Poland’s economy surged ahead of the rest of the EU in late 2024, recording the bloc’s fastest growth.
Poland recorded the fastest economic growth in the European Union in the final quarter of 2024, according to Eurostat data. The country’s GDP expanded by 3.7% year-on-year, narrowly surpassing Lithuania at 3.6% and Spain at 3.5%. However, final data from Croatia and Malta—both of which posted over 4% growth in the previous quarter—could still push Poland off the top spot. Regardless, the country remains firmly among the three fastest-growing economies in the EU.
In contrast, Germany, Austria and Estonia saw continued GDP declines, marking over a year of economic contraction. Among Poland’s Central European neighbors, the Czech Republic grew by 1.6%, Slovakia by 1.7% and Romania by just 0.7%, while Hungary barely edged into positive territory with 0.2%. The eurozone as a whole expanded by 0.9%, in line with economists’ expectations.
Poland’s growth was primarily fueled by rising household consumption and increased government spending, both of which climbed by over 3% in the last quarter of 2024. Business investment also saw modest gains, but the biggest drag on GDP was the external sector—exports grew more slowly than imports, creating a net negative impact on overall growth.
The data underscores the gradual recovery of Poland’s economy from the downturn caused by the Ukraine war and the European energy crisis in early 2023. The first half of 2023 saw two consecutive quarters of GDP contraction, but since then, growth has steadily accelerated, aside from a brief summer slowdown. Projections for 2025 suggest even stronger performance, with some analysts predicting a real GDP expansion of up to 4%. Economists anticipate that higher investment—especially as EU funds start flowing more freely—will further support growth.
In contrast, Germany, Austria and Estonia saw continued GDP declines, marking over a year of economic contraction. Among Poland’s Central European neighbors, the Czech Republic grew by 1.6%, Slovakia by 1.7% and Romania by just 0.7%, while Hungary barely edged into positive territory with 0.2%. The eurozone as a whole expanded by 0.9%, in line with economists’ expectations.
Domestic growth drivers and export struggles
Poland’s growth was primarily fueled by rising household consumption and increased government spending, both of which climbed by over 3% in the last quarter of 2024. Business investment also saw modest gains, but the biggest drag on GDP was the external sector—exports grew more slowly than imports, creating a net negative impact on overall growth.
The data underscores the gradual recovery of Poland’s economy from the downturn caused by the Ukraine war and the European energy crisis in early 2023. The first half of 2023 saw two consecutive quarters of GDP contraction, but since then, growth has steadily accelerated, aside from a brief summer slowdown. Projections for 2025 suggest even stronger performance, with some analysts predicting a real GDP expansion of up to 4%. Economists anticipate that higher investment—especially as EU funds start flowing more freely—will further support growth.
EU debates military spending and fiscal reform
The shifting stance of the United States toward Europe under President Donald Trump could have long-term consequences for the EU’s economy, extending well beyond the potential resolution of the Ukraine war. One of the key proposals gaining traction is the issuance of common EU debt to finance military spending, a move that had previously been blocked by Germany and the Netherlands.
However, Friedrich Merz, leader of Germany’s CDU party and the likely next chancellor, has signaled openness to the idea. This marks a major shift for CDU, traditionally skeptical of joint EU borrowing. Meanwhile, President Emmanuel Macron of France has called for a broader overhaul of the EU’s fiscal policies, arguing that Europe’s existing budgetary and monetary rules are outdated. He has suggested scrapping the EU’s 3% deficit limit, which currently restricts member states’ spending, to allow for greater investment in defense, green energy and new technologies.
If these proposals gain traction, they could lead to the most significant changes in EU economic governance since the bloc’s founding. The EU remains one of the world’s largest economies but has historically relied on individual member states for debt issuance rather than leveraging its collective financial strength. Expanding the EU’s borrowing capacity could accelerate growth across the region, strengthen investor confidence and bolster the euro’s position in global markets.
However, Friedrich Merz, leader of Germany’s CDU party and the likely next chancellor, has signaled openness to the idea. This marks a major shift for CDU, traditionally skeptical of joint EU borrowing. Meanwhile, President Emmanuel Macron of France has called for a broader overhaul of the EU’s fiscal policies, arguing that Europe’s existing budgetary and monetary rules are outdated. He has suggested scrapping the EU’s 3% deficit limit, which currently restricts member states’ spending, to allow for greater investment in defense, green energy and new technologies.
