The global economic situation in 2025 was determined by geopolitical risks, trade tensions and the development of technologies related to artificial intelligence. In the Polish economy, last year was marked by gradually booming activity and faster-thanexpected disinflation, which allowed monetary policy to be eased significantly.
Situation in the world economy
The year 2025 was another period of heightened uncertainty marked primarily by a sharp rise in trade tensions and a progressive fragmentation of international cooperation, linked to, among other things, a radical change in foreign policy by the Donald Trump administration.
Fears about the negative impact of protectionism on the U.S. economy have so far not materialized. Admittedly, in the second half of last year, the record-long shutdown of the federal government's work resulted in gaps and delays in the publication of data, among other things, making it difficult to assess real trends. Nonetheless, U.S. inflation in 2025 eased to 2.6% from 2.9% in 2024, and Q3 2025 GDP grew in real terms by as much as 4.4% y/y, after 3.8% y/y in Q2 and compared to a 0.6% y/y decline in Q1 (annualized seasonally adjusted).
However, concerns about the condition of the labor market overseas remain elevated. In December 2025, the U.S. unemployment rate reached 4.4%, up from the 4.1% recorded at the end of 2024. This compares with 3.8% at the end of 2023, confirming the continuing upward trend. In 2025, this was accompanied by the largest wave of reductions in the public sector in decades, estimated to include some 300,000 positions. In the fall, concerns about the labor market situation began to dominate over inflation and tariff risks, prompting the Fed to cut interest rates three times by 25 bps each, collectively cutting rates from 4.50% to 3.75%.
In 2025, the rate of economic growth in the eurozone has accelerated slightly. In the fourth quarter of 2025, real GDP grew by 1.3% y/y in this group of countries, following 1.4% y/y in Q3, 1.5% in the second quarter and 1.6% y/y in the first quarter. For 2025 as a whole, growth reached 1.5%. In the individual quarters of 2024, the rate of change of GDP in the eurozone varied between 0.5% and 1.3% y/y, which translated to an average of 0.9% in annual terms.
The lone leader in eurozone economic growth last year was Ireland, where double-digit GDP growth was generated by accelerated shipments to the U.S. due to tariffs, as well as the activities of technology and pharmaceutical companies and the transfer of intellectual property rights. In addition, the wide disparity among the other eurozone member countries persisted. The best performing economies were Central-Eastern Europe, Spain and Croatia. The German economy, which is key for Poland because of its trade ties, has managed to get out of recession, although the growth rate is so far low (0.2% y/y).
Germany’s economic outlook is supported by both planned investment and fiscal measures, but improvement continues to be limited by persistent structural challenges. With demand still moderate, inflationary pressures gradually eased further. In the eurozone, average annual inflation fell to 2.1% in 2025, while in 2024 it was 2.4%. In December 2025, the harmonized index of consumer prices (HICP) stood at 2.0%, fully in line with the European Central Bank’s inflation target. In response to the improved inflation situation, the European Central Bank carried out four interest rate cuts of 25 basis points each in the first half of 2025, reducing the rate from 3.15% to 2.15%. At the same time, the labor market remained stable. The unemployment rate has been hovering around 6.3% in recent months, close to historical lows. However, the rate continues to rise in some countries, most strongly in Finland and Slovenia, where it was more than 1.5 p.p. higher at the end of 2025 than in 2024.
China last year managed to achieve the result planned by the central authorities – GDP growth in the Middle Kingdom remained at 5.0%. However, according to official statistics, the growth rate weakened over the course of the year – from 5.4% y/y in Q1 to 4.5% y/y in Q4 2025. In the face of U.S. tariff sanctions, China’s exporters have managed to find alternative markets for their production, including in Europe or Africa, achieving a record trade surplus for the year. Exports partially compensated for weaknesses in domestic demand, with weak consumer purchasing and credit activity, including in the still crisis-ridden housing market.
Trends in the Polish economy
GDP and production
In 2025, industrial output sold increased by 3.0%. Despite trade tensions, a still-weakened economy of our trading partners and growing pressure from Chinese manufacturers, Polish industry has slowly begun to emerge from several years of stagnation. Signs of recovery were seen in export-oriented manufacturing and construction-related divisions, among others. The production of capital goods increased strongly in 2025.
