The most important economic trends in Poland and abroad

In the eurozone, the unemployment rate in December 2024 stood at a record low of 6.3%, 0.2 p.p. lower than in the same period in 2023. However, countries like Slovenia and Finland, where the rate at the end of 2024 was more than 1 p.p. higher than in 2023, Germany and France, where the unemployment rate rose by 0.2 and 0.3 p.p., respectively, but also Spain and Greece, where the rate fell by 1.3 and 1.0 p.p., respectively, December to December.

The U.S. economy did relatively well last year, maintaining a solid GDP growth rate (2.8% in 2024, after 2.9% in 2023). Also overseas, there were concerns about the health of the labor market during the year, but the end of the year showed that the situation had stabilized, with the US unemployment rate rising slightly in the first half of 2024 to remain at 4.1–4.2% in the second half. As at the end of 2023, the ratio was 3.8%.

China last year succeeded in achieving the result planned by the central government. The China’s GDP growth was 5.0% in 2024 after 5.2% in 2023. However, reaching the target was possible thanks to a series of demand stimulus measures introduced by the Chinese authorities. The country is struggling with deflationary tendencies, and there are fears of their perpetuation, similar to Japan in the 1990s. The real estate crisis is also still unresolved, and the uncertainty surrounding the rise of protectionism around the world casts a shadow over this economy’s growth prospects in the coming years.

Public consumption (+1.3 p.p.) and inventory change (+0.5 p.p.) also made significant positive contributions to last year’s growth of the Polish economy. In contrast, growth was negatively affected by net exports. This category subtracted 1 p.p. from the GDP rate in 2024, and this was a result of faster growth in imports than exports (3.3% and 1.2%, respectively), reflecting a faster pace of activity recovery at home than in our trading partners.

In 2024, industrial output sold increased by 0.3%. The prolonged stagnation in the sector was the result of a weakened economy in Poland’s major trading partners, domestic demand accelerating slower than expected, as well as troubles in the automotive industry and geopolitical tensions. As a result, depressed sentiment persisted in the sector throughout the year. At the same time, it limited inflationary pressures. Prices of industrial output sold fell by 6.8% in 2024, with a deceleration in the rate of decline evident throughout the year.

Construction and assembly output declined in 2024 by 8.0%. The weaker result is a result of the transition period between successive EU financial perspectives, which involved limited absorption of these funds. Construction output results were also weighed down by reduced investment by companies and a high base due to the end of the “Bezpieczny Kredyt 2%” Secure Loan 2%) program. With relatively high interest rates, the number of housing units completed fell, although at the same time the number of units for which permits were issued and construction started grew rapidly last year.

Source: Statistics Poland/PZU Department of Macroeconomic Analyses
The figures for 2024 are a preliminary estimate.

In contrast, the weaker economy in the labor market has not significantly affected unemployment. At the end of December 2024, there were about 786 200 unemployed people in the registers of labor offices (2 thousand fewer than in December 2023), keeping the unemployment rate at 5.1%. In turn, the deseasonalized unemployment rate published by Eurostat, calculated with a methodology harmonized for EU countries, was 3.0% in December 2024, with the average for the European Union at 5.9%. Only Czech Republic (2.6%) boasted a lower rate than Poland.

The average gross monthly salary in the business sector in 2024 was PLN 8,265.92. Compared to 2023, it grew by 11.0% in nominal terms and 7.0% in real terms. For the national economy as a whole, the average wage growth rate in 2024 was higher, reaching 13.6%, according to the first estimate. This was, among other things, a consequence of significant increases of more than 20% in the budget sphere.

Retail sales increased by 1.0% in real terms in 2024. Despite the marked improvement in their income situation, consumers remained cautious in their purchasing decisions and rebuilt savings that had been eroded by increased inflation. Demand for durable goods, including furniture and household appliances and electronics, has still not recovered. Meanwhile, sales of motor vehicles fared best, where year-end demand growth was also helped by the entry into force of stricter emission standards starting in 2025.

