Poland’s Growth Accelerates More Than Forecast in Boost for Tusk

(Bloomberg) — Poland’s economic growth accelerated more than forecast in the second quarter, boosting Prime Minister Donald Tusk’s government ahead of parliamentary elections next year.

Gross domestic product expanded an annual 3.8% in April to June, compared with 3.5% over the previous three months, according to preliminary data from the statistics office published on Thursday. The median estimate in a Bloomberg survey was 3.7%. The economy grew 0.9% from the previous quarter.

Tusk is counting on one of the fastest economic growth rates in the European Union to help reduce a record budget deficit and tackle ballooning debt. Expansion in the second quarter was powered by a rebound in construction, investment and defense spending, which helped compensate for a decline in private consumption as the US war on Iran drags on and raises energy costs.

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“Despite global turmoil, GDP growth accelerated, confirming the resilience of the Polish economy to external shocks,” Bank Pocztowy SA’s chief economists Monika Kurtek wrote in a note on Thursday.

Defense expenditures are set to have a pronounced impact on growth after Tusk’s government secured the biggest share of the EU’s €150 billion ($173 billion) funding plan for military modernization. Around €44 billion of the so-called SAFE program is earmarked for Poland.

“The scale of the defense spending planned in Poland is such that it will have a significant impact on the macroeconomic outlook,” said Credit Agricole Bank Polska SA economists led by Jakub Borowski. They said Polish producers of artillery systems, ammunition, armored vehicles and unmanned systems may be among the biggest winners of the SAFE funds.

The robust economic expansion is likely to relieve pressure on the Polish central bank to resume interest-rate cuts, especially after a resurgence of inflation. Headline consumer price growth accelerated to 3% in July from 2.5% in the previous month following the removal of the government’s fuel price caps.

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