IMF Wraps 2025 Article IV Talks With Poland

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation26F [1] with the Republic of Poland, considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis. The authorities have consented to the publication of the Staff Report prepared for this consultation. [2]

Poland has shown significant resilience to recent global shocks. The primary driver for growth has been private consumption due to a strong rebound in real wages. Fiscal stimulus in recent years has also played a role. These expansionary forces have been partially counterbalanced by appropriately tight monetary policy which dampened private investment. In addition, while direct exposure to US tariffs is limited, export growth has been moderate, largely due to soft EU demand. The current account has fallen to 1 percent of GDP deficit, reflecting a rapid increase in imports.

Fiscal imbalances have widened considerably. In 2025, the fiscal deficit and public debt are projected to reach 7 percent and 59 percent of GDP, respectively. Poland has the second largest fiscal deficit in Europe this year even though the output gap is largely closed. The widening of the fiscal deficit since 2021 solely reflects a substantial increase in expenditures. Spending now matches levels in advanced European economies—despite differences in composition—while revenues remain closer to levels seen in Central and Eastern Europe.

Disinflation is on track helping support monetary policy normalization. Headline and core inflation returned to the target, driven by goods, while services inflation has remained elevated. Inflation expectations remain well-anchored in consumer and producer surveys. With this progress in disinflation, the National Bank of Poland's (NBP) has gradually reduced policy rates by 175 bps to 4 percent in 2025. The gradual monetary easing has supported credit recovery with banks remaining well capitalized, liquid and profitable, while non-performing loans are declining.

Executive Board Assessment [3]

Poland's near-term outlook is favorable, with growth projected to accelerate to 3.3 percent in 2025 and 3.5 percent in 2026, driven by a sharp increase in EU fund execution and monetary easing. Inflation has declined into the target range, and the output gap is expected to close in 2026. Nonetheless, risks remain elevated, including fiscal vulnerabilities, declining price competitiveness, global trade developments and regional security concerns. Staff assesses the external position in 2025 to be broadly in line with the levels implied by medium-term fundamentals and desirable policies. Over time, growth is expected to moderate as EU-financed investment wanes and fiscal consolidation continues.

Stabilizing public debt should be a key priority. Under current policies, debt is projected to rise significantly above the EU benchmark of 60 percent of GDP, reaching 78 percent of GDP by 2031. Staff recommends a cumulative fiscal adjustment of 4 percent of GDP to reverse this trend. The composition of consolidation depends on Poland's social preferences regarding the size and role of the state. The recent widening of the deficit stems entirely from net higher spending—driven by expanded social benefits, a better-compensated public sector, and increased defense outlays. Poland must either raise more revenue to sustain these services or return to a leaner public sector with more efficient and targeted spending. Building on recent gains in fiscal transparency, establishing a well-resourced and independent fiscal council would strengthen fiscal governance.

The disinflation process is proceeding well, but monetary policy should now proceed cautiously. Services inflation remains elevated, and economic activity is set to accelerate. Staff advocates a wait-and-see approach to allow time to observe incoming data and to ensure that inflation remains close to the mid-point of the target range on a sustained basis. If economic activity and core inflation begin to fall in a manner that suggests inflation might undershoot the lower end of the target range, further easing would be advisable. Throughout, we see MPC communication that underscores the decision-making process as more constructive than specific predictions for rates.

The banking sector is stable and well-capitalized, but there is scope to reduce frictions to credit provision. While credit is recovering, structural barriers—including legal risks and distortionary taxation—continue to constrain financial intermediation. In this regard, staff welcomes the recent reduction in the bank asset tax and encourages going further by eliminating it in a fiscally neutral manner. The objectives of the recently introduced Long-Term Funding Ratio have merit but should be redesigned to avoid unintended consequences that would raise the cost of credit and further undermine credit creation. In addition, legal risks around mortgage contracts should be addressed through proportionate penalties and standardized templates to reduce uncertainty and improve access to credit.

Structural reforms at both the national and EU levels are critical to sustaining convergence. Poland's labor productivity growth remains strong, but innovation lags and demographic pressures are mounting. Staff recommends measures to enhance labor mobility, digital skills, and participation, including gradual increases in the retirement age and better integration of migrant workers. Capital market reforms should improve household returns and expand firm financing. The OKI and Innovate Poland initiatives are promising but should avoid excessive home bias and promote broad participation. Deeper EU integration—especially in energy and capital markets—will support productivity and resilience. While Poland has made progress on decarbonization, further efforts are needed to meet climate targets and preserve competitiveness.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/Poland page.

[3] The Executive Board takes decisions under the lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.