Assessing the macro implications of the “Polish Deal”

The “Polish Deal” outlined by the ruling Law and Justice party over the weekend strengthens the shift in policy since 2015 towards higher social welfare spending and support for families. Fiscal policy looks set to be looser over the next few years to the tune of around 2% of GDP per annum, although we don’t think this will push the debt trajectory onto an unsustainable path. We have raised our GDP growth and inflation forecasts out to 2023 and now think that interest rate hikes will come in the first half 2023.