IMF Executive Board Concludes 2015 Article IV Consultation with Poland
The economy has recovered from the 2012–13 slowdown. Growth accelerated to 3.4 percent in 2014, and further to 3.6 percent in the first quarter of 2015, on the back of buoyant domestic demand, supported by improving labor market and financial conditions. However, inflation has remained negative since July 2014 owing to low commodity prices and weak imported inflation. The current account deficit narrowed from 3.5 percent in 2012 to 1.4 percent in 2014, benefiting from strong exports.
The outlook is for continued robust growth and subdued inflation amid downside risks. Economic expansion is expected to continue, with growth projected at 3.5 percent in 2015 and over the medium term. External downside risks include a surge in global financial market volatility amid asymmetric monetary exit in advanced economies, continued geopolitical tensions in the region, and renewed sovereign stress or protracted low growth in the euro area. Domestically, inflation could fail to pick up owing to external factors or if low inflation expectations become entrenched. On the upside, a stronger-than-expected recovery in the euro area and low oil prices would further lift growth in Poland. Poland’s Flexible Credit Line (FCL) arrangement with the IMF helps mitigate external downside risks.
Policies have focused on supporting growth and rebuilding policy buffers. Monetary policy has remained accommodative helped by a cumulative 100 basis points cut in the policy interest rate since October. Fiscal consolidation has advanced further, allowing Poland to exit the Excessive Deficit Procedure (EDP) one year early. The general government deficit, which declined to 3.2 percent of GDP last year, is expected to narrow further over the medium term. The banking sector has remained well-capitalized and resilient to shocks, w
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