{
  "title": "Poland: Staff Concluding Statement of the 2023 Article IV Mission",
  "publication": "IMF News, March 24, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/03/24/poland-staff-concluding-statement-of-the-2023-article-iv-mission",
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  "summary": "Following an impressive recovery from the pandemic, the Polish economy has been struck by the effects of Russia’s war in Ukraine, which have contributed to high inflation and slowing growth.",
  "publishDate": "2023-03-24",
  "sections": [
    {
      "heading": "Economic outlook and risks",
      "content": "- Growth projections:\n  - GDP (change in percent): 2022 est. 4.9; 2023 proj. 0.3; 2024 proj. 2.4; 2025 proj. 3.7; 2026 proj. 3.4; 2027 proj. 3.1; 2028 proj. (not shown).\n  - Short-term: slowdown continued into early 2023 with a gradual recovery beginning in the second half of 2023.\n  - Medium-term: economic growth projected to exceed 3 percent annually as investment (including Next Generation EU grants) offsets demographic headwinds.\n- Inflation projections and dynamics:\n  - CPI inflation (percent) average: 2022 14.4; 2023 11.9; 2024 6.1; 2025 4.1; 2026 2.9; 2027 2.5.\n  - CPI inflation (percent) end of period: 2022 16.6; 2023 7.2; 2024 5.0; 2025 3.6; 2026 3.3.\n  - Headline inflation projected to decline to 3.6 percent at end-2025, reaching the top of the tolerance range of the target by end-2025.\n  - Core inflation is more domestically driven; the mission projects core inflation averaging nearly 11 percent in 2023 and more than 7 percent in 2024.\n- Labor market and output gap:\n  - Output gap (percent of potential GDP): 2022 1.9; 2023 -0.8; 2024 -1.3; 2025 -0.7; 2026 -0.2; 2027 -0.1; 2028 0.0.\n  - Unemployment rate (average, according to LFS): 2022 3.2; 2023 3.5.\n- External position and reserves:\n  - Current account balance, percent of GDP: 2022 -2.4.\n  - Total external debt, percent of GDP: 2022 48.4; 2023 45.7; 2024 43.4; 2025 41.1; 2026 39.6; 2027 38.6; 2028 38.4.\n  - Central bank foreign exchange reserves described as ample and expected to remain adequate."
    },
    {
      "heading": "Fiscal outlook and recommendations",
      "content": "- Recent fiscal developments and projections:\n  - General government net lending/borrowing (percent of GDP): 2021 1.9 (referenced earlier); 2022 -3.1; 2023 proj. -4.5; 2024 proj. -3.8; 2025 proj. -4.0; 2026 proj. -4.2; 2027 proj. -3.9; 2028 proj. -3.5.\n  - General government debt: 2022 49.6; 2023 50.7; 2024 51.7; 2025 52.4; 2026 53.6; 2027 54.1; 2028 54.5.\n  - General government primary balance and cyclically adjusted balances show weakening (specific cyclically adjusted overall balance and primary balance figures noted in source).\n- Fiscal policy guidance:\n  - Avoid fiscal loosening in 2023; at minimum, further fiscal loosening should be avoided unless major downside risks materialize.\n  - Future energy support measures should be temporary, more targeted according to household income and energy poverty, and allow a greater role for price signals to promote energy conservation.\n  - Move expenditures executed through off-budget funds into the budget to improve transparency and permit parliamentary and societal review.\n  - Create room within the budget to accommodate a planned increase in defense expenditures by finding offsetting savings to prevent debt from increasing over the medium term.\n  - Consider revenue measures and expenditure reforms to preserve fiscal buffers and put debt on a gradual downward path, including: reforming the property tax to raise additional revenues; enhancing the targeting of social benefits; raising the retirement age.\n  - End reliance on extra-budgetary funds and require all spending to go through the budgetary approval process."
    },
    {
      "heading": "Monetary policy",
      "content": "- Policy stance and guidance:\n  - The Monetary Policy Council raised rates during 2021-22 and held the policy rate at 6.75 percent since October 2022.\n  - The NBP should continue to respond to changing data and conditions and be prepared to raise interest rates further, if necessary, to reduce inflation to the target by end-2025.\n  - The MPC should consistently communicate that its current focus remains on the maintenance of a tight policy stance and that discussion of rate cuts is premature.\n  - Resumption of monetary policy tightening would be warranted if core inflation momentum, wage growth, and the economy fail to slow as projected or if there is a new fiscal expansion."
