Polish economic growth will be slower than expected in 2026 and 2027 as a prolonged conflict in the Persian Gulf weakens private consumption and exports, Poland’s Bank Pekao said in a report on May 12.

The bank expects Poland’s gross domestic product to grow by 3.5% in 2026 and 2.7% in 2027, down from previous forecasts of 3.8% and 3.6%, respectively. Pekao said the downgrade reflected the impact of a longer-lasting regional conflict on domestic demand and external trade.

Pekao said a prolonged fuel crisis was increasingly becoming its baseline scenario, with no clear prospect of a stable agreement or the reopening of the Strait of Hormuz. It said oil prices had settled well above levels seen before the escalation of tensions.

According to the bank’s estimates, the peak impact of the current fuel shock on inflation would appear around five to six months after its onset. Assuming the shock began in March and that its current scale and structure continue until the end of 2026, with oil at about $100 a barrel and natural gas at €50 per megawatt hour, the oil crisis could lift inflation by about 2pp.

Pekao said second-round effects should now be treated as a serious risk. Under that scenario, the bank said it saw a need to revise its inflation path higher, with annual inflation rising through the year to about 4% by the end of 2026, above the National Bank of Poland’s (NBP) permitted deviation band of 1.5%-3.5% around its 2.5% inflation target.

The war in the Gulf, even allowing for a ceasefire, had removed any appetite within the Monetary Policy Council, the NBP’s monetary policy body, for interest rate cuts this year, according to the report. National Bank of Poland Governor Adam Glapiński’s hawkish press conference last week also raised the possibility of rate increases, the bank said.

The NBP’s reference interest rate has been 3.75% since March.

Poland’s registered unemployment rate stayed at 6.1% in March, while wage growth accelerated to 6.6% year on year and employment deepened its decline to 0.9%. Pekao said falling labour demand was the clearest signal that labour market conditions were weaker than the low unemployment rate might suggest.