Over the past year, this ratio has increased by nine people in the first category and by three in the second, indicating a gradual deterioration in the situation. The majority of these non-working individuals are retirees and others in the post-working age group, whose numbers are increasing more rapidly than those of the unemployed.
Despite these demographic pressures, Poland continues to set records in terms of employment among its working-age population. According to the latest data from Statistics Poland (GUS), the employment rate rose to 79% in the second quarter of this year, up from 78.7% last year and 76.3% three years ago.
This is occurring even though the actual number of employed individuals has decreased by 96,000 over the past year, bringing the total to 16.43 million. The improvement in the employment rate is primarily due to a faster decline in the number of economically inactive individuals—those not working and not seeking work—whose numbers have dropped by 108,000 to 3.91 million. This group includes non-working students, individuals with health issues or disabilities, and those engaged in household duties. Their numbers have been gradually decreasing as some of them re-enter the labor market. As a result, despite the overall population decline, the number of employed individuals has only slightly decreased.
The labor market also saw an uptick in the number of unemployed individuals, which increased by 22,000 to 468,000 in the second quarter. Consequently, the unemployment rate among the working-age population rose from 2.6% last year to 2.8% now. It's worth noting, however, that last year's rate was historically low, making this increase less alarming than it might otherwise seem.
In terms of economic performance, Poland's GDP grew by 3.2% in the second quarter compared to the previous year, surpassing the expectations of most economists. The total value of goods and services produced in the country over the past four quarters has reached 3.486 trillion złoty (approximately €814 billion), placing Poland 21st globally in terms of nominal GDP. This growth was driven by a 4.7% increase in consumer spending, a 2.7% rise in investments, and a 10.7% surge in government spending, primarily due to wage increases in the public sector.
However, the growth could have been even higher if not for a decline in business inventories and the first negative impact of net exports in two years.
Looking ahead, Poland's economic growth is expected to remain consumption-driven for the rest of the year. In 2025, investment growth is anticipated to accelerate due to EU funding. The future of Poland's exports, however, will largely depend on the economic conditions in the Eurozone, which remains weak but is expected to improve.
The pace of Poland's economic growth will be crucial for public finances, which have been under strain and are unlikely to see significant improvement next year. The draft budget for 2025, presented by Finance Minister Andrzej Domański, projects a reduction in the public sector deficit to 5.5% of GDP from 5.7% this year. However, this still represents a significant deficit, and the revision upward from the previously estimated 5.1% for this year raises the likelihood of a budget revision in the coming months. The central budget deficit is expected to increase from 184 billion złoty (approximately €43 billion) this year to 289 billion złoty (about €68 billion) next year, largely due to two key shifts within the public finance system: the state budget will finance the repayment of debt from the Polish Development Fund (PFR) and BGK Bank, and it will transfer significantly more funds to local governments.
Poland's borrowing needs are projected to reach 367 billion złoty (about €87 billion) next year, although after accounting for the PFR and BGK debt repayments, the net borrowing requirement will be 304 billion złoty (about €72 billion), 52 billion złoty (about €12 billion) more than this year. To meet these needs, the finance ministry plans to rely more on foreign debt issuance and may also issue short-term treasury bills in the domestic market.
Inflation in Poland rose to 4.3% in August, slightly higher than economists had forecast. The increase was driven by a modest 0.1% monthly rise in prices, with food prices falling less than usual for August, fuel prices dropping by 0.9%, and energy prices inching up by 0.1%. According to experts at ING Bank, higher wage increases in the public sector, particularly for teachers, could lead to a noticeable rise in education-related costs in the coming months. Inflation is expected to remain within the 4-5% range through the end of the year.
In contrast, inflation in the Eurozone has continued to decline, reaching 2.2% in August, the lowest level since mid-2021. This has reinforced expectations that the European Central Bank (ECB) will cut interest rates at its next meeting on September 12, marking the second rate cut this year. Lower borrowing costs are intended to stimulate the European economy, which has struggled in recent years. If Eurozone interest rates fall while Polish rates remain unchanged, it could strengthen the Polish złoty.
Finally, Poland's labor market continues to perform well by European standards. The country's unemployment rate, according to Eurostat, stands at 2.9%, second only to the Czech Republic's 2.7%. This position has remained consistent for several months, with Germany (3.4%), Malta (3%), and Slovenia (3.3%) also posting low unemployment rates. In contrast, the Baltic states face higher unemployment rates, with Estonia at 7.5%, Lithuania at 8%, and Latvia at 6.9%. The overall unemployment rate for the European Union has remained steady at 6% since March.
