Poland's economy grows 0.8% in Q2, outperforming amid US tariffs

Poland's economy expanded 0.8% quarter-on-quarter in Q2 2025, slightly below consensus but maintaining solid momentum, fueled by robust retail sales and industrial production. Despite increased US tariffs on EU imports, Poland's low export dependence on the US and substantial EU fund inflows are expected to sustain its projected 3.0% full-year growth. This strong economic performance, coupled with higher-than-expected inflation, suggests the Polish central bank will maintain its current pace of monetary easing, with a 25 basis point interest rate cut anticipated in September.

Analysis

Poland's economy demonstrated sustained momentum in the second quarter of 2025, expanding 0.8% quarter-on-quarter. While this figure slightly missed the 1.0% consensus forecast, it builds upon a 0.7% expansion in the prior quarter, signaling continued economic resilience. Growth drivers appear to be domestically focused, with monthly data highlighting robust retail sales growth of 2.5% QoQ and a resilient 1.0% QoQ increase in industrial production. This domestic strength is providing a buffer against external headwinds, specifically the recent increase in US tariffs on EU imports to 15%. The economy's low export dependence on the US, coupled with strong income growth and substantial EU fund inflows, supports the standing forecast of 3.0% GDP growth for the full year 2025. This robust performance, combined with stronger-than-expected July inflation data, suggests the Polish central bank is unlikely to accelerate its monetary easing. Consequently, the market anticipates a measured 25 basis point interest rate cut in the upcoming September meeting, maintaining a gradual policy path.

Key Decisions for Investors

• Given the central bank's likely adherence to a gradual 25 basis point easing cycle due to resilient growth and firm inflation, investors might find the Polish Zloty (PLN) relatively well-supported, particularly against currencies with more dovish central bank outlooks.
• Investors with exposure to Polish equities should note the strength in domestically-oriented sectors like consumer retail, which are benefiting from strong wage growth, though the limited prospect for deeper rate cuts may temper upside for Polish government bond prices.
• It is crucial to monitor upcoming high-frequency data on retail sales and industrial production to confirm that domestic demand continues to offset any drag from the new US tariffs, as a significant slowdown could alter the central bank's measured approach to monetary policy.