After a difficult 2024, construction and assembly output began to rebound, although its total growth in 2025 was only 0.7%. The number of infrastructure projects under implementation increased (including the Port Polska airport, railway and port investments) as well as energy projects (including offshore wind farms in the Baltic Sea, the nuclear power plant, and the modernization of transmission grid), accompanied by rising absorption of EU funds. For the time being, however, this has not translated into results for companies specializing in civil engineering, which ended the year under the dash. Declines also ended 2025 in the building construction segment, with the final months of the year bringing an improvement in activity in this area. On the plus side, those performing specialized work, which includes preparing land for investment, stood out.
Source: Statistics Poland/PZU Department of Macroeconomic Analyses
Labor market and consumption
in 2025 was PLN 8,934.98, nominally higher than a year earlier by 8.1%, the lowest nominal wage growth in the sector since 2020. Although a temporary acceleration in wage growth was visible in some months – partly due to calendar effects and shifts in the payment dates of variable remuneration components – wage pressure is easing, as confirmed, among other things, by survey results published by the National Bank of Poland. Despite lower nominal changes, rapidly falling CPI inflation is keeping wage purchasing power growth high. Last year, wages in the enterprise sector increased by 4.5% year on year in real terms, compared with a 7.0% increase in 2024.
in 2025 amounted to 6,445.9 thousand full-time jobs, 0.9% lower than a year earlier. Between January and December 2025, approximately 45,000 full-time equivalent jobs were lost. Recruitment activity by companies continues to weaken.
Weaker labor demand from the enterprise sector has not significantly affected unemployment, due to demographics, among other factors. The registered unemployment rate in December 2025 admittedly reached 5.7%, 0.6 p.p. higher than a year earlier, and the number of unemployed registered at labor offices at the end of 2025 was 887,900, up 101,700 y/y. However, these statistics do not indicate a significant worsening of the labor market situation; they are primarily the result of the entry into force of the labor office reform, which has significantly reduced the number of de-registrations from unemployment, especially those resulting from failure to appear at the labor office on the scheduled date. Invariably, the situation in Poland remains relatively favorable compared to other EU countries – in December 2025, only Czech Republic (3.1%) could boast a lower unemployment rate (seasonally adjusted, calculated according to a harmonized methodology for EU countries) than Poland, and the same as Poland – Malta (3.2%).
Inflation, monetary policy and interest rates
In 2025, the rate of growth in consumer prices remained at 3.6%
Average annual inflation remained near the upper range of the NBP's inflation target band (2.5%, +/- 1 p.p.), but subsequent quarters brought a marked deceleration in price growth – in Q4 2025, consumer price growth slowed to 2.5% y/y, after 3.0% y/y in Q3 and compared to 4.1% y/y in Q2 and 4.9% y/y in Q1 2025. As a result, inflation last December was below the NBP's inflation target, standing at 2.4% y/y.
The disinflation process was supported by, among other things, favorable price trends in global food and fuel markets, a strong zloty and growing competitive pressure from Chinese imports to Europe. Also important for the level of inflation in 2025 was the continuation of interventions in electricity prices and system heating prices. The rate of growth in service prices was also slowing, with December’s rate of 5.2% y/y being the lowest since the end of 2019. Weakening price pressures were also confirmed by core inflation, whose main measure – excluding food and energy prices – slowed to 2.7% year on year in December 2025, reaching its lowest level in six years. At the same time, another measure of core inflation – excluding administered prices – fell below 2% at the end of the year.
Favorable trends in inflationary processes have prompted the Monetary Policy Council to significantly ease monetary policy. In 2025, the Monetary Policy Council (RPP) lowered the reference rate six times – in May, July, September, October, November, and December. Overall, since the beginning of the year, the cost of money fell by 175 bps, reaching 4.00% in December.
