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The country’s GDP grew by almost 3% in 2024, compared to 1% for the entire EU and the 0.2% decline in Germany. What can the rest of the bloc learn from Warsaw?
At a time of existential economic crisis throughout the European Union (EU), one of its main economies has consistently presented positive numbers: the Poland.
With a growth rate of almost 3% of Gross Domestic Product (GDP) in 2024, Poland was ahead of the overall EU rate of 1% and overcame the two largest economies in the bloc: Germanywhich suffered a retraction of 0.2%, and the Francewhich grew 1.2%.
The projection for 2025 is also positive. In the second quarter, Poland recorded growth of 0.8%, the fifth best rate in the EU. And the growth predicted for this year is around 3.3%, with a positive result of at least 3% expected for 2026.
But Poland did not become an economic success story overnight. Since joining the EU in 2004, average annual GDP growth in Poland has been almost 4%, a figure that has intensified especially in the last decade.
However, there is currently a particular impulse: The Polish stock market has grown exponentially, which has increased optimism regarding its ability to become one of the most robust and dynamic economies in the EU.
“Over the last two decades, Poland has definitely outperformed. Real GDP has doubled. That’s something extraordinary. Obviously, it’s part of a convergence process, but overall, Poland stands out,” says Katarzyna Rzentarzewska, chief macroeconomic analyst for Central and Eastern Europe at Erste Group.
Size matters
Jacob Funk Kirkegaard, senior researcher at the Peterson Institute for International Economics, believes that Poland’s success has been mirrored, to some extent, by other eastern EU and Baltic countries, but that the country’s size is a key difference.
“Poland is big. Therefore, it matters at an aggregate level in the EU, so a much smaller economy does not have as much weight, either in political or economic terms”, says Kirkegaard.
Poland has a population of 37 million inhabitantsthe fifth largest in the European Union, and, currently, its economy is among the 20 largest in the world in terms of GDP.
Along with economic growth, Poland has strategic and geopolitical importance. In recent years, the country has increased defense spending to the point that it is now the NATO member that proportionally invests the most in the sector: around 4.5% of GDP.
Much of defense spending goes to orders from abroad rather than domestic production, but at the same time, according to Rzentarzewska, a large share of Poland’s growth is driven by domestic private consumption rather than exports.
“It is the pillar of growth,” says the analyst, noting that the strength of the Polish domestic market can be seen in low unemployment and growth in real wages, which also leaves it relatively protected from external shocks.
“When you see a global recession, it’s obvious that the first economies to be affected are the smaller, export-oriented ones, because that’s how the value chain works. In Poland’s relatively closed economy, consumption remains strong,” he says.
So where did Poland get it right? Rzentarzewska argues that its successful integration into the European Union, NATO, the Schengen Area and the Organization for Economic Co-operation and Development (OECD) was fundamental to its success. “If we look at the broad concept of integration, Poland did very well,” he says.
Although it did not join the eurozone, the country has benefited from vast EU funding since joining the bloc more than 20 years ago: “We cannot deny that access to European funds was enormous, an important factor that contributed to growth”, he ponders.
Kirkegaard believes that Poland “got the basics right”.
“They used EU funding to significantly improve their infrastructure. They completely eradicated corruption on the streets, which was widespread during the years of communism. They fundamentally managed to create a very welcoming business environment. And they have a generally well-qualified workforce. Poland is an example of successful integration into the EU. The country needed to do things well, because it is a very big country. And they got it right.”
Political divisions threaten European funds
Potential obstacles also exist. For much of the last two decades, Poland has been politically divided between a large right-wing bloc, led by the nationalist-conservative Law and Justice (PiS) party, and a liberal bloc, currently led by Prime Minister Donald Tusk’s Civic Coalition.
Tusk’s coalition is more pro-EU, and his group’s victory in the 2023 parliamentary elections was seen as essential to securing long-term EU funding, given that PiS regularly clashed with Brussels over the independence of the judiciary when it was in power.
PiS-backed eurosceptic Karol Nawrocki’s victory in this year’s presidential elections was seen as potentially damaging to Poland’s future relations with the EU.
Weeks after taking power in 2023, Tusk managed to convince the European Commission to release €137 billion in funding, provided that it realigned Poland’s judicial system to EU norms and rules.
Tusk’s attempts to consider the possible dismissal of judges appointed during PiS’s time in government are putting him on a collision course with Nawrocki.
However, Rzentarzewska argues that despite Poland’s political divisions, the country has achieved economic progress under both blocs. “Poland is a good example of how it is possible to have progress and dynamic growth under different political parties or orientations, whether conservative or more liberal”, he states.
The new Germany?
Rzentarzewska says that the increase in investment in social assistance, such as the child benefits introduced by PiS, was favorable and helped boost the economy.
She warns, however, that the extra spending, combined with increased defense spending, plus inflation, have contributed to a tight fiscal situation. According to projections presented by Finance Minister Andrzej Domanski, the Polish government’s deficit will be 6.5% of GDP in 2026.
Rafal Benecki, chief economist for Poland at consultancy ING, says the country’s solid growth rate means rating agencies and investors in general are not worried at the moment, but he believes “a convincing fiscal adjustment plan is needed to boost confidence”.
Rzentarzewska corroborates this thought: “Poland will need to deal with this. It will need to go through fiscal consolidation, fiscal austerity, and this is something that can naturally slow down growth.”
Still, he also believes that the current climate of confidence is justified: “The low unemployment rate, consumer confidence and, fundamentally, high productivity, all contribute to an optimistic general feeling and the performance of the economy”.
Kirkegaard states that Poland has a lot to teach the rest of the European Union about economic dynamism and flexibility: “There was a time when Michigan and what is now known as the ‘rust belt’ in the United States dominated the American economy, which is no longer the case.”
It refers to an area in the northeast region of the USA that was extremely prosperous after the Second World War, due to industrial power, but plunged into a huge crisis from the 1970s onwards, with the abandonment of companies and, consequently, unemployment.
“If we assume that Germany is incapable of reforming itself and Poland continues to perform as it has since becoming a member of the EU, it could overshadow countries like Germany, which could become Europe’s ‘rust belt’”, he concludes.