Administrative decisions also played an important role in the formation of the CPI at the aggregate level – the VAT on food was reinstated, but it was also decided to continue intervening in the market for electricity and gas prices.

Despite the reduction in inflationary pressures in the economy (core inflation fell from 6.9% in December 2023 to 4.0% in December 2024), the Monetary Policy Council (MPC) kept interest rates at 5.75% throughout 2024.

According to Statistics Poland’s fiscal notification of October 2024, the deficit in the government and local government sector in 2023 stood at 5.3% of GDP, after being at 3.5% of GDP in 2022. Estimates available from Eurostat indicate that the deficit reached 6.2% of GDP in Q3 2024 (as the sum of the last four quarters). On 26 July 2024, the EU Council decided to launch the excessive deficit procedure against Poland. The justification states that the general government deficit’s overshoot of the benchmark (3% of GDP) is not temporary, and both the Ministry of Finance’s (5.7%) and the European Commission’s (5.8%) forecasts indicate that the deficit remained above 5% of GDP in 2024 as well. The increase in the deficit last year was primarily due to an increase in defense spending and increases in salaries and benefits.

The Budget Act for 2024 assumed a maximum state budget deficit of PLN 184 billion, and after its October amendment, PLN 240.3 billion. In the end, the budget deficit at the end of 2024 amounted to PLN 210.9 billion, which was mainly the result of spending 32.1 billion less than planned.

According to the last of Statistics Poland’s fiscal notifications, the deficit in the government and local government sector in 2023 went up to 49.7% of GDP from 48.8% of GDP in 2022. The Ministry of Finance and the European Commission estimate that the debt ultimately rose to 54.6% and 54.7% of GDP in 2024, respectively. Estimates available from Eurostat indicate that it was at 53.5% of GDP as recently as in Q3 2024. Government debt in 2024 is expected to be slightly higher, exceeding 55% of GDP.

Along with rebounding economic growth, household consumption and high levels of investment have revived the Lithuanian economy, after two years of stagnation. According to data from the State Data Agency of Lithuania, the real change in GDP in the fourth quarter of 2024 compared to the corresponding quarter of 2023, excluding seasonal and calendar factors, was 3.8%. Economic growth was driven by positive net exports and household consumption, which recovered in late 2023 and strengthened in early 2024.

Annual inflation (December 2024 versus December 2023) was 2.1%. This was mainly due to price increases for food services, heat energy, pharmaceuticals, tobacco, milk, cheese and eggs, medical and dental services. At the same time, there was a decrease in prices for electricity, gas, solid fuels, vegetables and clothing.

In 2024, Lithuania’s unemployment rate was 7.1% registering a 0.3 p.p. increase over the previous year. The number of people employed in the country increased by 1.6% relative to 2023. Labor supply has been boosted by favorable migration trends. Employment growth in 2024 was driven by the private sector, especially information and communications, administration and services, accommodation and food service, and manufacturing activities.

Data from the Central Statistical Bureau of Latvia shows that gross domestic product declined by 0.4% in 2024 compared to 2023. Compared to the fourth quarter of 2023, it fell by 0.4% in the fourth quarter of 2024, while it rose by 0.1% in the fourth quarter compared to the third quarter (according to seasonally and calendar-adjusted data).

In 2024, the manufacturing sectors’ value added decreased by 2.8%, while the services sector increased by 0.4%. Growth was recorded in agriculture, forestry and fishing. Recession was observed in the processing of metal products, the manufacture of computers, electronic and optical products, while the production of foodstuffs increased. The volume of construction output decreased, which was affected by low demand for building construction. Increases were recorded in the retail and wholesale trade and accommodation and food service sectors.

Over the year, the average level of consumer prices increased by 3.3%. The average level of consumer prices was most influenced by increases in the prices of food and non-alcoholic beverages, tobacco and alcoholic beverages, health care, recreational and cultural goods and services, and decreases in the prices of housingrelated goods and services.

