Economic Outlook

Tuesday 19 December 2017 - 15u52


As in other CEE countries, GDP growth in Poland suffered a slowdown last year due to weaker investments during the transition to the new EU budget. Nevertheless, growth reached 2.7% in 2016, i.e. a relatively solid level. The main contribution came from strengthening private consumption. That trend continues this year with households still strongly supporting Polish growth.

The unemployment rate has reached the lowest level for the last 26 years while wages continue to rise.Moreover, the child allowance that was introduced last year is encouraging further retail sales growth in Poland.

In a strong labour market environment, skill shortages have been rising. Companies have been reporting difficulties in filling vacancies, despite a sizeable inflow of Ukrainian workers to Poland. Labour shortages are expected to remain a constraint, especially as unemployment rates are expected to decrease further and the labour supply will be affected by the lowering of statutory retirement age from October 2017.

The tightening labour market will drive wages growth. After a slump in fixed assets investment, this will contribute positively to growth in the coming years. However the first months of 2017 showed that companies have remained relatively reluctant to make significant increases in their investments. Growth in this area came mostly from small and medium enterprises increasing their investments in machinery. Nevertheless, private investments will grow, and this is already reflected in public infrastructure projects which started to recover.

Coface forecasts that Poland will record growth of 3.6% in 2017 and 3.3% in 2018.


The Czech labour market remains strong with the unemployment rate falling below 4% – stronger than other CEE countries in this regard. Buoyant consumer confidence, combined with private consumption, is driving economic growth. On the other hand, labour shortages in the Czech Republic are the highest among all CEE countries and companies find it hard to fill vacancies, particularly for specialised jobs. This situation also results in rising wages. Moreover, it limits growth in production capacities, which would be beneficial for increasing Czech exports in line with growing foreign demand. Both private and public investments are expected to increase and further contribute to growth.

The economy is expected to grow by 2.7% this year and 2.8% in 2018. As inflation has returned to ‘normal’ the central bank decided to abandon the exchange rate cap in April 2017 which had been in force for the last 3 years. The move had some minor impact on the value of the koruna, however this policy change was expected and business entities, mostly exporting companies, were prepared for the removal of the cap, making their products less competitive on foreign markets.

Nevertheless, Czech exports benefit from inclusion in Western European manufacturing chains and higher demand coming from the Eurozone. Inflation is expected to exceed 2%, supported by price increases for food and services as well as a further tightening of the labour market and low unemployment.


In the coming years Slovakia is expected to record solid growth rates. According to the Coface forecast, GDP growth will reach 3% this year and 3.5% in 2018. The main driving force for the Slovak economy will remain a decreasing unemployment rate and growing wages. As in other CEE countries, the strong labour market position is beneficial for households but companies have been reporting difficulties in filling vacancies, despite offering higher compensation. The unemployment rate fell to 8.7% which is a record low level for Slovakia, and an increase in the minimum wage is scheduled within the next year.

Economic activity will also be strengthened this year by increasing public and private fixed asset investments as well as higher export volumes, mainly to the main destination for Slovak exports, i.e. western Europe. After last year’s contraction in fixed asset investments, resulting from the period of transition to the new EU financing, accelerated investment activity will boost the construction sector this year. This includes the construction, now under way, of a manufacturing plant for Jaguar Land Rover (with an expected operational start in 2018), a regional centre for Amazon employing a workforce of 1,000 and a significant public infrastructure project, the Bratislava ring road.

Source: Coface