Republic of Poland: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Poland

2024ARTICLE IV CONSULTATION—PRESS RELEASE;STAFF REPORT; AND STATEMENT BY THE EXECUTIVEDIRECTOR FORTHE REPUBLIC OF POLAND Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussionswith members, usually every year. In the context of the2024Article IV consultation withthe Republic of Poland, the following documents have been released and are included inthis package: •APress Releasesummarizing the views of the Executive Board as expressed during itsJanuary 10, 2025consideration of the staff report that concluded the Article IVconsultation withthe Republic of Poland. •TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onJanuary 10, 2025, following discussions that ended onOctober17,2024, with the officials ofthe Republic of Polandon economicdevelopments and policies. Based on information available at the time of thesediscussions, the staff report was completed onDecember 16, 2024. •AnInformational Annexprepared by the IMFstaff. •AStatement by the Executive Directorforthe Republic of Poland. The documents listed below have been orwill be separately released. Selected Issues TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staff reports andother documents. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. IMF Executive Board Concludes 2024 Article IV Consultationwith the Republic of Poland FOR IMMEDIATE RELEASE Washington, DC–January 21, 2025:The Executive Board of the International MonetaryFund (IMF) concluded the Article IV consultation1with the Republic of Poland. Economic growth is estimated to have accelerated in 2024 to 2.8 percent, driven by a reboundin domestic demand, mainly from private consumption rising due to strong nominal wagegrowth and lower inflation. This is partially offset by net exports becoming a drag on growth ashigher imports from increased consumption outpace exports hindered by weak Euro Areademand. The outlook is positive, further supported by expected absorption of Next GenerationEU (NGEU) funds, with growth projected at around 3.5 percent in 2025 and 2026. Over themedium-term, as the impact of NGEU funds absorption unwinds, growth is expected tomoderate to slightly below 3 percent largely due to population ageing. The fiscal deficit is estimated to have widened to 5.9 percent of GDP in 2024 amidst amoderately expansionary fiscal stance (0.3 percent of GDP) as permanent increases in publicsector wages and social benefits outweighed savings from the lower cost of energy supportmeasures. The deficit is expected to remain elevated in 2025 at 5.6 percent of GDP, in partdue to high defense spending. The authorities have announced fiscal consolidation over themedium-term aiming for a deficit of 2.9 percent of GDP by 2028. That said, some of theconsolidation measures remain to be identified. Staff projects, based on measures identifiedso far, that the deficit will decline to 3.5 percent of GDP over the medium-term with public debtstabilizing around 65 percent of GDP. Inflation has declined considerably from 2023 but remains well above the central bank inflationtarget despite the tight policy stance. Core inflation remains elevated in the context of strongwages growth amid a still-tight labor market. Absent surprises, both core and headline inflationshould peak before mid-2025, then moderate to around the upper end of the target rangeof 2.5±1 percent by end-2025.The financial system remains resilient and private credit isrecovering slowly. Capital and liquidity buffers remain well above regulatory requirements,while asset quality has improved. Bank profits increased due to wider net interest margins withhigh liquidity keeping deposit rates subdued. Private sector credit has recovered somewhatsince bottoming out in mid-2023, partly due to a subsidized mortgage scheme. Executive Board Assessment2 Executive Directors agreed with the thrust of the staff appraisal. They commendedthe Polish authorities’ prudent policies that have resulted in impressive economic and socialgains and accelerated absorption of New Generation EU funds. While welcoming theongoing recovery and the positive near-term outlook, Directors noted that risks are tilted tothe downside and inflation remains elevated, given a tight labor market and strong wagegrowth. Directors highlighted the need to rebalance the policy mix to help rebuild buffers,strengthen resilience, and support private investment-led growth. Structural reforms to boostproductivity and tackle longer-term challenges from ageing and the climate transition are alsoimportant. Directors agreed that fiscal policy should increasingly focus on rebuild