Poland's GDP growth surged to 3.7% year on year in the fourth quarter (chart), picking up after a revised gain of 2% y/y in the previous quarter, according to seasonally adjusted preliminary data released by the statistical office GUS on February 28.

Household consumption drove the expansion October-December, the breakdown of the data showed. Investment growth eased but still beat the consensus. Net trade slowed GDP growth as weak foreign demand weighed on exports, while rising domestic demand drove imports. A positive sign, analysts say, is the contribution of inventories to growth, indicating a rebalancing between demand and supply.

Household consumption growth accelerated sharply, rising 3.5% y/y compared to just 0.3% y/y in the third quarter. Investment growth came in at a modest-looking 1.3% y/y but clearly recovered after the stagnation of 0.1% y/y in Q3. Overall, domestic demand grew 4.8% y/y in the fourth quarter, compared to a gain of 4.4% y/y in the preceding three months.

Analysts believe the pick-up in economic activity in Q4 is a prelude to a “breakthrough year” in 2025.

“As households rebuild their savings, they are likely to channel more funds into consumption. Meanwhile, lower interest rates and fresh inflows of EU funds could give a strong boost to investment and domestic production,” PKO BP said in a comment on GUS data.

“A strong złoty and recovering domestic demand may dampen the contribution of net exports to GDP growth, keeping its impact neutral,” PKO BP added.

Still, analysts are confident GDP growth will move beyond the 3% line in 2025, coming in at 3.2%-3.5%. In 2024, Poland's economy grew 2.9%.

In unadjusted terms, GDP grew 3.2% y/y in Q3, up from 2.7% y/y in Q2, GUS data also showed.

Quarter on quarter, GDP added by a seasonally adjusted 1.3% in the fourth quarter, following a 0.1% q/q increase in Q3, GUS also reported.

GDP data for Q4 support the basic scenario that the National Bank of Poland will carry out a rate cut in Q2 2025 unless more data come indicating the economic growth is less inflationary than anticipated.