Polish economy to grow strongly in H1 2016, investment growth likely to be higher going forward

The Polish economy was one of the most rapidly growing economies in Europe in 2015. The economy expanded 3.5% last year, mainly driven by growing domestic demand. With the domestic demand being the main growth driver, it contains the weakness to external demand and augurs well for sustained solid growth in H1 2016, according to Nordea Bank.

“We expect growth at 3.8% in 2016 and 3.6% in 2017”, added Nordea Bank.

There are improvements in Poland’s external account. In the 12 months to June 2015, Poland’s trade balance recorded surplus, while the current account balance turned slightly positive in the 12 months to January 2016. Favorable terms of trade partially helped in the recovery and are expected to be transitory, noted Nordea Bank. Net exports, in terms of volume, are not expected to be a considerable economic driver in the forecast horizon.

Meanwhile, developments in the labor market remain a key optimistic factor for the Polish economy. Since the start of 2014, employment has been rising by 1%-2% y/y, while the jobless rate sa is in line with the lowest level since 1991. Furthermore, amidst negative inflation, wages rose by over 3%. Meanwhile, investment growth is expected to be higher in the near future as capacity utilization has been higher said Nordea Bank. However, political uncertainty might compel firms to delay investment and restrict banks’ capacity to underpin higher growth in investment.