Fresh data from Poland’s Central Statistical Office (GUS) have raised doubts about the strength of the country’s economic recovery. In a disappointing turn, retail sales fell by 0.5% in February compared to the same month last year, surprising economists who had predicted another robust performance following January’s unexpectedly strong 4.9% growth.
The January surge in consumer spending had been seen as a potential turning point, offering hope that Polish households were beginning to open their wallets after months of cautious spending. However, the latest figures now cast doubt on that narrative. February’s decline suggests that the earlier momentum may have been a temporary anomaly rather than the beginning of a sustained recovery.
The disappointing retail data come alongside several other indicators pointing to a broader economic slowdown. Most notably, average wages in the business sector rose by just 7.9% year-on-year in February, the slowest pace of wage growth since the early months of the Covid-19 pandemic. While that increase still outpaces the current annual inflation rate of 4.9%, the margin is narrowing, which means consumers are seeing smaller real gains in purchasing power than in previous months.
To provide context, the average gross salary in Poland now stands at around PLN 8,500 (€1,955). Although this represents an improvement from previous years, the rate of wage growth is cooling noticeably, and that is beginning to affect confidence and consumption.
For now, the optimism that characterized the start of the year has been replaced by a more measured realism. Poland’s recovery, while still possible, appears to be less certain and more uneven than early indicators had suggested.
With Poland’s economic recovery showing signs of strain, pressure is building on the country’s central bank to begin cutting interest rates – a move that could offer relief to borrowers and provide a modest growth stimulus.
In recent weeks, several key economic indicators have disappointed. Retail sales fell unexpectedly in February, industrial production contracted, and wage growth slowed to its weakest pace in nearly four years. At the same time, inflation – long the main obstacle to looser monetary policy – has come in below expectations for two consecutive months. Annual inflation stood at 4.9% in both January and February, defying earlier forecasts of 5.3%.
In this context, high interest rates – with the National Bank of Poland’s benchmark rate currently sitting at 5.75% – are increasingly being viewed as a drag on growth rather than a necessary brake on inflation. While the bank has kept rates on hold for several months, speculation is mounting that cuts could begin as early as this summer.
Members of the Monetary Policy Council (RPP) – the rate-setting body of the central bank – have begun to publicly discuss the likelihood of cuts. Henryk Wnorowski, a prominent member of the Council, said last week that he sees a “clear opportunity” for a cut in July, while Wiesław Janczyk noted that the discussion around loosening policy is now “open and entirely possible.”
Another member, Cezary Kochalski, suggested that the July inflation forecast from the central bank could provide the necessary justification for lowering rates – and even hinted that the initial cut might exceed the standard 0.25 percentage point move. Przemysław Litwiniuk added that a vote on a rate cut could come even earlier than July, depending on upcoming data.
The disappointing retail data come alongside several other indicators pointing to a broader economic slowdown. Most notably, average wages in the business sector rose by just 7.9% year-on-year in February, the slowest pace of wage growth since the early months of the Covid-19 pandemic. While that increase still outpaces the current annual inflation rate of 4.9%, the margin is narrowing, which means consumers are seeing smaller real gains in purchasing power than in previous months.
To provide context, the average gross salary in Poland now stands at around PLN 8,500 (€1,955). Although this represents an improvement from previous years, the rate of wage growth is cooling noticeably, and that is beginning to affect confidence and consumption.
For now, the optimism that characterized the start of the year has been replaced by a more measured realism. Poland’s recovery, while still possible, appears to be less certain and more uneven than early indicators had suggested.
Poland edges closer to interest rate cuts
With Poland’s economic recovery showing signs of strain, pressure is building on the country’s central bank to begin cutting interest rates – a move that could offer relief to borrowers and provide a modest growth stimulus.
