Economic and Political Overview

flag Poland Poland: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response

 

Economic Outline

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Poland has emerged as a dynamic market over the past 25 years and has become a major actor within Europe, being the tenth-largest economy in the EU. The country recovered well from the global Covid-19-induced crisis, with GDP returning to its pre-pandemic level already in the second quarter of 2021. Overall, the Polish economy grew an estimated 5.1% over the year, underpinned by increased consumer spending and investment (IMF). With the country’s main trading partners gradually recovering, dynamic private consumption, and increased companies’ investment, economic growth is expected to remain strong this year (+5.1%) and in 2023 (3.5%) according to the latest IMF forecast, though much will depend on the global economic and sanitary recovery.

An expansionary fiscal policy – which included the decision to lower the retirement age and increase transfers to pensioners and households with children - has been deepening the public deficit in recent years, a trend that was accelerated by the COVID-19-induced crisis: the general government budget was negative by 4% of GDP in 2021, mostly due to the cost of measures to contain the impact of the pandemic and of a one-off additional pension payment, which is estimated to have caused an increase in the 2021 headline deficit of almost 0.5% of GDP alone. Nevertheless, government revenues have been increasing and will benefit from resumed consumption and the favourable labour market conditions in 2022, with the deficit forecasted to stabilize around 2% this year and the next (IMF). Though still relatively low, debt-to-GDP ratio also saw an increase in the last couple of years, jumping to 55.5% in 2021 from a pre-pandemic level of 45.6%. Sustained economic growth should contribute to a decline in the ratio, to 53.3% this year and 52.1% in 2023. Rising energy prices, growing demand and supply-side bottlenecks have contributed to a steady and robust hike in inflation, which stood at 4.4% in 2021. The IMF expects inflation to gradually ease over the forecast horizon, landing at 2.8% in 2023. Nevertheless, the European Commission warns that a higher-than-expected increase in inflation arising from supply constraints and labour shortages may weigh on purchasing power and private consumption growth.

The unemployment rate has been structurally low in recent years (just above 3%), though more than one in four employees have temporary contracts, twice the EU average. The labour market has proved resilient to the crisis, although emerging labour shortages could act as a significant drag on employment growth in the near future (in 2022, minimum wage rises and tax changes associated with the “Polish Deal” fiscal stimulus programme will add to wage pressures). After reaching 3.5% in 2021, the IMF forecasts a drop in unemployment to 3.2% in 2022 and 3% the following year. The GDP per capita (PPP) of Polish citizens was USD 35,957 in 2021, still 23.3% lower than that of the EU-27 (data IMF). Finally, there are still large disparities between the east and the west of the country.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 597.19595.92e655.33720.35776.33
GDP (Constant Prices, Annual % Change) 4.7-2.7e5.44.63.7
GDP per Capita (USD) 15,72715,699e17,31819,05620,562
General Government Balance (in % of GDP) -1.4-6.4e-4.0-2.0-2.0
General Government Gross Debt (in % of GDP) 45.657.5e55.553.352.1
Inflation Rate (%) 2.33.4e4.43.32.8
Unemployment Rate (% of the Labour Force) 3.33.2e3.53.23.0
Current Account (billions USD) 2.9320.5514.8111.204.79
Current Account (in % of GDP) 0.53.42.31.60.6

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

 

Main Sectors of Industry

In Poland, agriculture employs 9.1% of the active population and contributes about 2.5% of GDP (World Bank, latest data available). More than 60% of Poland’s total land area is taken up by farming, and the country is generally self-sufficient in terms of its food supply. The main crops are rye, potatoes, beetroot, wheat and dairy products. Poland also breeds pigs and sheep in livestock farming. The country is relatively rich in natural resources and the main minerals produced are coal, sulphur, copper, lead and zinc. According to the Polish Agricultural Market Agency (ARR), there are roughly 1.5 million small family farms of less than 9 ha in the country. The average area of agricultural land of farms amounted to 11.1 ha in 2020 (Statistics Poland – latest data).

The industry sector contributes 27.7% of GDP and employs 32.1% of the workforce. The World Bank estimates that the manufacturing industry's value-added amounted to 16% of the Polish GDP in 2020 (latest data available). The country's main industrial sectors are machine manufacturing, telecommunications, environment, transport, construction, industrial food-processing and IT. Some of the traditional sectors have been in decline, as the steel and shipbuilding industries. The Polish automobile industry is mainly export-oriented and had been highly resistant to the effects of the 2008 economic crisis; however, it has been the worst-hit domestic sector in the coronavirus pandemic. In recent years, the country has diversified its manufacturing industry, developing sectors such as electrical appliances and clothing production.

The tertiary sector represents 57.8% of GDP, employing about 58.7% of the active population. The sector has been booming in recent years, especially for financial services, logistics, IT and tourism. This one, in particular, has seen impressive growth, with the number of tourists visiting the country reaching the record figure of 21.4 million in 2019. Nevertheless, the impact of the COVID-19 epidemic was heavy: according to data from the Central Statistical Office, in 2020 the number of domestic tourists was 43% lower than one year earlier, a percentage that goes up to 70% for foreign tourists. Concerning the banking sector, it is made up of 30 commercial banks (of which 8 are controlled by the State Treasury, accounting for 44.2% of the sector’s total assets), 530 cooperative banks and 36 branches of credit institutions (European Banking Federation).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 9.1 32.1 58.7
Value Added (in % of GDP) 2.4 28.2 57.5
Value Added (Annual % Change) -3.0 -1.0 -4.4

Source: World Bank, Latest available data.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
69,7/100
World Rank:
41
Regional Rank:
25

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
7.07/10
World Rank:
30/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.