Public finance
According to the Statistics Poland’s fiscal notification, the deficit of the general government sector in 2024 amounted to 6.5% of GDP, compared with 5.2% of GDP in 2023, while preliminary data for Q3 2025 indicate it reached approximately 7.0% of GDP (year-to-date). On 26 July 2024, the EU Council decided to launch the excessive deficit procedure against Poland. The justification states that the deficit of the general government sector exceeding the reference value (3% of GDP) is not temporary, as confirmed by the 2024 figure. According to the EU Council Recommendation to Poland of 8 July 2025, the procedure was temporarily halted due to compliance with the Council’s recommended rate of increase in net expenditure. The increase in the deficit in 2024 was primarily due to an increase in defense spending and increases in wages and salaries, as well as social benefits. According to the “Public Finance Sector Debt Management Strategy 2026 – 2029”the general government sector deficit is expected to gradually decrease from 2026 and reach 4.7% of GDP within the strategy’s horizon.
The central government budget deficit at the end of 2024 amounted to PLN 210.9 billion, against the PLN 240.3 billion assumed in the amendment to the budget act. The budget deficit in 2025, according to the budget act, is expected to be PLN 288.8 billion, while the budget act for 2026 assumes a value of PLN 271.7 billion.
According to the most recent Statistics Poland’s fiscal notification, general government sector debt increased to 55.1% of GDP in 2024, after 49.5% of GDP in 2023, while according to preliminary data after Q3 2025 it was 58.1% of GDP. According to the “Public Finance Sector Debt Management Strategy 2026–2029,” the general government sector debt is expected to rise to 75.3% of GDP in 2029, while public debt can exceed the prudential threshold of 55% of GDP in 2028, which would mean triggering prudential procedures under the Public Finance Act in 2030.
External environment in the Baltic Countries and Ukraine
According to the Bank of Lithuania, the value of gross domestic product after three quarters of 2025 reached EUR 61.7 billion. Real, non-seasonally and calendaradjusted GDP growth was 2.8%. In the third quarter, there was a minimal decrease of 0.02% in GDP compared to the second quarter of 2025, while an increase of 2.0% was recorded on an annual basis. The weakening of GDP growth in the third quarter was most influenced by the weaker performance of companies in the manufacturing, transportation and warehouse services industries. In turn, the wholesale and retail trade, scientific and technical activities and administrative services sectors had a positive impact on GDP. Compared to the previous quarter, household consumption decreased by 0.7%, government spending fell by 0.2%, while gross fixed capital formation increased by 1.2%. Exports of goods and services declined by 1.2%, while imports rose slightly by 0.1%.
In December 2025, annual inflation, measured against December 2024, was 3.2%. Its level was mainly influenced by price increases for meat, milk and dairy products, eggs, tobacco products and spirits. The prices of restaurant services, actual rents paid by tenants, maintenance and repair of transportation equipment have also increased. At the same time, there has been a decline in car and electricity prices. Prices of consumer goods and services in December decreased by 0.2% compared to the previous month.
Statistics Lithuania reported that in the third quarter of 2025, Lithuania’s unemployment rate was 6.6% recording a decrease of 0.6 p.p. compared to the previous quarter and 0.2 p.p. compared to the third quarter of the previous year. The long-term unemployment rate fell by 0.1 p.p. during the quarter, while increasing by 0.4 p.p. compared to the same period in 2024, and stood at 2.6%.
In the third quarter of 2025, the average monthly gross wage (before employee taxes) in the entire economy (excluding individual enterprises) was EUR 2,427.6, up 1.7% from the previous quarter. In the public sector, the average gross monthly salary stood at EUR 2,586.0 (up 2.1% from the previous quarter) and in the private sector at EUR 2,361.5 (up 1.5% from Q2).
Data published by Statistics Latvia shows that in Q3 2025, gross domestic product at constant prices increased by 2.5% (according to non-seasonally and calendar-adjusted data). Compared to the previous quarter, GDP grew by 0.6% (according to seasonally and calendar-adjusted data at constant prices). In the third quarter, the largest contributions to value-added growth came from the manufacturing sector, the construction sector and trade and real estate activities. In contrast, value added declined in the healthcare sector and in agriculture, forestry and fishing. Compared to the same period last year, total value added increased by 2.6%. Manufacturing sectors grew by 5.5%, while service sectors increased by 1.6%.
