Poland’s GDP fell an adjusted 7.9% y/y in the second quarter, the Central Statistical Office (GUS) said in a preliminary estimate on August 31.

The outlook is for a mild recession compared to fellow EU members but it is clouded by uncertainty regarding how the pandemic will unfold in the colder months.

The Q2 contraction came in the wake of the coronavirus (COVID-19) pandemic that froze the Polish economy in April with some of the restrictions in place throughout the rest of the quarter. In effect, domestic demand retreated 9.5% y/y after an expansion of 1.7% y/y in April-June, a breakdown of the data showed. 

Household consumption – a key driver of Poland’s growth in the pre-pandemic era – suffered particularly badly, falling 10.9% y/y (+1.2% y/y in Q1), the biggest contraction since Poland began quarterly recording of GDP in 1996. Investment also declined steeply, retreating 10.9% y/y (+0.9% y/y in Q1). That was the most severe fall since 2002.

Poland’s trade also weakened in the second quarter during the pandemic. Exports, however, suffered less than imports and managed a positive contribution of 0.8pp to growth overall. 

“The outlook remains fragile. The performance of the economy in the third quarter will be crucial for the 2020 growth [figure]," Erste said in a comment on the GUS release.

Analysts note the coronavirus-driven contraction of the economy is slightly less deep than expected.

“Private consumption growth should begin to recover from the third quarter onward but year-on-year growth dynamics will likely remain in the negative territory until the end of the year,” Erste said. Still, investments can post a double-digit contraction in the second half of the year, the Austrian bank added. 

“Readings from the real economy in July confirm a rapid recovery, especially in trade and industry. We expect, however, that … the decline in GDP will amount to approximately 3.8%,” Millennium Bank said. 

“These expectations are subject to high uncertainty regarding the development of the COVID-19 pandemic. Our forecast assumes no further restrictive lockdown,” it added. 

The preliminary reading – which could still be adjusted – confirms the flash estimate published in mid-August. Growth also came in at -8.2% y/y in unadjusted terms, again the same as in the flash estimate. Unadjusted GDP growth was 2% y/y in Q1.

Poland's GDP is expected to contract around 4% in 2020, most analysts say. The European Commission was more pessimistic in its summer forecast, gauging the fall at -4.5%. A recovery of around 4.5% is expected in 2021.