If these proposals gain traction, they could lead to the most significant changes in EU economic governance since the bloc’s founding. The EU remains one of the world’s largest economies but has historically relied on individual member states for debt issuance rather than leveraging its collective financial strength. Expanding the EU’s borrowing capacity could accelerate growth across the region, strengthen investor confidence and bolster the euro’s position in global markets.
Hungary blocks Ukraine’s EU accession talks
Despite potential fiscal changes, the EU still faces challenges in reaching consensus on major geopolitical issues. Last week, Hungary blocked the start of Ukraine’s accession negotiations, which were set to focus on judicial reforms, public administration and governance. The talks were intended to establish a roadmap for Ukraine to meet EU standards, with the European Commission poised to send Kyiv a list of necessary reforms.
The document, prepared under Poland’s EU presidency, was supported by almost all member states except Hungary. Budapest has imposed additional conditions related to minority rights protections for ethnic Hungarians in Ukraine.
The deadlock comes as European Commission President Ursula von der Leyen continues pushing for an accelerated accession process for Ukraine. However, given the current impasse, delays appear more likely than progress in the near term.
Both Poland and Hungary saw inflation accelerate in January, reaching the highest levels since December 2023. Hungary’s inflation rate jumped from 4.6% to 5.5%, while Poland’s climbed from 4.7% to 5.3%. Slovakia also experienced an increase, rising from 2.9% to 3.9%.
By contrast, inflation in Romania fell below 5%, and the Czech Republic now has the lowest inflation in the region at 2.8%, down from 3% the previous month.
Poland’s inflation spike was driven by rising food prices and larger-than-usual New Year price hikes in the services sector, according to economists at Pekao S.A. Analysts at PKO BP also pointed to higher alcohol and tobacco prices. They noted that these are preliminary figures, and in recent years, Statistics Poland (GUS) has more often revised initial inflation readings downward rather than upward.
Many economists expect inflation to rise slightly in the coming months before declining in the second half of the year. By early 2026, inflation is expected to be significantly lower than current levels.
The document, prepared under Poland’s EU presidency, was supported by almost all member states except Hungary. Budapest has imposed additional conditions related to minority rights protections for ethnic Hungarians in Ukraine.
The deadlock comes as European Commission President Ursula von der Leyen continues pushing for an accelerated accession process for Ukraine. However, given the current impasse, delays appear more likely than progress in the near term.
Inflation surges in Poland and Hungary
Both Poland and Hungary saw inflation accelerate in January, reaching the highest levels since December 2023. Hungary’s inflation rate jumped from 4.6% to 5.5%, while Poland’s climbed from 4.7% to 5.3%. Slovakia also experienced an increase, rising from 2.9% to 3.9%.
By contrast, inflation in Romania fell below 5%, and the Czech Republic now has the lowest inflation in the region at 2.8%, down from 3% the previous month.
Poland’s inflation spike was driven by rising food prices and larger-than-usual New Year price hikes in the services sector, according to economists at Pekao S.A. Analysts at PKO BP also pointed to higher alcohol and tobacco prices. They noted that these are preliminary figures, and in recent years, Statistics Poland (GUS) has more often revised initial inflation readings downward rather than upward.
Many economists expect inflation to rise slightly in the coming months before declining in the second half of the year. By early 2026, inflation is expected to be significantly lower than current levels.
Markets bet on end to Ukraine war
Financial markets continue to price in a potential resolution to the Russia-Ukraine war, even though Ukrainian President Volodymyr Zelenskyy has urged caution. Initial negotiations between Trump, Vladimir Putin and Zelenskyy confirmed their willingness to engage in talks, but leaked details of the U.S. proposal suggest that Ukraine could be forced into major concessions.
The U.S. also sought to secure access to Ukraine’s rare earth mineral deposits, but Zelenskyy rejected the terms, stating that they were unfavorable to Ukraine. Despite these uncertainties, markets remain optimistic, betting that a ceasefire is on the horizon.
Warsaw’s stock exchange is now the best-performing globally, with its WIG index surpassing 90,000 points for the first time and gaining over 15% year-to-date. Prague and Budapest’s markets have also hit all-time highs. The złoty has strengthened further, with the U.S. dollar dipping below 4 złoty (€0.88) for the first time since November. The euro has fallen to złoty 4.16 (€0.92), its lowest level in seven years, making travel and imports cheaper for Polish consumers.
