External Activity Conditions

In 2025, Poland’s GDP growth accelerated from 3.0% to around 3.6% year-on-year. The main driver of growth was private consumption, which accelerated from 2.9% to around 3.7% yoy despite a slowdown in real wage growth (from 7.5% to 4.0% yoy compared with 2024).

Investment, however, was disappointing: although it increased by around 4,2% yoy, this was slower than expected given the ongoing acceleration in the disbursement of EU funds. The contribution of foreign trade (net exports) to growth was negative for the second consecutive year and subtracted around 0.2 percentage points from Poland’s GDP growth in 2025.

The unemployment rate at end-2025 stood at 5.7%, up from 5.1% at end-2024. This marked increase does not reflect a deterioration in domestic labour market conditions, but rather results from regulatory changes associated with the reform of labour offices. Consequently, at this stage a more reliable measure free from regulatory distortions is the unemployment rate according to the Labour Force Survey (LFS), which rose to 3.2% in the third quarter of the year, from 3.0% in both the third quarter of 2024 and the second quarter of 2025. The evolution of this indicator accurately captures the condition of the domestic labour market in 2025: the economy experienced a mild deterioration, driven by a steadily declining demand for labour on the part of employers, alongside a persistently high labour force participation rate.

Wage growth in the enterprise sector decelerated markedly in 2025 from over 9% yoy in January to slightly above 7% in November. As a result, average annual wage growth slowed to around 8%, down from 11% in the previous year. Stagnant employment trends combined with inflation remaining at the NBP target are conducive to a further moderation in wage growth.

In the first quarter of 2026, the unemployment rate is expected to rise due to seasonal factors, before resuming its decline around the turn of the first and second quarters, heading towards this year’s minimum of approximately 5.5%. By the end of 26, the unemployment rate should remain at 5.7 saw in December 2025. Wage growth will continue to decelerate, albeit at a somewhat slower pace, ultimately falling by nearly 2 percentage points compared with the previous year. As a result, nominal wage growth in the enterprise sector is projected to decline to around 5,5% in 2026. Moreover, we forecast a slight acceleration in employment growth rate in the enterprise sector, to -0.5% in 2026 from -0.8% in 2025.

The second half of 2025 saw a further decline in consumer price inflation (CPI) – it returned to the National Bank of Poland’s (NBP) target at the end of the year, faster than previously forecast. CPI ended 2025 at 2.4% yoy. Core inflation (excluding food, energy and fuel prices), although on a downward trend, remained higher, primarily due to persistent cost pressures in the services sector. Average annual CPI in 2025 reached 3.6%, identical to 2024, but with a fundamentally different trajectory – rising in 2024 and clearly declining in 2025.

This is not the end of the disinflation process in Poland, although the rate of inflation decline will slow significantly in 2026. Inflationary pressure from regulated prices will remain limited: energy prices for households will remain at a similar level in 2026, despite the formal „unfreezing” of electricity prices. Furthermore, the president’s veto prevented larger hikes in excise taxes on alcohol and tobacco products and an increase in the sugar tax. The food market is also signaling low price pressure due to the end of previous supply disruptions.

Core inflation is no longer a key concern, although services inflation will remain significantly higher than goods inflation due to the „stickiness” of high labour costs. The projected Poland’s high economic growth rate in 2026 should not generate additional inflationary pressure, given the still-closing output gap and the relatively high rate of productivity growth in the economy.

According to forecasts by Bank Pekao economists, average annual CPI inflation in 2026 will reach 1.9%, below the NBP projection and market consensus.

In the fourth quarter of 2025, the Monetary Policy Council (MPC) continued its monetary easing, cutting interest rates by 25bps at each meeting. Year 2025 ended with the reference rate at 4.00%. In total, the Council cut rates by 175bps throughout the year, marking the strongest monetary policy easing since 2013. A key factor enabling such decisive action was faster-than-expected disinflation.

After the January- February pause in the cycle, interest rate cuts are expected to continue, and market consensus indicates that the reference rate will reach the target level (3.25%) by mid-2026 at the latest. At the same time, the Council will likely maintain cautious communication, emphasizing the risks of secondary inflationary effects related to the closing output gap, strongly expansionary fiscal policy and heightened geopolitical uncertainty.

The central government budget deficit in 2025 amounted to approximately PLN 276 billion (as estimated by Pekao economists) — several dozen billion zlotys less than assumed in the Budget Act (PLN 289 billion), and at the same time PLN 65 billion more than a year earlier. The increase in the deficit was driven mainly by the reform of local government financing (an increase in their share of PIT revenues) and by the need for the Ministry of Finance to redeem Treasury bonds issued by the Polish Development Fund (PFR) during the pandemic, with a total value of PLN 34 billion. New social transfers were also introduced (widow’s pensions), but their scale was smaller than in the previous year. Tax rates did not change significantly, but tax revenues were lower than expected. This applied in particular to VAT, which generated around PLN 320 billion compared with the planned PLN 341 billion, as well as to CIT revenues. CIT receipts were expected to amount to PLN 80 billion but reached slightly less than PLN 70 billion.

