Poland’s economy maintains strong momentum, having outperformed our 2025 expectations with 3.6% GDP growth. We project economic expansion to peak at approximately 3.9% in 2026, underpinned by robust fixed investment and resilient household consumption. Growth should moderate in 2027, yet still remain solid at roughly 3%. Although inflation has eased and was expected to average near the NBP target in 2026, it remains the most uncertain element of the forecast. The Iranian conflict has materially elevated risks through energy price volatility, threatening a renewed inflationary uptick and weaker real income dynamics. While the NBP recently delivered a cautious 25bp rate cut in response to an improving baseline, further easing is on hold. The geopolitical situation clouds the inflation outlook and raises the risk of second-round effects, keeping monetary policy firmly data-dependent.
Beyond macroeconomic fundamentals, the Iranian conflict has also impacted local bond and FX markets. Polish government bond yields, previously declining amid lower inflation and a more dovish NBP stance, spiked as geopolitical tensions drove up risk premia. Our baseline, however, assumes yield normalization if the conflict proves short-lived. The zloty has shown resilience in recent months, despite some depreciation following the escalation. EUR/PLN remains supported by solid economic growth, EU fund inflows, and a cautious central bank. Domestically, high public financing needs, fiscal slippage, and political friction remain structural challenges. Nevertheless, Poland can tap into a substantial pool of EU financing, including standard Cohesion funds and remaining RRF allocations, to partially cover its funding requirements. Ultimately, while Poland’s economy remains robust, the Iranian conflict stands as the primary external shock shaping near-term risks across growth, inflation, rates, yields, and the currency.