While much of the European Union grapples with sluggish economic performance, Poland has emerged as a standout performer. In 2024, the country achieved a GDP growth rate of nearly 3%, surpassing the EU average of 1% and outpacing major economies like France, which grew by 1.2%, and Germany, which contracted by 0.2%. n nProjections for 2025 remain optimistic, with a 3% growth rate anticipated. The second quarter of 2025 already showed a 0.8% expansion, placing Poland fifth among EU nations in quarterly growth. Over the past two decades, Poland’s average annual growth has hovered near 4%, reflecting a sustained period of economic advancement since joining the EU in 2004. n nThis momentum is supported by strong domestic demand. According to Katarzyna Rzentarzewska, Erste Group’s chief macro analyst for central and eastern Europe, private consumption is the main driver of Poland’s economic expansion. Low unemployment and rising real wages have bolstered consumer confidence, making the economy less vulnerable to global downturns compared to export-reliant neighbors. n nPoland’s size amplifies its influence. With a population of 37 million, it ranks as the EU’s fifth-largest nation and holds a position within the world’s top 20 economies by GDP. Jacob Funk Kirkegaard of the Peterson Institute highlights that Poland’s scale gives it significant weight in both political and economic discussions at the EU level—unlike smaller states with similar growth patterns. n nIntegration into key institutions—such as the EU, NATO, Schengen Area, and OECD—has played a crucial role. Although Poland retains its own currency, access to EU funding has been instrumental in upgrading infrastructure and fostering a favorable business climate. Rzentarzewska notes that EU financial support has been a major catalyst, while Kirkegaard credits Poland with eliminating systemic corruption and cultivating a skilled workforce. n nHowever, challenges loom. Defense spending now accounts for about 4.5% of GDP, the highest in NATO, though much of this goes toward foreign procurement rather than domestic industry. Combined with expanded welfare programs and post-pandemic inflation, fiscal pressures are mounting. The government deficit is projected to reach 6.5% of GDP in 2026, prompting calls for fiscal consolidation. Rafal Benecki of ING warns that without a credible adjustment plan, investor confidence could wane. n nPolitical dynamics add complexity. While Prime Minister Donald Tusk’s pro-EU coalition secured €137 billion in funding by aligning judicial reforms with EU standards, the election of eurosceptic president Karol Nawrocki in 2025 has reignited tensions over rule-of-law issues. Despite these divisions, Rzentarzewska observes that both conservative and liberal governments have overseen economic progress, suggesting resilience across political shifts. n nLooking ahead, Kirkegaard draws a historical parallel: just as the U.S. Rust Belt lost economic dominance, a failure by Germany to reform could see Poland overtake it, potentially reshaping Europe’s economic hierarchy. For now, Poland’s productivity, labor market strength, and institutional integration justify the current optimism. n— news from DW n
— News Original —nEurope’s hidden economic success story: Poland – DW – 10nIn an era of existential economic gloom across the EU, one of its larger members has been consistently posting positive numbers: Poland. n nIts GDP growth rate of almost 3% in 2024 put it ahead of the overall EU rate of 1%, as well as the bloc ‘s two largest economies France and Germany. France recorded a rate of 1.2% while Germany suffered a -0.2% contraction. n nThe signs for 2025 are also positive. Poland recorded growth of 0.8% in the second quarter, the fifth best rate in the EU. Growth of around 3.3% is forecast this year, with a 3% rate expected for next year. n nIt ‘s not an overnight success, either. Since it joined the EU in 2004, average annual growth has been almost 4%, a rate that has largely accelerated over the last decade. n nYet there is a particular momentum at present. Its stock market has been surging and optimism is growing around its capacity to develop into one of the EU ‘s most robust and dynamic economies. n n”Over the last two decades, Poland definitely outperformed,” Katarzyna Rzentarzewska, chief macro analyst for central and eastern Europe at Erste Group told DW. n n”Real GDP doubled. This is something outstanding. Obviously, it ‘s part of a process of convergence, but on the whole, Poland stands out.” n nSize matters n nJacob Funk Kirkegaard, nonresident senior fellow with the Peterson Institute for International Economics, says Poland ‘s success has been mirrored to an extent by other eastern European and Baltic states, but that it ‘s size is a key difference. n n”Poland is big,” he told DW. “So it actually matters, if you like, at the aggregate EU level — in a way that a much smaller economy doesn’t — both politically and as a matter of economic weight.” n nPoland has a population of 37 million, the fifth largest in the EU. Its economy is now ranked just inside the top 20 in the world in terms of GDP. n nAllied to its growing economic heft is