In recent weeks, several key economic indicators have disappointed. Retail sales fell unexpectedly in February, industrial production contracted, and wage growth slowed to its weakest pace in nearly four years. At the same time, inflation – long the main obstacle to looser monetary policy – has come in below expectations for two consecutive months. Annual inflation stood at 4.9% in both January and February, defying earlier forecasts of 5.3%.
In this context, high interest rates – with the National Bank of Poland’s benchmark rate currently sitting at 5.75% – are increasingly being viewed as a drag on growth rather than a necessary brake on inflation. While the bank has kept rates on hold for several months, speculation is mounting that cuts could begin as early as this summer.
Members of the Monetary Policy Council (RPP) – the rate-setting body of the central bank – have begun to publicly discuss the likelihood of cuts. Henryk Wnorowski, a prominent member of the Council, said last week that he sees a “clear opportunity” for a cut in July, while Wiesław Janczyk noted that the discussion around loosening policy is now “open and entirely possible.”
Another member, Cezary Kochalski, suggested that the July inflation forecast from the central bank could provide the necessary justification for lowering rates – and even hinted that the initial cut might exceed the standard 0.25 percentage point move. Przemysław Litwiniuk added that a vote on a rate cut could come even earlier than July, depending on upcoming data.
Poland faces dilemma over frozen electricity prices
Electricity prices play a crucial role in shaping Poland’s inflation rate, which is why, for the past several years, household energy tariffs have been effectively frozen. These price caps were introduced to shield consumers from soaring energy costs amid the global energy crisis and war in Ukraine, and they’ve since been extended multiple times. The current freeze is due to expire at the end of September 2025 – but with political and economic tensions mounting, yet another extension is looking increasingly likely.
The underlying concern is simple: if the freeze is lifted and prices are allowed to adjust to market levels, households could face a sharp increase in electricity bills. This would not only dent consumer confidence, but also risk reigniting inflation just as the country begins to recover from several difficult years.
National Bank of Poland (NBP) Governor Adam Glapiński has pointed directly to this scenario when explaining his resistance to cutting interest rates. He argues that once energy prices are unfrozen, regulated tariffs could jump, fueling a new round of inflation – precisely what the central bank is trying to avoid. While some commercial banks and economists believe inflation may continue to fall, the central bank maintains a more cautious stance, largely due to the uncertainty surrounding energy pricing.
Polish consumers show willingness to spend (and save)
New research from GUS reveals a complex and intriguing picture of consumer sentiment. Nearly 17% of respondents say they plan to spend “a little” or “a lot” more over the next 12 months on major household purchases such as furniture or large electrical appliances. This is the highest level recorded since March 2020 – the very beginning of the pandemic. For the past three years, that figure had hovered around 10%, but it now appears to be rising rapidly.
This shift could signal a coming boost in consumer spending, which would be a positive development for Poland’s wider economy. Increased household expenditure typically contributes to stronger GDP growth and supports sectors like manufacturing, retail, and logistics.
At the same time, an unprecedented 64% of respondents say they are currently able to save “a little” or “a lot”. This suggests that many Polish households may be entering a phase of both increased consumption and stronger savings – a rare combination that indicates a more balanced and resilient financial position.
Ye, beneath these encouraging signals lies a persistent sense of unease. More than 30% of those surveyed report that their household’s financial situation has deteriorated over the past year. Looking ahead, 26% expect things to get worse over the next 12 months, while only 15% anticipate any improvement. Just 17% express optimism about the future.
This combination of increased financial activity – both spending and saving – alongside continued pessimism about household conditions, suggests that while the economic fundamentals may be strengthening, many consumers remain cautious, shaped by recent years of inflation, energy uncertainty and geopolitical tensions.
One week after Fitch affirmed Poland’s credit rating, Moody’s has followed suit, maintaining its assessment with a stable outlook. This means the agency does not anticipate any change – upward or downward – to Poland’s creditworthiness in the coming months.
