According to the forecast published in mid-February 2022 by the Institute for Economic Forecasts and Analysis, Poland’s GDP growth will reach 4.5%, mainly thanks to high dynamics recorded in the first half of the year
In March 2022, i.e. just after Russia’s aggression against Ukraine, the NBP published a GDP growth forecast for Poland. It assumes that in the coming years at least part of the sanctions imposed on Russia will be maintained and, consequently, there will be no return in economic relations to the status quo from before the aggression. Consequently, for 2022 as a whole, growth in the major developed economies will be markedly lower than in the previous. At the same time, it assumed that the number of COVID- 19 infections would fall and that future restrictions would no longer have a significant impact on demand and its feasibility in the domestic economy. With these assumptions, the NBP forecasts that Poland’s GDP will grow by 4.4% in 2022.4.
The main driver of GDP creation will remain household consumption, which is likely to grow by 4.6%. Its growth will be stimulated by the solutions of the Polish Deal programme introducing fundamental changes in the Polish tax system, which should result in a shift of demand towards lower income groups of households. Among other elements of the Programme, private consumption should be fostered by: increasing transfers to families within the framework of the Family Welfare Capital, support for housing purchases through a guarantee of own contribution, consumption expenditures of new migrants from Ukraine, protective allowances and temporary reduction of indirect taxes within the framework of Anti-inflation Shields. On the other hand, the expected high inflation and previous NBP interest rate hikes will adversely affect the purchasing power of households while increasing their propensity to save. A deterioration in household sentiment as a result of the Russian military aggression against Ukraine may also have a downward effect on private consumption.
NBP predicts continued, albeit at a slower pace than in 2021, growth in corporate gross fixed capital formation. It should grow by 4.7% in 2022. The expected continuation of the rebuilding of the investment demand of enterprises is to be confirmed, among others, by the results of surveys, according to which the investment moods of companies were better than those recorded a year ago. At the same time, in the fourth quarter of 2021, the capacity utilization rate in most groups of companies was at a level similar to that recorded before the outbreak of the pandemic. An increase in capital expenditure by companies should also be stimulated by the low initial degree of automation and robotisation in Polish industry and rising labour costs. In contrast, domestic investment prospects will be negatively affected by the implications of Russia’s military aggression against Ukraine, resulting in higher levels of uncertainty and a sharp rise in commodity prices. Increased exchange rate volatility and prolonged disruptions in supply chains will have an impact in the same way. At the same time, the NBP expects a weakening of the hitherto high demand for housing, inter alia due to the recent increase in NBP interest rates, translating into the availability and cost of credit. On the other hand, the path of residential investment will be positively influenced by the launch from 2022 of dedicated support for families for the purchase of a flat under the Polish Deal.
The key challenge of 2022 is likely to be further price increases. According to the NBP, in 2022 the average inflation rate will reach 10.8%, compared to 5.1% in 2021.
Poland is the biggest beneficiary of EU funds from the perspective 2014-2020 (co-financing value of EUR 86.1 billion). According to the state at the end of January 2022, agreements were signed for co-financing projects with the total value of grants amounting to PLN 337.0 billion, i.e. 93.7% of the total available allocation of EU funds. In turn, the total value of beneficiaries’ expenditures settled at the national level amounted to PLN 346.6 billion, including the EU co-financing of PLN 225.1 billion, which accounts for 62.6% of the allocation.5
In December 2021, the Polish government submitted a Partnership Agreement to the European Commission concerning the allocation of EU funds under the next financial perspective of the European Union falling in the period 2021-2027. The document is awaiting approval. The proposed value of funds allocated to Poland amounts to EUR 76 billion in current prices, compared to EUR 82.5 billion in current prices which were allocated to Poland under the previous financial perspective. The Infrastructure and Environment Programme (FEnIKS) has been allocated €25.1 billion, compared to €27.4 billion in the previous financial perspective. Despite decrease in the value of allocations, Poland will remain the biggest beneficiary of EU funds. The expected scale of support in the area of infrastructure projects should allow the EU funds to maintain a significant role in the development of the Polish construction sector in the coming years. The forthcoming budget perspective will be the first in which railway investments will have priority over road investments. It will also be important to support infrastructure projects under the Connecting Europe Facility (CEF).
An additional source of investment funding may be the Reconstruction Fund. Under the subsidies, Poland will receive PLN 23.9 billion, including PLN 12 billion for transport projects on the railways and PLN 3.2 billion for roads. Additionally, Poland can apply for PLN 34.2 billion in the form of loans. The approval process for the National Reconstruction Programme governing the disbursement of the aforementioned funds has been protracted. At the time of preparing this report, it is difficult to assess the feasibility and timeliness of the implementation of the programme.
An important investment project that construction companies are counting on is the Central Communication Port (CPK) project – the construction of the Solidarity port. It is at the first stage of works, which will last until 2023 and is expected to cost PLN 13 billion. First field works have started in the area of the planned CPK. This involves examining the land and creating a detailed map of the site. In early 2021, the CPK entered into a strategic consulting agreement with Incheon Airport in Seoul. Over the course of 2021, South Korean experts provided analysis and studies, sharing experience gained from the design and construction of the Seoul hub. In October 2021, CPK concluded a master plan contract with Arup Polska, which was commissioned to carry out most of the planning work. In October 2021, the CPK company announced the largest framework procedure in Europe for the design documentation of the CPK rail program. The estimated value of the works is over PLN 7 billion. In January 2022, the bidding process for construction works at the Solidarity Port began. The aim of the bidding process is to select up to eight contractors to whom the CPK company will subcontract individual tasks under a simplified executive procedure. The estimated value of the contract is over PLN 1.7 billion. In addition to investment in airport infrastructure, the CPK construction plan calls for a number of rail and road investments. The government adopted a regulation on the list of investments accompanying the construction of CPK.
4 Source: Inflation Report – March 2022, NBP, 11 March 2022
5 Source: Ministry of Funds and Regional Policy