While this behaviour reflects prudence in uncertain times, it also threatens to dampen broader economic momentum.
The latest GUS survey on consumer sentiment highlights a significant shift toward saving. An unprecedented 56% of respondents stated it is “likely” or “very likely” they will save money over the next year. In comparison, this figure rarely exceeded 50% in previous years. Additionally, nearly 60% of households report “some savings,” while 3.3% describe their savings as substantial.
Conversely, only 4.1% of respondents admitted to dipping into their savings or taking on debt to cover current expenses. On the surface, these figures seem positive, reflecting the strong income growth Poland has experienced in recent years. However, the rising propensity to save means that much of this income is not being spent in shops, slowing down overall economic activity.
Saving: A double-edged sword
From an individual household’s perspective, saving money is wise and provides a buffer against economic shocks. However, when the majority of households save simultaneously, the economy can suffer. Economic growth relies heavily on consumer spending and business investment, not savings held back for future use.
The slowdown in consumer spending has become a key concern for economists, especially as households choose to rebuild savings depleted during Poland’s recent period of high inflation. This trend suggests households remain cautious despite rising incomes, prioritizing financial security over immediate consumption.
Central Bank insights on cautious spending
The National Bank of Poland (NBP) has also examined this trend. Marta Kightley, the deputy head of the NBP, attributes the cautious behaviour to lingering uncertainty stemming from several recent crises.
“In our view, this stems from the significant shocks of recent years, which have left households with a sense of needing to prepare for an uncertain future. They may also be concerned about rising energy costs,” Kightley explained in an interview with the Polish Press Agency.
This cautious sentiment aligns with consumer confidence data, which show increasing anxiety about personal finances and job security. Over 31% of consumers fear their financial situation will deteriorate in the next year, the highest level since August 2022. Concerns about rising unemployment have also surged, with 40% of respondents expressing worry – marking an 18-month high.
Broader economic implications
Poland’s economy, like many others, relies heavily on consumer spending to fuel growth. The slowing pace of household consumption adds to existing economic headwinds, including weak exports and geopolitical uncertainties.
While saving rates continue to rise, it’s worth noting the potential for a feedback loop: as households save more, reduced spending slows economic growth, potentially leading to lower household incomes in the long run. Economists fear this dynamic could further undermine Poland’s recovery prospects, especially as global conditions remain volatile.
The path forward
To counteract the slowdown, policymakers may need to consider measures to encourage spending or boost consumer confidence. This could include targeted tax relief, incentives for household consumption, or broader social support to mitigate financial anxieties. However, balancing these efforts against rising inflation and fiscal constraints will be challenging.
For now, Poland’s record-breaking saving rates underline a shift in household behavior that could have far-reaching consequences for the country’s economic trajectory. While the instinct to save is understandable, the collective impact could hinder the recovery that policymakers and businesses alike are striving to achieve.
Construction sector plunges further
Poland's construction industry is in a deep slump, with output shrinking for the tenth consecutive month in October, marking a 9.6% year-on-year drop – the steepest decline since March. Analysts had anticipated a smaller contraction, highlighting the worsening crisis in the sector. The lack of growth stems from two primary factors: reduced public infrastructure projects and a slowdown in housing construction.
Public investments, such as roads, bridges, and water treatment facilities, have decreased significantly due to delayed disbursements from EU Recovery Funds. While these funds are expected to bolster the economy in 2024, the current shortfall is hitting infrastructure projects hard.
Similarly, housing development has taken a hit. October saw a 27% drop in completed housing units compared to the previous year, as developers pulled back due to tighter mortgage conditions. The situation is slightly better for individual investors building single-family homes, where completions fell by only 1%.
However, some positive indicators suggest a potential recovery next year. The number of newly initiated housing projects increased by 18% year-on-year in October, and building permits rose by 1.5%. Additionally, the anticipated lowering of interest rates in 2024 could improve access to housing loans, providing much-needed support to the sector.
