Republic of Poland

For Poland, Russia’s war in Ukraine represented a major downward shock to output and upward shock to inflation. However, the strong real wage growth and fiscal stimulus of recent years have driven a nearly full closing of the output gap. In addition, inflation has returned to target due to both appropriately tight monetary policy and a subsiding of external supply shocks. The main vulnerability that emerged from recent years is an increase in the fiscal deficit to a projected 7 percent of GDP in 2025. This has raised public debt to 59 percent of GDP, a 10 percentage point increase in two years.