Poland has been the best growth performer within the OECD through the global economic crisis. However, with its planned fiscal retrenchment and the European economy grinding to a halt, real GDP growth is projected to slow to 2¾-3 per cent in 2012 and 2013. That should be sufficient to ease inflation pressures, implying that the current somewhat accommodative monetary policy stance is appropriate, even though inflation risks are currently tilted to the upside. Yet, Poland is not immune to contagion risks from its European trading partners. Despite sound prudential regulation and a comparatively solid financial system, the banks’ large foreign-currency liabilities and the reliance on potentially volatile portfolio inflows represent potential sources of instability in the event of a deeper liquidity crisis. Under a scenario of a sharper-than-projected slowdown, Poland would have policy space to cushion the shock by easing monetary conditions, provided that the zloty does not weaken substantially. On the other hand, automatic fiscal stabilisers should be allowed to work within the constraints imposed by the constitutional debt rule.