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investments in energy transformation and defense. Economists at PKO BP also predict a recovery in private investments.
The favourable labour market situation in 2025 is expected to have a positive impact on loan repayments. The rate of unpaid retail loans at the end of Q3 2024 fell to a historically low level of 4.86%. In the corporate portfolio, there is some deterioration among individual clients, particularly in industries heavily exposed to the German market, which remains in a downturn.
A shadow over the sector’s outlook is posed by foreign currency loans. The Swiss franc issue has been partially resolved, with provisions already exceeding PLN80bn. However, the NBP estimates that an additional PLN10bn to PLN15bn will be needed to cover the associated risk.
Ownership changes in the banking sector are unlikely in 2025, as there are no indications that foreign investors plan to withdraw from Poland.
5.0 Budget and Debt Outlook
In 2024, the public finance sector deficit in Poland will increase for the third consecutive year, remaining above the reference value of 3% of GDP. Fiscal policy remained expansionary, with no signs of consolidation. The general government sector deficit is expected to rise to 5.8% of GDP in 2024, compared with 5.3% of GDP in 2023.
Growth in deficit was accompanied by a significant increase in public debt. As of the end of September 2024, the debt of government and local government institutions grew by nearly 17% y/y to PLN1.9 trillion (53.5% of GDP in Q3 2024 compared with 48.6% a year earlier). Fiscal policy, heavily focused on social expenditures, did little to bring inflation sustainably back to the central bank’s target. The persistent fiscal imbalance also prompted the European Commission to subject Poland to an excessive deficit procedure.
The picture will remain largely unchanged in 2025. Fiscal policy is expected to remain expansionary, with the state budget deficit planned at PLN289bn, the biggest gap in history. The entire public finance sector deficit is projected to amount to 5.6% of GDP. According to the government’s strategy, the deficit is set to decrease starting in 2026, with the general government sector deficit expected to fall below the reference value of 3% of GDP by 2028. Analysts view this as ambitious, given the significant burden on public finances from military expenditures (these expenditures Poland wants the EU to ignore when scrutinising its budget and fiscal position).
It remains unclear if the government’s planned budget revenues and expenditures will come as planned. For expenditures, a key source of
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