its strategic and geopolitical importance. In recent years, it has boosted defense spending to the extent that it is now number one in NATO in terms of the share of GDP it spends on defense, currently around 4.5%. n nMuch of the defense spending is on overseas orders rather than domestic production, but Rzentarzewska says a lot of Poland ‘s growth is driven by private consumption within the country, rather than exports. n n”It is the pillar of the growth,” she says, noting that Poland ‘s strong domestic market can be seen in its low unemployment and strong real-wage growth. It also gives it the capacity to be relatively sheltered from external shocks. n n”When you see a global downturn, then obviously first to be hit are the smaller, export-oriented economies because that ‘s how the value chain works,” she said. “In Poland ‘s relatively closed economy, consumption remains strong.” n nA model of integration n nSo what exactly has Poland gotten right? Rzentarzewska sees its successful integration into the EU, NATO, the Schengen Area and the OECD as key to its success. n n”If we look at the broad concept of integration, Poland did it really well,” she says. Although it did not join the euro area, it has benefitted from extensive EU funding since joining in 2004. n n”We cannot deny that the access to European funds was huge—a major contributor to the growth,” she says. Kirkegaard agrees, saying Poland “has gotten the basics right”. n n”They have used EU funding to significantly improve their infrastructure,” he says. “They have completely eradicated street-level corruption that was rampant during the Communist years. They have fundamentally succeeded in generating a very welcoming business environment. They have a generally well-educated workforce. n n”Poland is a poster child for successful EU integration. They needed to get it right because they are so big. And they got it right.” n nPolitical division threatens EU funds n nYet there are potential headwinds. For much of the last two decades, Poland has been politically divided between a large right-wing bloc, led by the populist and conservative Law and Justice party and by a liberal, center-left bloc, currently led by prime minister Donald Tusk ‘s Civic Coalition. n nTusk ‘s coalition is more pro-EU and his group ‘s victory in the 2023 parliamentary elections was seen as helpful to securing longer-term EU funding for Poland, given that Law and Justice regularly got into disputes with Brussels over judicial independence when it was in power. n nThe victory of Karol Nawrocki in the 2025 presidential election, a eurosceptic independent candidate who was supported by Law and Justice, was seen as potentially damaging to Poland ‘s future EU relations. n nWeeks after taking power in 2023, Tusk was able to convince the European Commission to release €137 billion in funding, providing he bring Poland ‘s justice system back into line with EU norms and rules. n nHowever, his attempts to consider the possible removal of judges appointed during the Law and Justice period in government is bringing him into direct conflict with Nawrocki. n nYet Rzentarzewska says that despite its political divisions, Poland has made economic progress under both blocs. “Poland is a good example of how you can have progress and dynamic growth under different political parties or orientations, be it conservative or or more liberal,” she said. n nThe new Germany? n nShe says that extra welfare spending, such as child benefits brought in by Law and Justice, has been beneficial and has helped boost the economy. n nHowever, she also cautions that extra spending, combined with the hike in defense spending and the post-pandemic inflation shock, has contributed to a tight fiscal situation in Poland. n nAccording to recent plans presented by Polish Minister of Finance Andrzej Domański, Poland ‘s government deficit will be 6.5% of GDP in 2026. n nRafal Benecki, chief economist for Poland at ING, says that Poland ‘s robust growth rate means ratings agencies and investors are generally not concerned, but he believes the country needs “a convincing fiscal adjustment plan to boost confidence.” n n”Poland will need to tackle that,” says Rzentarzewska. “It will need to undergo a fiscal consolidation, fiscal austerity, and this is naturally something that can slow growth.” n nBut she emphasizes that the current mood of confidence is justified. “The low unemployment rate, the consumer confidence and, crucially, high productivity—that all adds up to overall sentiment, positive sentiment, and performance of the economy.” n nKirkegaard agrees and says there is much that Poland can teach the rest of the EU about economic dynamism and flexibility. n n”There was a time when Michigan and what is today the ‘Rust Belt ‘ in the United States was the economically dominant part of the US economy,” he said. “That ‘s not the case anymore. n n”But if you assume that Germany is unable to reform itself and Poland continues to perform the way it has done since it became a member of the EU 20 years ago, then it will eventually eclipse the likes of Germany, which could become like the rust belt of Europe.” n nEdited by: Kristie Pladson