Poland posts fastest growth since 2022 on demand

Poland delivered its strongest economic expansion in three years in Q3 2025, with GDP rising 3.7% year-on-year—a decisive acceleration that provides political and fiscal relief for a government navigating elevated budget pressures and tightening European fiscal rules. The result signals an economy that is cycling out of post-inflation stagnation and regaining momentum across consumption, investment and manufacturing, though underlying structural constraints remain significant.

The mechanism behind the rebound reflects three major drivers. First, household consumption stabilised as real incomes recovered following a sharp decline in inflation from its 2022–2023 peaks. Wage growth outpaced price dynamics across services, manufacturing and retail, improving purchasing power and supporting discretionary spending. Second, investment activity strengthened as supply-chain normalisation, EU Recovery and Resilience Facility (RRF)-funded projects and a resilient labour market improved corporate visibility. Manufacturing firms reported higher output in automotive components, electronics and intermediate goods, benefiting from firmer demand in Germany and Central Europe. Third, public investment provided a counter-cyclical boost as the government advanced infrastructure and energy-transition projects to anchor growth ahead of 2026 budget negotiations.

Poland’s performance stands out within the EU. While many eurozone economies remain constrained by weak industrial demand and high real rates, Poland’s flexible exchange rate, diversified production base and strong labour market provided insulation from cyclical pressures. Employment levels remain near record highs and the unemployment rate continues to track below the EU average, underpinning domestic-demand resilience. The services sector—particularly transport, logistics and shared-services centres—also showed solid expansion, benefiting from structural integration with EU-wide supply chains.

Nevertheless, the macro picture is more nuanced than a single quarterly print suggests. The stronger GDP figure temporarily eases political pressure around fiscal consolidation, but budget fundamentals remain demanding. Poland faces a widening structural deficit, elevated social expenditures and rising interest costs on domestic debt. The European Commission is preparing to reintroduce stricter fiscal-oversight benchmarks in 2026, leaving limited flexibility for fiscal drift. A 3.7% GDP print boosts nominal revenues, but not enough to fully offset medium-term commitments in defence, energy security and welfare spending.

External risks also loom. Poland’s industrial sector remains highly sensitive to Germany’s manufacturing cycle, and any renewed downturn in European capital goods or automotive demand would quickly transmit through supply chains. Moreover, geopolitical uncertainty in Ukraine continues to weigh on business sentiment and logistics-system resilience. The zloty has appreciated modestly in response to stronger growth expectations and narrowing inflation, tightening financial conditions for exporters even as it reduces import costs.

Financial markets have reacted constructively but cautiously. Polish government-bond yields tightened modestly as investors interpreted the growth reading as a sign that fiscal deterioration may be less severe than feared. Equities linked to domestic demand—retail, construction materials, banking—saw incremental support, while exporters and industrial cyclicals lagged due to currency strength and external-demand fragility. Poland’s banks, which benefit from higher loan demand and lower credit risk as real incomes improve, remain well positioned to gain from the growth outlook.

Forward indicators will determine whether Q3 represents a cyclical peak or the start of sustained acceleration. Key metrics to watch include core inflation’s trajectory, real wage growth, retail volumes, EU-fund disbursement rates and industrial orders from Germany. If domestic demand continues to firm while inflation remains contained, Poland could maintain above-EU-average growth into 2026. A renewed energy-price shock, slower EU demand or delays in RRF funding would, however, erode the momentum.

Poland’s 3.7% expansion is both a signal and a test: evidence of an economy regaining stride, and a reminder that sustaining this trajectory requires disciplined fiscal management, steady investment inflows and resilience against external shocks. For now, the government gains breathing room—its challenge will be to convert cyclical strength into structural stability.