Latvia’s annual inflation rate rose to 3.3% in December 2024 from 2.2% the previous month. This was the highest level of inflation since September 2023, driven by accelerating price increases in food and nonalcoholic beverages, clothing and footwear, health care, recreation and culture, education and hotel services. In addition, transportation costs rose and deflation in the housing and utilities sector eased. At the same time, growth in the prices of alcoholic beverages and tobacco products, household furnishings and maintenance, and communications has slowed. On a monthly basis, consumer prices rose 0.2% in December 2024, remaining unchanged for the third consecutive month.

The average monthly wage in 2024 was 9.7% higher than the previous year. In the public sector, wages grew faster than in the private sector, by 12.2% and 8.7%, respectively.

Latvia’s unemployment rate stood at 6.9% in the fourth quarter of 2024, up 0.2 p.p. from the previous quarter

According to data from Statistics Estonia, GDP in the fourth quarter of 2024 grew by 1.2% compared to the same period in 2023, marking the end of ten quarters of recession. In contrast to previous quarters, most of the measures had a positive impact on the economy. The energy sector led the way, with a 21% increase in value added. This was followed by real estate activities and information and communication and manufacturing and trade. The construction sector, transportation and warehousing, and administrative and service activities stood out for their negative impact.

There was also a positive reversal in private consumption, which grew at the same rate as GDP. Growth occurred in most categories of spending, with the largest increases in spending on insurance and financial services, transportation, and information and communications. Spending on clothing and footwear declined significantly, and there was a slight decrease in spending on food and housing.

Foreign trade decreased for in 2024. Compared to 2023, merchandise exports fell by 4% and imports by 2%. The trade deficit amounted to EUR 3.3 billion, up EUR 275 million from the previous year.

The unemployment rate in 2024 was 7.6%, an increase of 1.2 percentage points. The number of unemployed increased, on the one hand, due to a reduction in employment, and on the other hand, an increase in participation in the labor market by previously inactive people (e.g., retirees, students, housewives).

The average gross monthly salary in Q3 was 8.1% higher than in Q3 last year. The largest increases in average wages were recorded in the health care and social assistance sector (up 10.6%) and in education (up 9.6%).

The war instigated by Russia on 24 February 2022 against Ukraine made most risks for both the people and the business materialize. Ukraine’s economy is adjusting and gradually rebuilding, continuing work and overcoming the challenges of the war. In 2024, macroeconomic conditions were conducive to the activities of financial institutions, which supported economic development allowing to overcome the effects of the war. The recovery in the economy was made possible primarily by stable consumer demand in the domestic market and increased exports due to the stable operation of seaports and the expansion of production in the metal and mining industries. The economy recorded real GDP growth in both the second and third quarters of 2024.

In December 2024, inflation accelerated to 12.0% y/y. This was primarily due to rising prices of food products due to the summer drought and crop failure, as well as rising electricity prices, rising labor costs and the weakening of the hryvnia exchange rate. On 13 December 2024, the NBU decided to increase the key interest rate to 13.5% (+0.5 p.p.) to avoid upsetting inflation expectations and support real yields on UAH instruments.

Labor demand has been growing in 2024, while supply remains constrained due to further migration abroad, mobilization, the adaptation needs of internally displaced persons and growing imbalances in the labor market. The rapid increase in demand for workers amid limited supply has led to a decline in the unemployment rate. According to UN data, the number of migrants from Ukraine continues to rise slightly, and as of 16 December 2024, stands at 6.8 million people, but this figure includes those who were forced to leave or were deported to Russia.

Since the beginning of the war, S&P Global Ratings has revised Ukraine’s long-term foreign currency credit ratings several times, and as at 8 March 2024, the Standard & Poor’s rating agency downgraded Ukraine’s long-term foreign currency sovereign rating to “CC” from “CCC” with a negative outlook. U raine’s sovereign credit rating in local currency (CCC+/C) and short-term sovereign rating in foreign currency (C) remained unchanged. On 5 September 2024, the international agency Fitch Ratings raised Ukraine’s long-term domestic currency rating from CCC- CCC+. At the same time, the agency affirmed the long-term foreign currency rating at “RD” registered default).