Outlook for 2025

The situation on the core markets will primarily be conducive to further easing of monetary policy in an environment of rather restrictive (EU) and at least neutral (US) fiscal policy. We still believe in a soft landing of the US economy, but it will not happen without maybe not rapid but steady progressing FOMC interest rate cuts. At most, the Fed will allow itself a break in January, before all the revisions of labor market data are released (and so the picture remains unchanged, i.e. slow but stubborn deceleration). In the eurozone, easing will gain momentum, because there is no inflationary pressure there anymore, and even the boldest growth forecasts are well below potential growth. In general, we believe that high supply will rule globally (echoes of high production capacity, the effects of imposed tariffs and acceleration in productivity growth). This will reduce commodity inflation. Service prices will slow down together with the deceleration of labour markets (labor demand will fall faster than supply, which suggests declines in wage growth).

We expect GDP growth in Poland to be slightly below 4%. The baton of growth will be passed from consumption to investment activity (both are set to contribute positively but investment is something that was non-existent in 2024). Here, as usual, EU money will play crucial role, which will also be used to finance “large” projects such as the CCP, modernization of transmission networks, or a nuclear power plant. They will be accompanied by private company investments in automation, energy efficiency, and green energy. Local governments will slowly be unlocked (yes, also with EU money). Central government is going to wake too with regard to continuation fo financing less spectacular investments than the ones mentioned above. Consumption will do worse, because the labor market will no longer generate such large increases in nominal wages. A less negative contribution from net exports would be a nice addition, but we estimate that the global environment will not be good enough to lead to very rapid diversification of exports (although diversification as such will take place). Local military investments may turn out to be the underdog of growth. They will constitute an infrastructure, supply and human resources base for purchased equipment (imports). The army may be the ultimate recipient of surplus employees in some regions, which will appear as a result of cost restructuring of companies and progressing automation. Inflationary pressure is already falling, and in 2025 it will only get better, when wages (growing slower) will lose their significance for inflation, while productivity will continue to improve. The inflation increases at the beginning of 2025 are mainly a statistical and regulatory artifact. This is not inflationary pressure, but an increase in the level of (some) prices. The MPC will maintain the current rhetoric as long as possible, waiting for the inflation peak (March, publication in April) and its confirmation (April, publication in May). However,  we believe that, ultimately, the cuts will be faster due to the clearly non-inflationary environment and will start already with the March projection (-50bps).

2025 will continue to be a year of geopolitical tensions. We have no opinion on the end of the war in Ukraine. We also see no clear indications of an end to tensions in the Middle East. Weather disruptions will be a constant travel companion through 2025. It's worth noting, however, that any supply shocks they may cause will fall on less inflationary ground.