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Recent retail sales in Poland have come in below expectations (-0.5%YoY in February 2025), with a significant decline driven by vehicle sales, followed by reduced consumption in food and fuel. Our model incorporates factors that directly influence the underlying shifts in demand reflected by retail sales. As a result, our curve has shifted downward (Figure 1), capturing the pullback in consumption.

Figure 1

There are two key factors to watch in Poland’s inflation outlook for 2025. The first is wage growth, which drives consumption and plays a critical role in demand-side inflation. The second is energy prices towards the end of the year—particularly the anticipated lifting of energy price caps in October 2025. Should energy costs rise, we expect this to introduce upward price pressures, contributing to broader inflationary trends.

Slowing Wage Growth, Inflation Expectations Reduces Consumer Spending

Slowing wage growth (Figure 2) and rising food inflation are reducing real disposable income and dampening consumption. Sentiment indicators, like inflation media volume, indicate growing inflation expectations, causing consumers to become more cautious in their spending. This caution, along with rising costs in services, is further slowing consumption.

Meanwhile, food prices, particularly for eggs and dairy, have risen, driving broader inflation. As inflation concerns grow, we expect continued reductions in consumption, especially in fuel and food sectors. However, we anticipate a recovery in consumer spending as food supply constraints ease and disposable income stabilize.

Figure 2

Inflation Beyond Energy Price Caps

Regarding energy prices, coal, which accounts for most electricity generation in Poland, has been declining. This decline will help moderate energy price pressures once electricity price caps are lifted, leading to a more moderate increase in inflation from energy costs (Figure 3). We expect the uptick due to the end of energy caps to persist through the winter as demand for electricity increases and the price shock gradually gets absorbed throughout 2026. However, if energy caps are extended – which we assume given the upcoming election cycle, inflation may continue from our current 12-month forecast horizon.

Figure 3

Looking ahead, the cooling trend in retail sales is likely to persist through March due to high inflation expectations. However, we anticipate demand to pick up around Easter in April, particularly in food-related sectors. If agricultural supply improves, we may see food price pressures ease. The ongoing decline in coal prices and the potential end of the energy price freeze are key factors to monitor, with a more stable inflation outlook expected if the coal price trend continues.