 

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Political Outline

Current Political Leaders
President: Andrzej Duda (since 6th August, 2015)
Prime Minister: Mateusz Morawiecki (since 11th December, 2017)
Next Election Dates
Presidential: 2025
Senate: October 2023
Sejm: October 2023
Current Political Context
The ruling Eurosceptic Law and Justice (PiS) Party obtained the majority in the Sejm in the last elections but lost it in the Senate. Nevertheless, Morawiecki was confirmed as Prime Minister. Nevertheless, the political situation remained unstable due to the COVID-19-induced crisis and several other issues affecting the majority. In late October 2021, a new coalition agreement reached by PiS has marginally improved the stability of the ruling coalition. The political situation has also been characterized by frictions with the EU institutions, as the Polish Constitutional Tribunal ruled that any interim measures from the top European court against Poland's judicial reforms were "not in line" with the national constitution. The government stance was that the constitutional court’s decision was “against interference, usurpation and legal aggression by organs of the European Union”.
Among controversial issues at the national level there were abortion rights, judicial reform, LGBT rights, economic grievances, labour demands, and EU membership, with the EU Commission likely to continue withholding EU funding or trigger further infringement procedures.
Main Political Parties
Poland is generally governed by a coalition government. The country's main parties/coalitions are:

- Law & Justice (PiS): centre-right, in the Government since November 2015, mildly euro-skeptic and based on a platform of law and order
- Civic Coalition (KO): centre-right, stronger electoral performance in northern and western regions
- Democratic Left Alliance (The Left) (SLD): centre-left, successor of the communist party, recast as a social democratic party
- Polish People' Party (PSL): Christian democratic, centrist, represents farming communities
- Confederation Liberty and Independence: far-right, populist
- Solidarity Poland (SP): right wing
- Agreement: Centre-Right, Conservative Liberalism
- German Minority Electoral Committee: represents the German minority in the lower house of the Polish parliament
- Modern: liberal
- Kukiz'15: right, anti-establishment
- Left Together (LR): left-wing, socialism, democratic
- National Movement (RN): Far-Right, Polish Nationalist
- KORWiN: right-wing
- Polish Initiative (IPL): progressivism, social democracy
- The Greens: green politics, progressivism
- Union Of European Democrats (UED): centre, social liberal

Other minor political parties:

- Congress Of New Right (KNP): Right-wing, libertarian
- Right Wing of The Republic ( PR) :Social-Conservatist
- Real Politics Union (UPR): Right Wing
- Labour United (UP): Centre-Left, social-democratic
- Your Movement (TR): liberal, typically described in media as libertarian or populist, represents minority groups in Polish society

Type of State
Poland (official name: Republic of Poland) is a republic based on parliamentary democracy.
Executive Power
The President is the head of State, elected by universal suffrage for a five year term. The Prime Minister is the head of the government. He is appointed by the President, an appointment which must be confirmed by the lower house of Parliament (as a general rule, he is the leader of the majority party or coalition), for a four-year term of office. The Prime Minister holds the executive power, which includes the enforcement of the law and the management of the country's current affairs. The Council of Ministers is proposed by the Prime Minister and approved by the lower house before being appointed by the President.
Legislative Power
The legislative power in Poland is bi-cameral. Parliament is composed of the Senate (upper house, which has 100 seats and whose members are elected by a majority vote on a provincial basis, for a four-year term of office) and of the Sejm (lower house, which has 460 seats and whose members are elected by a complex system of proportional representation, for a mandate of four years). The President has the right to veto legislation passed by Parliament, but the latter can supplant him by a majority of two thirds of the Sejm.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
64/180

Source: World Press Freedom Index, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
2/7
Civil Liberties:
2/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Poland, consult the daily statistics published by the WHO. For the geographical distribution of the infection within the country, visit the official governmental portal (in Polish).
For the international outlook you can consult the latest
situation reports published by the World Health Organisation.

Sanitary measures
To find out about the latest public health situation in Poland and the current sanitary measures in vigour, please consult the dedicated pages on the official governmental portal, as well as the website of the Chief Sanitary Inspectorate (in Polish).
For the government’s recommendations on how to fight the spread of the disease, click here.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions

For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Polish Customs Service. Further details can be found on the “Customs measures” section on KPMG's website.
For the updated information on the introduced trade import and export restrictions and other trade measures (ex. tariffs reductions) due to COVID-19 pandemic, please consult the section dedicated to the Poland on International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

To know about the economic measures taken by the Polish government to address the impact of the COVID-19 pandemic on the national economy, please visit the pages of the governmental portal dedicated to the so-called “Anti-crisis Shield” (in Polish).
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the website of the
European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Hungarian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Poland in the
IMF’s Policy Tracker platform.

Support plan for businesses
For the information on the local business support scheme and taxation measures established by the Polish government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the dedicated pages on the official governmental portal (in Polish).
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's
SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
To find out about the support plan for exporters put in place by the Polish government, please consult the website of the Polish Customs Service, as well as the portal of the Polish Investment & Trade Agency (in Polish). Further details can be found on the “Customs measures” section on the KPMG Polish website.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.
 

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Latest Update: May 2022