Moody’s pointed to several positive developments underpinning its decision. Chief among them is the recent improvement in Poland’s relationship with the EU, which has led to the unblocking of substantial investment funds. The agency also noted that any potential weakening of the American defense umbrella over Europe would likely have only a limited fiscal impact on Poland. This is because the country has already been increasing its defense spending for several years and is well into a modernization program for its armed forces.
However, the agency did warn of demographic headwinds that could increase fiscal pressure over time. Poland’s ageing population is expected to become a more significant drag on public finances and economic growth in the second half of the decade.
Even hypothetical or unlikely security threats are now shaping Poland’s fiscal reality. The country’s sharp increase in defense spending is accelerating public debt growth, prompting early suggestions that such spending may need to be financed through new forms of taxation.
This week, Katarzyna Pełczyńska-Nałęcz, Poland’s funds and regional policy minister, proposed introducing a windfall tax on the banking sector. The idea is to target “extraordinary profits” – though the minister did not specify what level of earnings would qualify as extraordinary, or where the boundary lies between normal and excessive profit.
The proposal comes in the wake of a record year for Polish banks, which collectively posted net profits exceeding €9.15 billion. Much of this was driven by high interest rates, which have significantly widened banks' net interest margins.
However, the plan to tax bank profits is already proving controversial. On the one hand, Pełczyńska-Nałęcz has criticised the high cost of borrowing in Poland. On the other, the banks argue that one of the main reasons credit is so expensive is the existing bank levy, which has been in place for several years and generates more than €1.37 billion annually for the government.
Critics warn that introducing a second tax on the sector could drive loan costs even higher, further tightening access to credit for households and businesses. While the government has not yet confirmed whether it will proceed with the windfall tax, the debate reflects growing tension between fiscal needs and financial sector stability – particularly at a time when Poland is under pressure to simultaneously invest in defense, infrastructure and long-term economic resilience.
Moody’s maintains Poland’s credit rating
One week after Fitch affirmed Poland’s credit rating, Moody’s has followed suit, maintaining its assessment with a stable outlook. This means the agency does not anticipate any change – upward or downward – to Poland’s creditworthiness in the coming months.
Moody’s pointed to several positive developments underpinning its decision. Chief among them is the recent improvement in Poland’s relationship with the EU, which has led to the unblocking of substantial investment funds. The agency also noted that any potential weakening of the American defense umbrella over Europe would likely have only a limited fiscal impact on Poland. This is because the country has already been increasing its defense spending for several years and is well into a modernization program for its armed forces.
However, the agency did warn of demographic headwinds that could increase fiscal pressure over time. Poland’s ageing population is expected to become a more significant drag on public finances and economic growth in the second half of the decade.
Poland weighs windfall tax on banks to fund defense spending
Even hypothetical or unlikely security threats are now shaping Poland’s fiscal reality. The country’s sharp increase in defense spending is accelerating public debt growth, prompting early suggestions that such spending may need to be financed through new forms of taxation.
This week, Katarzyna Pełczyńska-Nałęcz, Poland’s funds and regional policy minister, proposed introducing a windfall tax on the banking sector. The idea is to target “extraordinary profits” – though the minister did not specify what level of earnings would qualify as extraordinary, or where the boundary lies between normal and excessive profit.
The proposal comes in the wake of a record year for Polish banks, which collectively posted net profits exceeding €9.15 billion. Much of this was driven by high interest rates, which have significantly widened banks' net interest margins.
However, the plan to tax bank profits is already proving controversial. On the one hand, Pełczyńska-Nałęcz has criticised the high cost of borrowing in Poland. On the other, the banks argue that one of the main reasons credit is so expensive is the existing bank levy, which has been in place for several years and generates more than €1.37 billion annually for the government.
Critics warn that introducing a second tax on the sector could drive loan costs even higher, further tightening access to credit for households and businesses. While the government has not yet confirmed whether it will proceed with the windfall tax, the debate reflects growing tension between fiscal needs and financial sector stability – particularly at a time when Poland is under pressure to simultaneously invest in defense, infrastructure and long-term economic resilience.
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