Republic of Poland: 2023 Article IV Consultation-Press Release; and Staff Report

This 2023 Article IV Consultation analyses that the Polish economy has slowed significantly amid still-high inflation. The Polish economy in 2022 faced energy and food price shocks, which exacerbated inflationary pressures and slowed economic growth. With Russia’s war in Ukraine, the authorities seek to increase defense expenditures and energy security. The economy has slowed considerably, though inflation remains well above the target. While the economy is projected to rebound in late 2023 and 2024 and inflation to decline, the pace of growth and underlying inflation are subject to considerable uncertainty, highlighting the policy challenges related to returning inflation to the target without incurring an excessive loss of output. In the near term, the authorities should avoid a new fiscal expansion. Energy price measures should be temporary and move toward greater targeting. Over the medium term, the authorities should create fiscal space to accommodate new defense expenditures without placing public debt on an upward trajectory. In addition, the authorities should consider carbon taxation to meet decarbonization targets and continue to facilitate Ukrainian refugees’ integration into Polish labor markets.