Poland’s economy returned to growth in 2021, following the crisis caused by the COVID-19 pandemic. In 2021, the GDP grew by 5.7% compared to 2020, when it declined by 2.5%. Poland was among the few European countries where economic activity in 2021 exceeded pre-pandemic COVID-19 levels.
In 2021, the main growth creator was household consumption, which grew by 6.2% on an annual basis. There was also an increase in investment activity from quarter to quarter, mainly by companies. In 2021, gross fixed capital formation increased by 8.0% compared to the previous year (compared to a decrease of 9.0% in 2020). Similarly to the previous year, in 2021 the investment rate in the national economy (the ratio of gross fixed capital formation to gross domestic product at current prices) was 16.6%.
The problem of the Polish economy was high inflation. In December 2021, prices were 8.6% higher than a year earlier. On 6 October 2021, the Monetary Policy Council began tightening monetary policy and raised interest rates a total of three times by the end of 2021. As a result of these increases, the reference rate rose from 0.10% to 1.75% during 20211. Increases in interest rates may significantly reduce the availability of credit, both for businesses and households (among other things by reducing demand in the property market).
In addition, economic activity in Poland and the level of inflation in 2021 were influenced by global phenomena, such as the increase in global commodity prices, the shortage of semiconductors, supply bottlenecks and the increase in transport prices. For example, since the beginning of 2021, steel prices have rocketed from levels of €500-600 per tonne to €1,130 per tonne in July 2021. In the second half of 2021, prices for steel fell slightly and by December 2021 were at around €950 per tonne.
In 2021 the value of construction and assembly production in current prices amounted to PLN 117.1 billion and grew by 7.9% compared to the previous year. This compares with a growth rate of 0.4% in 2020. Construction and assembly production in the field of volume construction (residential and non-residential buildings together) reached PLN 56.0 billion and increased by 5.0% in relation to the previous year. The upturn occurred in both residential and non-residential construction, where construction output rose by 7.2% and 3.7% respectively in 2021. In 2021, the value of infrastructure construction output was PLN 61.1 billion, i.e. it increased by 10.7% (including construction and assembly output in road construction 5.8%, and in rail construction 2.6%)2.
Construction and assembly production in PLN billion
Favourable trends in residential construction continued. In 2021, 234.7 thousand accommodations were put into use, i.e. by 6.3% more than in the previous year (when the growth was 6.5%). There was an increase in the number of accommodations completed in private construction (by 19.4%), while there was a decrease in construction meant for sale or rent (by 0.7%).
Despite maintaining the upward trend in production, the COVID-19 pandemic undoubtedly had an impact on the activities of the construction sector in Poland and took the form of:
- disruption of supply chains;
- reduced availability of foreign workers, mainly of Ukrainian origin;
- slowdown of works resulting from the need to maintain the sanitary regime;
- protraction of administrative decisions on ongoing construction contracts and delays in announcing tenders for new infrastructure investments.
In order to limit the negative effects of increased prices of construction materials and wages on their profitability, companies increased the prices of construction contracts. Construction output prices were 7.6% higher in December 2021 compared to the same month of the previous year3. Thus, the method of contract valorisation in force in 2021 may in many cases not have compensated for the sharp increase in prices.
In 2021, average employment in construction was 419,800 people, slightly lower than in 2020 (by 0.2%). In December 2021, a construction worker received an average of £6,360 in wages compared to £5,800 paid a year earlier, meaning that average wages increased by 9.7% in 2021. The reasons for this increase can be found primarily in the growing demand for construction workers and wage pressure under the influence of rising inflation.
Despite production growth, overall sentiment in the construction industry deteriorated month on month. Companies most often indicated that constraints related to labour costs, material costs and the uncertainty of the overall economic situation were hindering their operations. According to entrepreneurs, capacity utilisation in the construction industry in December 2021 was around 83%.
Price change of steel bars
Changes in asphalt wholesale prices
1 During January-April 2022, the Monetary Policy Council raised interest rates four times, including the reference rate by 2.75 p.p.
2 Source: GUS
3 Source: GUS