POLAND: Transition Period In EU Funding Cycle Weighs On Construction Output

Poland's construction output fell by 1.4% Y/Y in July, which was a less pronounced construction than the expected -2.3%. Analysts continued to point to the cyclical pause in EU-funded investments as one of the reasons for ongoing weakness in the sector.

• mBank write that construction output was better than forecast and closer to zero (adding that "we are coming back from a long journey"). They note that if investments accelerate, then GDP growth should exceed +4% Y/Y in 2025. They still see room for interest-rate cuts around mid-2025.
• PKO note that construction output was supported by a favourable Y/Y change in the number of working days in July. The sector remains constrained by the transition period between EU financial perspectives and a temporary reduction in investment appetites of private enterprises. However, the situation may change as projects funded by the EU accelerate, which should boost activity in the sector amid possible supply-side constraints.
• The Polish Economic Institute suggest that an improvement in construction output will only come in 2025, which they link to the length of the construction cycle.