Economic expansion continued in 2004 despite some slowing in the second half of the year. Activity should remain robust in 2005, although it is expected to decelerate as exports weaken following the appreciation of the zloty. An investment-led recovery is well under way and should gain strength in 2005 as a consequence of accession in the European Union. This will also help to raise employment.

Despite robust growth in 2004, the budget deficit deteriorated substantially. With the expected moderation of GDP growth, public expenditure targets will need to be reinforced if medium-term fiscal sustainability is to be attained. Budgetary slippages could make the task of the central bank more difficult and could also trigger drastic consolidation measures, given the constitutional provisions to limit the level of debt.