World Bank Group in Poland

COUNTRY CONTEXT

^{*Data for 2022}

The Polish economy has shown resilience thanks to a well-diversified economic structure, integrated into regional value chains, macroeconomic stability, a sound financial sector, strong domestic labor markets and generous social programs combined with reactive protective measures. Over the medium term, continued economic success hinges on technological transitions. A growth model driven by innovation, leveraging Poland’s strengths in clean value chains and advanced manufacturing capabilities will require financial deepening. The rapidly aging population remains a significant challenge to growth, inclusion and fiscal sustainability. Technological transformation, particularly Artificial Intelligence (AI), is creating leapfrogging opportunities but requires adequate planning. 

The administration elected in October 2023 has made efforts to strengthen institutions, the predictability of the regulatory framework and the rule of law. In 2024, Poland was placed in Excessive Deficit Procedure (EDP) as its fiscal deficit exceeded the threshold partly due to the large increase in defense spending (to around 4% of GDP). Under the new EU Fiscal Framework, it has committed to a Medium-Term Fiscal Structural Plan to converge with EU fiscal deficit rules by 2028.

Last Updated: Apr 23, 2025

Strategy

The World Bank Group’s financing to Poland remains highly selective and in support of delivering global and/or regional public goods. The country has made strides in strengthening its overall economic governance systems over the last three decades with key economic institutions for instance being able to put together a robust package of fiscal and monetary actions in 2020 that limited the GDP contraction caused by the COVID-19 pandemic. Today, the spillover effects from the war in Ukraine require agile economic planning and management to mitigate the impacts from the crisis on growth and public finances, while supporting the vulnerable, including Ukrainian refugees.

However, economic and social institutions to manage key transitions—demographic, green, and digital—need to be developed further on the national and subnational level to achieve sustainable graduation from IBRD. To boost growth and reverse trends that are slowing down productivity and to further reduce inequality of opportunity in the future, Poland will need to navigate three imminent transitions that require it to simultaneously shift towards a green economy, adopt digital technologies, and adjust to the needs of an aging population.

These shifts will require strong political ownership, institutional coordination, and administrative capacity to direct the enabling reforms at the national and subnational level, including through establishing appropriate financing structures to support the needed investments. Local institutions also must deal with increased pressure from Russia’s invasion of Ukraine. The 12 largest metropolitan areas were estimated to have experienced an immense influx of Ukrainians in the months after the outbreak of the war, stretching the capacity of local housing services, and placing significant pressure on public services like health, education, water/wastewater, and transport.

The World Bank will continue to work together with the government, the EU, UN agencies, and other partners on the implementation of flagship initiatives where progress can advance the development agenda on global public goods, such as economic integration of forcibly displaced populations, decarbonization, just transition out of coal, comprehensive water management, clean air, and sustainable cities.

Last Updated: Apr 23, 2025

Recent Economic Developments

After a sharp deceleration in 2023, real GDP growth picked up in 2024, reaching 2.9%. Private consumption was the primary driver of growth, supported by increases in nominal and real income. While private consumption is expected to remain strong in 2025, public consumption is anticipated to moderate. Investments are projected to drive growth, with double-digit growth possible in the public sector due to the implementation of EU-funded projects. Private investment could be lower than earlier anticipated due to trade uncertainty weighing down on investment decisions. On the supply side, services will remain solid

in 2025. At the end of 2024, inflation increased to 4.7%(YoY), primarily due to the elimination of the zero VAT rate on staple food products and the statutory price caps on fuels during the second half of the year. This widening rate differential with the European Central Bank has resulted in continued real-term appreciation of the zloty. A gradual decline in inflation is expected in the second half of 2025.

On the fiscal front, Poland’s fiscal deficit exceeded 6% of GDP in 2024 on the back of large defense spending and the fulfillment of election promises. Record high defense expenditures will cause the deficit to remain above 5% also in 2025.

Economic Outlook

Over the medium term, growth is expected to stabilize close to 3%. Inflation should continue its downward trend, moving closer to the National Bank of Poland (NBP) target of 2.5% (+/- 1%), while wage growth should persist due to a tight labor market. The contribution of net exports to growth is expected to remain negative in the medium term, partly because of the uncertainty over trade policy and indirect effects via German supply-chains. With large investment expenditures, a rebound is expected in the construction sector, with manufacturing also expected to accelerate. The government announced fiscal consolidation measures over the medium term aiming for a deficit of 2.9% of GDP by 2028. If defense spending were to be excluded from the EDP calculations, Poland would gain some fiscal space in the medium term.

Poland must speed up its transition to cleaner energy sources to stay competitive in the EU, embrace new technology, and prepare its workforce for job market changes. Additionally, Poland's public finances will be strained over the long term due to more extreme and frequent weather events, an ageing population, and the necessity for increased investment. Risks exist both to the downside and upside due to regional and global geopolitical developments and global trade uncertainty. Under a high fiscal deficit, a flexible exchange rate and monetary policy may prove to be crucial in mitigating global risks.

Last Updated: Apr 23, 2025