CEE Macro Weekly: Third quarter in Poland had a good start

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TOP MACRO THEME(S):

• Stronger GDP growth, brighter outlook (p. 3) – Poland’s GDP growth accelerated to 3.4% y/y in 2q25, driven by stronger consumption and resilient investments. Growth momentum places Poland among top EU performers.

WHAT ELSE CAUGHT OUR EYE:

• POL: CPI inflation in July dropped to 3.1% y/y from 4.1% y/y in June (final data confirmed the flash estimate). Monthly price growth was 0.3%. Core inflation (CPI excl. food and energy prices) inched down to 3.3% y/y from 3.4% y/y. PPI deflation decelerated to 1.2% y/y from 1.5% y/y. We expect that after the sharp, one-off drop, CPI inflation will remain around 3% y/y until the end of the year, while core inflation will remain within 3-3.5% y/y range. We assume that electricity prices growth will not accelerate much this year, despite President K.Nawrocki’s veto of the bill extending energy price freezes, although the risk of an alternative scenario has slightly increased.
• POL: Poland plans to increase the corporate income tax rate paid by banks to 30% in 2026, from 19%, to finance increased defence spending. The rate would be lowered to 26% in 2027 and further to 23% in subsequent years along with a reduction of the existing bank levy starting from 2027.
• ROM: The latest NBR forecast includes a higher inflation path than assumed in May. In particular, the forecast for 3q25 and 4q25 was raised by 4.1pp and 4.2pp, respectively. Inflation will reach its peak (in terms of the forecast at the end of a given quarter) in September, at 9.2% y/y. The upward revision of the forecast is primarily due to three factors: 1) the liberalization of electricity prices, adding 1.5pp to inflation; 2) the higher VAT rate, adding 1.6pp; 3) the excise duty increase, with an estimated impact of 0.4pp. At the same time, the projected price growth at the end of the previous forecast horizon (4q26 and 1q27) was reduced by 0.4pp. Price growth will decline sharply in 3q26 as the base effects related to the lifting of the electricity price cap and the VAT increase fade. We expect the inflationary shock associated with these administrative changes to be purely supply-driven – fiscal consolidation will restrain the build-up of demand-side pressures, which the NBR also foresees, anticipating a marked slowdown in growth. Over the forecast horizon, the output gap will remain negative and will deepen until 4q26, reaching -3.6% of GDP. In particular, the NBR does not rule out that, with the freeze on public sector wages and pensions, real incomes will decline in 2026. Under these conditions, investments will be the main driver of growth.
• CZE: Ministry of finance marginally upgraded its GDP growth forecast for 2025, by 0.1pps to 2.1%, while downgrading its estimate for 2026, by 0.4pps to 2%. MinFin continues to see average inflation rate at 2.4% in 2025 and 2.3% in 2026. The risks to economic growth forecast are skewed to the downside, with the main risks including geopolitical tensions, trade barriers and possible renewed problems in supply chains. The forecast will constitute a basis for 2026 budget bill. Prime minister, P.Fiala, said that the budget bill should be ready by August 31 and it will be debated in September.

THE WEEK AHEAD:

• Week will start with retails sales and M3 growth data from Poland. We expect to see robust consumer spending. Calendar also includes revised GDP estimate in Czechia, as well as flash CPI estimate for August in Poland – the latter one we expect to be close to 3% y/y. On Tuesday the MNB will decide on monetary policy, most probably leaving rates unchanged.