Poland's economy expanded 4.6 percent in 2017, its fastest pace since 2011, preliminary data showed on Tuesday, driven by domestic demand and higher economic activity in the region and the European Union, its main trade partners. The rate of gross domestic product (GDP) growth was slightly above analysts' forecast of 4.5 percent and substantially faster than the 2.9 percent of 2016.
Household consumption expenditure, which accounts for 61 percent of GDP, grew 4.7 percent in 2017, its strongest rise in nearly a decade, resulting from generous social spending by the ruling conservatives and higher wages. Finance Minister Teresa Czerwinska said in an emailed comment that the growth rate, combined with improved tax collection last year and stable budget situation, boded well for economic growth in 2018.
Fixed investment - money put into tangible assets, such as buildings, roads and machinery - recovered from a slump in 2016 to grow 5.4 percent, chiefly thanks to an increase in distribution of the European Union funds. Stronger economic activity in Poland's neighbours and the EU have also helped Poland. Economic growth in Germany, Poland's top exports market, hit a six-year high in 2017.
But some economists and policymakers say wage pressures are a concern. Economists at Danske Bank said in a recent note that while Poland's economy showed no signs of overheating, there were "dangers".
"The Polish labour market is red-hot," they wrote, pointing to unemployment at record lows in post-Soviet history which spurs wage pressures. They also see Poland's sustainable growth rate only at 2-3 percent.
Adam Glapinski, the country's top monetary policy maker known for his dovish stance, said on Tuesday that shortages in the labour market are the main concern for now when making rate decisions. Analysts at Erste Group Research said on Tuesday that rising wages will pressure inflation to above the central bank's target of 2.5 percent in the middle of the year, which may bring pressure on the Monetary Policy Council (MPC) to a rate hike.
"So far, however, the MPC has been dovish," the analysts wrote in a note. The Polish central bank decided earlier this month to keep interest rates unchanged, with the key rate at record-low of 1.50 percent.
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