    },
    {
      "heading": "Financial sector issues and recommendations",
      "content": "- Current health and vulnerabilities:\n  - Banking sector described as stable, well capitalized; non-performing loan rates remain low; sector-wide capital remains strong; higher interest rates have supported earnings.\n  - Challenges that could limit banks' ability to provide credit include: costs from broadly available mortgage credit holidays; difficulties issuing instruments for MREL requirements; legal risks from foreign exchange (FX) mortgages.\n- Policy recommendations:\n  - Discontinue costly untargeted credit holidays; instead, scale up existing programs targeting truly distressed borrowers.\n  - Continue voluntary restructurings of FX mortgages, and explore policy options to resolve legal uncertainty that casts risk over the banking sector.\n  - Monitor banks' ability to meet MREL requirements; absent improved market access, some banks may need to meet requirements with own funds in early 2024."
    },
    {
      "heading": "Energy transition and security",
      "content": "- Strategy and priorities:\n  - Energy strategy update expected to propose a strong increase in renewable energy and a reduced role for natural gas as a transition fuel.\n  - Priorities: reduce regulatory barriers, ensure a level playing field to attract private investors, phase out coal in electricity generation and direct household use.\n  - Meeting decarbonization targets under EU policies will be supported by EU funds; additional policy instruments may be needed, and authorities are encouraged to consider a role for carbon taxation.\n  - The “Energy Shield” of 2023 introduces block tariffs for electricity allowing greater price increases above a consumption threshold and is a step toward better targeting."
    },
    {
      "heading": "Refugee integration and labor supply",
      "content": "- Current measures and suggestions:\n  - Poland is hosting 1 million refugees from Ukraine; refugees have full rights to work and direct access to health and education systems.\n  - The authorities have provided financial support and operational rights to Ukrainian businesses.\n  - To further integrate refugees, the mission suggests: provide further training opportunities for reskilling and upskilling; offer Polish language training; provide access to affordable childcare; facilitate recognition of Ukrainian professional licenses in Poland.\n  - A sustained increase in immigration would increase Poland’s competitiveness and raise medium-term growth."
    },
    {
      "heading": "Scenarios and key risks",
      "content": "- Downside risks:\n  - Escalation of the war in Ukraine or intensification of banking sector turmoil in advanced economies could trigger greater risk aversion and weaker external demand.\n  - Inflation could remain high for longer than expected, especially if core inflation and wage growth decline more slowly due to structural labor shortages.\n- Upside opportunities:\n  - Increased nearshoring-related investments and sustained immigration could boost competitiveness and medium-term growth."
    },
    {
      "heading": "Selected quantitative indicators (highlights from Republic of Poland: Selected Economic Indicators, 2022–28)",
      "content": "- Activity and prices:\n  - GDP (change in percent) 2022 4.9; 2023 0.3; 2024 2.4; 2025 3.7.\n  - Output gap (percent of potential GDP) 2022 1.9; 2023 -0.8; 2024 -1.3; 2025 -0.7.\n  - CPI inflation (average) 2022 14.4; 2023 11.9; 2024 6.1; 2025 4.1.\n  - CPI inflation (end of period) 2022 16.6; 2023 7.2; 2024 5.0; 2025 3.6.\n  - Unemployment rate (average, according to LFS) 2022 3.2; 2023 3.5.\n- Public finances (percent of GDP):\n  - General government net lending/borrowing 2022 -3.1; 2023 -4.5; 2024 -3.8; 2025 -4.0.\n  - General government debt 2022 49.6; 2023 50.7; 2024 51.7; 2025 52.4; 2026 53.6; 2027 54.1; 2028 54.5.\n- Balance of payments and external indicators:\n  - Current account balance, percent of GDP 2022 -2.4.\n  - Total external debt, percent of GDP 2022 48.4; 2023 45.7; 2024 43.4; 2025 41.1; 2026 39.6; 2027 38.6; 2028 38.4.\n- Memorandum item:\n  - Nominal GDP (billion zloty): 2022 3067.7; 2023 3440.7; 2024 3745.5; 2025 4053.8; 2026 4343.6; 2027 4616.4; 2028 4891.0.\n\nSource: Poland: Staff Concluding Statement of the 2023 Article IV Mission (March 24, 2023).\n\n---\n\n\n References\n\n- Republic of Poland and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2023/03/24/poland-staff-concluding-statement-of-the-2023-article-iv-mission"
    }
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    "Published: March 24, 2023",
    "Growth projections:",
    "Inflation projections and dynamics:",
    "Labor market and output gap:",
    "External position and reserves:",
    "Recent fiscal developments and projections:",
    "Fiscal policy guidance:",
    "Policy stance and guidance:",
    "Current health and vulnerabilities:",
    "Policy recommendations:",
    "Strategy and priorities:",
    "Current measures and suggestions:",
    "Downside risks:",
    "Upside opportunities:",
    "Activity and prices:",
    "Public finances (percent of GDP):",
    "Balance of payments and external indicators:",
    "Memorandum item:",
    "[Republic of Poland and the IMF](http://www.imf.org/external/country/POL/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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