Polish Growth Forecast Revised Down in 2022 as Russian Invasion of Ukraine Weighs on Europe’s Economy
WARSAW – The World Bank has lowered its gross domestic product (GDP) annual growth forecast for Poland to 3.9 percent in 2022, as the Russian invasion of Ukraine is hitting hard the economies of Europe and Central Asia, says the World Bank’s latest Regional Economic Update.
In Central Europe, indirect spillovers from Russia’s invasion of Ukraine are expected to be significant. Key transmission channels include an influx of refugees, higher commodity prices, lower external demand from the euro area, and a deterioration in confidence. Growth is forecast to decelerate alongside the euro area, slipping to 3.5 percent in 2022, as inflationary pressures, tighter monetary policy, and greater policy uncertainty dampen domestic demand.
Poland’s GDP growth is expected to outpace the average for Central Europe, but due to the impact of the war, it has been lowered by 0.8 percentage points compared to the growth projections released in the January 2022 edition of the Global Economic Prospects report.
“The Ukraine war and the pandemic have once again shown that crises can cause widespread economic damage and set back years of per capita income and development gains,” said Asli Demirgüç-Kunt, World Bank Chief Economist for Europe and Central Asia. “Governments in the region should fortify their macroeconomic buffers and credibility of their policies to contain risks and deal with potential fragmentation of trade and investment channels; strengthen their social safety nets to protect the most vulnerable, including the refugees; and not lose focus on improving energy efficiency to ensure a sustainable future.”
Poland, which has welcomed close to 60 percent of refugees fleeing Ukraine, is expected to see a significant increase in demand for public services and housing, with pressures on public finances. On the upside, however, this could provide a boost to the economy in the short term via higher domestic demand.
In 2023, Poland’s GDP is expected to grow by 3.6 percent, according to the World Bank forecast, a 0.2 percentage points upward revision from the January 2022 projection.
GDP in the emerging and developing economies of the Europe and Central Asia region is expected to contract by 4.1 percent in 2022, compared with the pre-war forecast of 3 percent growth, as the economic shocks from the war compound the ongoing impacts of the COVID-19 pandemic. This would be the second contraction in two years, and twice as large as the pandemic-induced contraction in 2020.
Ukraine’s economy is expected to shrink by an estimated 45.1 percent this year, although the magnitude of the contraction will depend on the duration and intensity of the war. Russia’s economy, burdened by sanctions, has already plunged into a deep recession, with output projected to contract by 11.2 percent in 2022. The GDP of Belarus is expected to decline by 6.5 percent in 2022.
World Bank Group Response to the Ukraine War
The World Bank Group is taking fast action to support the people of Ukraine. Since the start of Russia’s invasion of Ukraine on February 24, the Bank Group has mobilized an emergency financing package of $925 million in support for Ukraine. This fast-disbursing support will go to help pay wages for hospital workers, pensions for the elderly, and social programs for the vulnerable. The rapid financing is part of a $3 billion package of support that the Bank Group is preparing for Ukraine over the coming months. The invasion has already caused the largest refugee crisis in Europe since World War II. The Bank Group is looking at how to support refugees in host countries.