on the economy and on foreign investors’ perception of Poland is likely to be limited. A much greater problem could be the situation at the NBP: its management board lacks the number of members required by law, its vice-president positions remain vacant, and there are plans to bring the central bank governor before the State Tribunal, which rules on the accountability of senior public officials. It is unclear who would lead the bank in that event. Any attempt to appoint a commissioner or place the NBP under an interim administration would have disastrous consequences and could trigger a sharp sell-off of Polish assets.

With less than a year until parliamentary elections, it is difficult to expect the disputes to subside quickly. Political risk is likely to remain with us for some time.

The real economy remains in good shape. Retail sales and industrial production both rose by 3.3% year over year in September, while exports grew by 12% year over year in the June–August period. Construction remains the weak spot, with output down 7.2% year over year.
Inflation is down and wage growth is stable. Inflation fell to 3.5% year over year in October, mainly thanks to the CPN program. Wages are growing by around 6% year over year, so there is no visible risk of a wage-price spiral, and the RPP has reasons to leave interest rates unchanged.
Markets are nervous. The zloty is weakening, with the euro already trading above PLN 4.40. Bond yields are at their highest level in more than three years. Political risk adds to the uncertainty: the vacancies on the NBP’s management board and plans to bring its governor before the State Tribunal could prove a greater problem than the dispute over the Constitutional Tribunal.