Global ratings agency Fitch has downgraded Poland’s GDP growth forecast for this year to 0.7 percent from 1.1 percent expected earlier.

In its latest forecast, published on Monday, Fitch maintained its earlier prediction of a 2.6 percent economic growth in 2024.

“With the energy crisis in Europe less severe than expected and energy commodity prices falling significantly, we now project a better start to 2023,” Fitch wrote of its outlook for the Polish economy. “Nevertheless, for the whole year, we forecast growth of 0.7 percent instead of the 1.1 percent we expected in December.”

Fitch predicts domestic demand will remain weak as high inflation “has eroded real incomes and slowed consumer spending.”

The current level of Poland’s reference interest rate, which is at 6.75 percent, has had a negative impact on household spending and business investment decisions.

However, “a significant inflow of FDI (foreign direct investment – PAP) and an expected increase in public spending (particularly on defence) will provide an important offset resulting in overall investment increasing in 2023,” the ratings agency said.

According to Fitch, Poland’s inflation will go down from January’s 17.2 percent to some 10.5 percent by the end of the year while the central bank will maintain a stable interest rate policy throughout the year. In 2024, the rates may be cut by a total of 1.75 percent, it added.