In December 2025, compared to December 2024, the average consumer price level increased by 3.5%. It was mainly influenced by the increase in the prices of housing-related goods and services (1.2 p.p.), particularly the increase in electricity prices. Higher prices for food and non-alcoholic beverages (1.1 p.p.) also had a significant impact on the price level, in addition to price increases for recreation and cultural goods and services (0.2 p.p.) and health care services (0.2 p.p.).
In November 2025, Latvia’s real unemployment rate stood at 6.9%, up 0.1 p.p. from both the previous month and the same period last year. On a y/y basis, the unemployment rate among women increased by 0.2 percentage points to reach 5.7%, while it remained unchanged among men at 8.1%.
The average gross monthly salary in the third quarter of 2025 was EUR 1,835, a y/y increase of 7.8%, while at the same time, on a quarter-to-quarter basis, it increased by 1.5%. In the private sector, annual growth in average wages was 1.0 p.p. higher than in the public sector (8.1% and 7.1%, respectively).
The average after-tax wage was EUR 1,361 (or 74.1% of gross wages), up 10.5% y/y, outpacing the growth in both consumer prices and gross wages. Real net wage growth, taking into account price increases, was 6.3%.
According to data from Statistics Estonia, gross domestic product in Q3 2025 rose by 0.9% compared to the same period in 2024. The largest positive impact in the change in GDP came from the manufacturing sector, whose value added increased by 7.9%; in addition, the energy sector and real estate activities had a positive impact. The rate of growth was negatively affected mainly by wholesale and retail trade, where value added fell by 6.9%, as well as transportation and warehousing and health and social assistance activities.
Foreign trade growth accelerated in the third quarter. Exports increased by 5.7% and imports by 5.6%. Net exports were positive for the second consecutive quarter, with Estonia’s exports of goods and services exceeding imports by EUR 147 million.
Compared to the third quarter of the previous year, private consumption fell by 0.6%. There was a decrease in spending on alcoholic beverages and tobacco products, food services and accommodation, and transportation. At the same time, spending on financial and insurance services, education and home furnishings increased the most.
In November 2025, the consumer price index dropped by 0.2% compared to October and grew by 4.9% compared to November 2024. Goods were 2.9% more expensive than in November last year, while services were 7.9% more expensive.
Food products had the largest impact on the y/y change in the index, with an increase of 6.5%. The main drivers of food price increases were increases in the prices of meat and meat products (up 7.1%), milk, dairy products and eggs (up 8.4%), fruits (up 6.3%) and chocolate (up 27.8%). Compared to last November, there was a decrease in the prices of clothing and footwear (down 5.7%), as well as recreation and leisure (down 0.1%).
The unemployment rate in Q3 2025 stood at 7.1%, representing a decrease of 0.7 p.p. compared with the previous quarter and 0.3 p.p. compared with Q3 2024.
The average gross monthly salary in Q3 2025 was EUR 2.075, 5.9% higher than in the same quarter previous year. At the same time, y/y wage growth has slowed.
The largest wage increases compared to Q3 2024 were in the electricity generation and distribution sector (up 15.3%) and also in manufacturing (up 7.7%), finance and insurance (up 7.2%) and construction (up 7.0%).
Russia’s aggression against Ukraine, which began on 24 February 2022, has led to the realization of a number of risks for both citizens and the business sector. Despite the difficult conditions, Ukraine’s economy is gradually adapting to the new realities and taking steps to rebuild. However, the process has been slow, mainly due to the consequences of warfare, including massive attacks and extensive damage to critical infrastructure.
The recovery in the economy continues to be driven by consumer demand in the domestic market. In Q3 2025, the economy recorded real gross domestic product growth of 0.8% over the previous quarter and 2.1% over Q3 2024. The intensification of early crop harvests, stable consumer demand and improvements in the energy sector were important factors in the growth.
In October 2025, the inflation rate fell to 10.2%. Despite the observed deceleration, inflationary pressures remain significant and are mainly due to rising consumer demand, high business costs, rising labor costs and the weakening of the hryvnia exchange rate.
A decision by the National Bank of Ukraine on 23 October 2025 kept the discount rate at 15.5%. This action is aimed at increasing the attractiveness of shortterm hryvnia deposits and stabilizing conditions in the domestic financial market.