According to estimates by Pekao economists, the general government deficit amounted to around 7% of GDP in 2025 (final data will be published in April 2026), compared with 6.5% of GDP a year earlier. This is a high level, but in the past year it did not result in difficulties in financing the government’s borrowing needs. Treasury bond yields remained elevated, but Poland’s risk premium-measured, for example, by the spread between domestic government bond yields and German Bunds-declined

Due to changes in US trade policy, 2025 was a turbulent year, but ultimately turned out to be quite conventional in terms of investor returns. Nevertheless, not all asset classes yielded the same returns. Treasury bond holders had to settle for rather modest gains. As in the previous year, changes in market interest rates were very unevenly distributed. While ongoing monetary policy easing cycles around the world allowed for a significant decline in short-term bond yields, investors could expect much less at the so-called long end of the curve. In fact, yields on 30-year treasury securities in key markets either remained unchanged or even increased.

This behavior of the longest-term treasury securities was due, among other things, to increased political and geopolitical risks affecting global capital flows, and above all to the lack of progress in fiscal consolidation in the major developed economies. Equity markets, on the other hand, performed very well: S&P500 gained 16.4%, Japanese Nikkei225 26.2%, German DAX 23%, Chinese Shanghai Composite 18.4% and British FTSE250 9.0%. French CAC40 gained 10.4%. Thus, 2025 stood out owing to its relatively low returns on investments in US stocks. This can be attributed to the slowdown in economic growth in that country, uncertainty about the shape of trade and economic policy, increased appetite for diversification of investment portfolios after years of US dominance, and factors specific to individual countries (reflation in Japan, fiscal package in Germany).

In 2025, the Warsaw Stock Exchange’s star was shining brightly. All major indices on the Warsaw trading floor were characterized by above-average returns and breaking new all-time records (with the exception of the WIG20 index, which still had not beaten its 2007 highs). The broad market WIG index grew by 47.3%, the WIG20 index of the largest companies gained 45.3%, medium-sized companies represented in the mWIG40 index yielded a 33.6% return, and the sWIG80 index, which groups small-cap companies, rose by 25.4%. In 2024, the downward trend in the number of companies listed on the stock exchange continued, with 15 companies delisting and three making their debut. Interest in the Warsaw Stock Exchange increased significantly, with the total value of trading on the stock market amounting to PLN 470 billion (for comparison, in 2024 it was PLN 331 billion).

According to data from the Financial Supervision Authority (FSA), the banking sector’s net profit in 2025 amounted to PLN 48,9 billion (+21,6% y/y) compared to PLN 40,2 billion in the whole of 2024. The increase in profits took place in an environment of falling interest rates: the inelastic supply of deposits allowed interest costs to remain unchanged, while interest income increased by PLN 3 billion y/y. Expenses related to provisions and write-offs also decreased, contributing PLN 3,5 billion y/y to net profit. However, the sector’s performance was weighed down by dynamic wage growth, which translated into an increase in expenses related to costs of operation of PLN 4,0 billion y/y.

According to the KNF data, the banking sector’s assets in 2025 amounted to PLN 3,685 billion, an increase of 9.7% y/y.

According to data from the National Bank of Poland, the following trends were observed in the main deposit categories:

The growth rate of household deposits in 2025 remained in single digits and slowed down (9.4% y/y in January, 7.9% y/y in December). In 2026, deposit growth will continue to slow down, reaching around 7% y/y due to lower projected wage growth.

The volume of corporate deposits accelerated aggressively at the end of last year (14.4% y/y in December), and in 2026 its growth will remain in double digits. This will mirror the credit boom and strengthening demand for credit from non-financial corporations.

The structure of deposits remained stable. In December 2025, private deposits accounted for 88.6% of all retail deposits. The share of term deposits remained high (30.5%), although it declined slightly as a result of interest rate cuts. We forecast that in 2026, the growth in the volume of current deposits will be half as high as that of term deposits.

The following trends were observed in the main categories of receivables:

In 2025, and especially in the second half of the year, the decline in interest rates was a clear stimulus for lending. The growth of the consumer loan portfolio accelerated from 5.8% y/y in January to 8.1% y/y in December. At the same time, despite the very high value of new mortgage sales (over PLN 100 billion, a significant part of which, however, was the result of refinancing existing liabilities), the value of mortgage portfolio amortisation was close to PLN 70 billion.

As a result, the volume of PLN-denominated housing loans grew by only 8.0% y/y. Altogether, loans for households grew by 4.1% y/y.

Increased interest in loans among entrepreneurs, motivated both by demand (economic recovery, NGEU investments) and supply (falling interest rates), was clearly visible in the data for 2025. After six consecutive months of double-digit growth, the operating loan portfolio ultimately grew by 7.2% y/y. The growth rate of investment loans was 10.5% y/y. Loans to businesses grew by a total of 9.0% y/y.

The quality of the sector’s loan portfolio improved in 2025 and is at historically high levels (the NPL ratio was 3.4% in November 2025, compared to 3.7% at the end of 2024). Further interest rate cuts and economic recovery will contribute to a further improvement in the quality of the loan portfolio.

The share of non-performing loans in the loan portfolios of households (3.5%) and small businesses (6.6%) remained on a favourable downward trajectory. The percentage of risky liabilities of large enterprises as a result of events in the second half of 2024 peaked in March last year (7.1%) and then fell to 6.8% in the following months.