Growth is expected to increase slightly in 2017, but without quite returning to its 2015 level. Household consumption will remain the principal driving force. Household incomes will continue to rise thanks to strong employment and the benefits created in April 2016 aimed at modest families with at least two children (PLN 500 per child and per month). Public Investment, reduced in 2016 during the transition between two European funding programmes, should pick up. House building should benefit from a government imitative aimed at supporting renovations and rental choices for medium income families. Private investment however is more uncertain given the scale of the political and social uncertainties. Exports (automobiles, machines, white goods, consumer electronics, food, furniture, ships, and construction materials) are expected to benefit from the upswings in the country’s leading markets and the depreciation in effective exchange rate. Only its exports to the United Kingdom (around 2.5% of GDP) are likely to suffer from the fall in the pound sterling. However, as imports, driven by increased consumption, will increase faster than exports, the contribution from foreign trade to growth will be virtually zero.

The public deficit is expected to widen again in 2017 and go back over the 3% threshold. Public spending will continue to increase with the first full year payment of the so-called “Family500+” children’s allowance (estimated annual cost of 0.9% of GDP). There are also plans to raise the income tax threshold. In addition, the abandoning of the plan to raise the minimum retirement age to 67 adopted in 2013 and the return to 65 for men and 60 for women is expected to cost the equivalent of 0.5% of GDP. Finally, the state as employer will feel the impact of the 8% increase in the minimum wage as of 1 January. Additional revenues will be generated through the 0.44% tax on bank assets imposed in 2016 (expected worth: 0.2% of GDP) and the increased tax rate on higher earnings. The introduction of the retail distribution tax, revised downwards under pressure from the European Commission, has been delayed until 2018 and will only bring in 0.1% of GDP. In addition, there will be no repeat of the one-off boosts received in 2016. Under these conditions, the public debt, 60% held by non-residents, is likely to deteriorate slightly. This should however be placed in context as the net debt held by the Polish public sector accounts for only 20% of GDP. Finally, the government is clearly working hard to avoid falling within the remit of the European Excessive Deficit Procedure.

The small surplus on the trade in goods, although shrinking, will continue in 2017. The trade in services will remain in surplus (in excess of 2% of GDP) thanks to tourism and international road transport. However, the surplus in goods and services is counterbalanced by the significant deficit in investment revenues linked with the extensive presence of foreign investors. Remittances for Polish workers abroad (800,000 in the United Kingdom) are offset by the remittances from foreign workers working in Poland (Ukrainians, Lithuanians, Belarusians, etc.). In the end, the current account balance will remain close to equilibrium. European funds (almost 3% of GDP) and new FDI (2% of GDP net) amounting to a stock equivalent to half of GDP, a sign of the degree of integration of Polish industry within the European production chain, will help reduce the external debt to 70% of GDP (from 73% in 2013) and boost the currency reserves held by the Central Bank.

The conservative and nationalist Law and Justice (PiS) party won a majority of seats in the Sejm in the legislative elections of October 2015, with 37.6% of votes ahead of Civic Platform, the main opposition party. Its leader, Jarosław Kaczyński, gave the post of Prime Minister to Beata Szydło, moderate in image, but retains significant influence over the government agenda. The promulgation by the conservative President, Andrzej Duda, of laws to change how the Constitutional Court operates, but deemed to be non-constitutional by this latter, has resulted in an institutional impasse, alongside the friction with the European Commission concerning the Rule of Law. As any European sanction (suspension of the right to vote) was unlikely, the Polish government ignored Brussels’ recommendations. This attitude, together with the imposition of taxes targeted at certain sectors (finance, retail, energy), in which there are significant foreign presences, could, as a result of a loss of confidence among investors and consumers, act to dampen activity. Popular opposition however forced the government to backtrack on its pledge to outlaw abortion. At the same time, the monetary authorities have tempered plans for the mandatory conversion of Swiss franc denominated mortgages (= 9% of GDP) limiting the cost for banks in reimbursing exchange rate spreads.