The National Bank of Poland (NBP) has released a new report based on transactional housing prices, providing a more accurate picture than online listing data. The biggest surprise was a sharp 6.2% drop in average prices per square meter in Warsaw’s secondary market in Q4 2024 compared to the previous quarter.
The gap between listing prices and actual sale prices has widened to 19%—the largest disparity since 2016—indicating that sellers must significantly lower their expectations to close deals.
The U.S. also sought to secure access to Ukraine’s rare earth mineral deposits, but Zelenskyy rejected the terms, stating that they were unfavorable to Ukraine. Despite these uncertainties, markets remain optimistic, betting that a ceasefire is on the horizon.
Warsaw’s stock exchange is now the best-performing globally, with its WIG index surpassing 90,000 points for the first time and gaining over 15% year-to-date. Prague and Budapest’s markets have also hit all-time highs. The złoty has strengthened further, with the U.S. dollar dipping below 4 złoty (€0.88) for the first time since November. The euro has fallen to złoty 4.16 (€0.92), its lowest level in seven years, making travel and imports cheaper for Polish consumers.
Housing prices dip in key cities
The National Bank of Poland (NBP) has released a new report based on transactional housing prices, providing a more accurate picture than online listing data. The biggest surprise was a sharp 6.2% drop in average prices per square meter in Warsaw’s secondary market in Q4 2024 compared to the previous quarter.
The gap between listing prices and actual sale prices has widened to 19%—the largest disparity since 2016—indicating that sellers must significantly lower their expectations to close deals.
Łódź and Szczecin also saw notable price drops of 5.4% and 7.5%, respectively, while smaller declines were recorded in Poznań, Bydgoszcz, Olsztyn and Lublin. However, prices continued to climb in Gdańsk, Gdynia and Katowice, where the cost per square meter remains at record highs.
Over the past year, home prices have increased the most in Gdańsk (+14%), followed by Czech cities Plzeň and Brno (+13%). Warsaw, Prague and Bratislava all recorded 10% annual growth, while Wrocław and Budapest saw increases of 9% and 8%, respectively.
Prague remains the most expensive housing market in Central Europe, with an average price of €5,558 per square meter. Warsaw and Brno exceed €4,000, while Łódź and Kaunas are the most affordable, with prices below €2,500.
Poland’s government has set pension indexation for 2025 at the lowest level legally permitted, opting for a 5.5% increase from March. The cost to the state budget is estimated at 22.8 billion złoty (€5 billion).
Under Polish law, pension adjustments are based on a weighted formula that accounts for inflation and real wage growth. The 2024 pensioner inflation rate was 3.6%, while real wages grew by 9.5%. A fifth of this wage growth (1.9%) is added to the inflation rate, resulting in the 5.5% indexation figure.
Unlike in previous years, when the government sometimes opted for higher discretionary increases, this time no additional funds were allocated. Poland’s budget deficit, currently over 5% of GDP, has limited fiscal flexibility, and the country remains under the EU’s excessive deficit procedure.
After the adjustment, the minimum pension will rise to 1,879 (€412) złoty, an increase of złoty (€21) from last year.
Over the past year, home prices have increased the most in Gdańsk (+14%), followed by Czech cities Plzeň and Brno (+13%). Warsaw, Prague and Bratislava all recorded 10% annual growth, while Wrocław and Budapest saw increases of 9% and 8%, respectively.
Prague remains the most expensive housing market in Central Europe, with an average price of €5,558 per square meter. Warsaw and Brno exceed €4,000, while Łódź and Kaunas are the most affordable, with prices below €2,500.
Gov’t keeps pension increases to minimum
Poland’s government has set pension indexation for 2025 at the lowest level legally permitted, opting for a 5.5% increase from March. The cost to the state budget is estimated at 22.8 billion złoty (€5 billion).
Under Polish law, pension adjustments are based on a weighted formula that accounts for inflation and real wage growth. The 2024 pensioner inflation rate was 3.6%, while real wages grew by 9.5%. A fifth of this wage growth (1.9%) is added to the inflation rate, resulting in the 5.5% indexation figure.
Unlike in previous years, when the government sometimes opted for higher discretionary increases, this time no additional funds were allocated. Poland’s budget deficit, currently over 5% of GDP, has limited fiscal flexibility, and the country remains under the EU’s excessive deficit procedure.
After the adjustment, the minimum pension will rise to 1,879 (€412) złoty, an increase of złoty (€21) from last year.
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