Poland’s deficit deepens in May but external position holds firm

The current account deficit in the balance of payments reached €1740 million in May, following a €596 million deficit in April, worse than the consensus (€666 million) and our forecast of €750 million. On a 12-month cumulative basis, the deficit increased to 1.0% of GDP in May from 0.9% of GDP in April (after revision), while the 12-month trade deficit rose to 1.6% of GDP from 1.5% of GDP a month earlier. The current account balance in May was the result of deficits in goods trade (€1.4 billion), primary income (€3.3 billion, i.e., €0.5 billion worse than a month earlier), and secondary income (€0.3 billion), as well as a substantial surplus in services trade (€3.3 billion).

In May, merchandise trade accelerated significantly, partly due to favourable calendar effects (one working day more than in May 2024). Exports expressed in euros increased by 4.2% year-on-year in May after a 1.9% decline in April (with, by contrast, unfavourable calendar effects). Imports rose by 5.2% YoY, slightly slower than the 5.5% in April. Changes in trade flows are explained by a moderate economic recovery in Poland (driving imports) and weak economic conditions in the eurozone (hampering exports), where approximately 60% of exports are directed.

According to the National Bank of Poland, export growth in May (measured in PLN) was strongest in clothing and pharmaceutical products, including re-exports. Automotive exports also rebounded, with notable gains in buses and car parts, and the decline in passenger car shipments came to a halt. Agricultural exports continued to expand. On the import side, the NBP highlighted elevated deliveries of military equipment and strong momentum in consumer and agricultural goods. However, import growth was held back by a sharp drop in oil prices - reaching their lowest PLN value since September 2021 - reflecting weaker global benchmarks and a depreciating US dollar. May marked the thirteenth straight month with a trade deficit.

We forecast a gradual widening of the current account deficit to 1.3% of GDP by the end of the year, partly due to a further deterioration in the trade deficit. The growth prospects for the German economy remain weak, although there is a chance for a slight 0.1% real GDP growth rate in this country after abandoning fiscal conservatism, following shallow declines in the past two years. We must wait until 2026 for an acceleration above 1%. Uncertainty in global trade is also being fuelled by unresolved issues regarding US-EU trade terms. According to Donald Trump's surprising decision on Saturday, 30% tariffs on imports of goods from the EU will apply from 1 August. EU officials are seeking a favourable agreement, and the EU is ready for various scenarios. Although the share of the US market in Polish exports is small (3.3% in 2024), the scale of Polish value-added exposure to this market, also through exports from other countries, is more than twice as high. The imposition of high US tariffs on EU goods would negatively impact the economic situation in Poland, mainly through the channel of a slowdown in Western Europe.

Polish exports are not particularly supported by the relatively strong zloty, which trades in a fairly narrow range around 4.25 per euro. May’s balance of payments data remains neutral for the zloty. Poland's external position remains solid and balanced. For the FX market, geopolitical factors and changes in the main currency pair USD/EUR are crucial, as well as expectations for further monetary policy easing by the NBP after the summer holidays and at the beginning of 2026.