Politics back to normal, mixed signals on economic performance and inflation, and a gloomy fiscal outlook

POLAND - Report 30 Sep 2025 by Jan Hagemejer

Polish politics briefly united during the September 9 drone crisis but then quickly reverted to partisan tensions. With the KO and PiS leading in polls, PiS’s rural dominance suggests a likely coalition with Konfederacja, sidelining the KO. Economically, Poland experienced strong growth in Q2 2025, driven by private consumption and services, although industrial stagnation and a decline in construction persisted. However, in 3Q 2025 we expect a recovery in manufacturing.

Inflation remains stable at 2.9% y/y, with core inflation at 3.2%, but rising unemployment, slow investment, and a potential slight slowdown in 2026 may prompt further rate cuts. Credit rating agencies maintained Poland’s rating but downgraded the outlook due to fiscal strain and political gridlock, as borrowing needs surge and the 2026 budget prioritizes defense spending and new taxes, while bond yields remain steady.

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