Electricity price freeze extended
In an effort to curb inflation and maintain public support ahead of presidential elections, the Polish government has announced a nine-month extension of its electricity price freeze for households. The initiative, which will cost over PLN 5 billion (€1.07 billion) in compensation to electricity providers, aims to shield households from rising energy costs.
A critical component of the legislation requires energy producers to submit new tariff proposals to the Energy Regulatory Office by mid-2024. Wholesale electricity prices have been steadily declining, raising hopes that these new tariffs will be lower than current rates. If market prices continue their downward trend, this could allow for the unfreezing of household electricity prices without significant increases.
For businesses and local governments, however, price freezes will end in January. Market rates for electricity are now below the frozen levels for these groups, allowing them to negotiate better deals with suppliers for 2024. While this could ease costs for firms and municipalities, the challenge will be securing competitive contracts as market dynamics shift.
Government pushes health contribution reforms
Poland’s government has submitted a bill to Parliament proposing significant reforms to health contributions for entrepreneurs, set to take effect in 2026. The reform, estimated to cost PLN 4.6 billion (€990 million), introduces a hybrid model: contributions will be flat up to a certain income threshold, above which they will remain income-based. Entrepreneurs will no longer be able to deduct part of their health contributions from PIT, with the state budget covering the resulting shortfall in National Health Fund (NFZ) revenues.
The changes are expected to benefit entrepreneurs with modest incomes. For example, those earning €4,260 monthly could save over €213 per month, while those earning €2,130 could save €85. However, entrepreneurs with incomes exceeding €10,650 per month may see their contributions increase.
Earlier changes for 2025 include exempting fixed asset sales from income calculations and reducing the minimum monthly contribution from €90 to €68. This adjustment, based on 9% of three-quarters of the minimum wage – set to rise to €1,004 in January – aims to ease financial pressures on low-income entrepreneurs.
Political challenges loom, as the reforms face opposition from left-wing parties, while support from conservative groups remains uncertain.
Studenac seeks dual listing in Warsaw and Zagreb
Following the successful IPO of Żabka, Croatia’s leading grocery chain, Studenac, is set to list on the Warsaw and Zagreb stock exchanges in a dual offering. The IPO, valued at €170 million, includes shares from existing owners – Enterprise Investors – and a new issuance aimed at raising €80 million for expansion.
Studenac operates over 1,400 stores and plans to open 150 new outlets annually, solidifying its position as Croatia’s fastest-growing grocery chain. The company’s decision to pursue a dual listing underscores the Warsaw Stock Exchange’s status as a regional capital market leader. Warsaw’s larger and more liquid market is expected to facilitate Studenac’s capital-raising efforts.
The Warsaw Stock Exchange currently hosts several dual-listed Central European companies, including energy giant CEZ and oil and gas company MOL, demonstrating its appeal to regional businesses seeking growth and investment opportunities.
Currency pressures mount
Central and Eastern European currencies faced notable declines against the US dollar last week while remaining stable against the euro. The Polish złoty weakened by 0.06, reaching over 4.15 złoty (€0.88) per dollar – the highest level since November 2022. Similar trends were observed with the Czech koruna, while the Hungarian forint hit its lowest value against the dollar since October 2022.
The euro itself has been losing ground to the dollar, with the exchange rate hitting its lowest point since December 2022. The downturn followed weak November PMI data for Germany and the eurozone, which revealed persistently low economic activity in manufacturing and services. Markets interpreted the data as increasing the likelihood of eurozone interest rate cuts, leading to the euro’s decline and dragging Central European currencies with it.
Adding to regional instability, heightened geopolitical risks linked to Russia’s ongoing war in Ukraine further weakened confidence. Russia’s recent military actions, including a shift in its nuclear doctrine, have stoked fears. Meanwhile, the Russian ruble continues to depreciate, with the dollar now trading at nearly RUB 105, a stark contrast to the pre-2014 rate of RUB 30.
