Real GDP should continue to grow around 3½ per cent annually, supported by solid investment and consumption growth. Considerable infrastructure investment supported by EU funds will continue to underpin productivity and GDP growth, despite a temporary slowdown in 2016 at the switchover of budget periods for EU funds. Consumer price inflation is expected to gradually recover as the effect of sharp falls in energy and food prices fades.
The central bank is assumed to start raising interest rates from record low levels at end-2016, as economic slack diminishes and inflation turns up. Now that Poland has exited the EU excessive deficit procedure, the recently elected government plans various revenue reforms and higher spending on child benefits. In the context of weak revenue growth owing to low inflation, further consolidation efforts are needed to continue gradual deficit reduction in 2016. Further lowering incentives to use irregular work contracts would strengthen productivity, wages and inclusiveness.
Focusing infrastructure spending on renewable energy, rail and urban public transport would help reduce Poland’s dependence on coal and road traffic, with positive effects on the climate and public health. Coherent and stable climate change policies and road pricing are needed along with green tax reform to provide for a strong price signal to internalise the effects of CO2 emissions.
Source: OECD, November 2015