ING, in cooperation with the European Economic Congress, published a yearly report “Engines of Polish economic growth. Concerns and postulates of businesses.” The publication is based on insights from over 50 business leaders and representatives of foreign chambers of commerce, supported by analysis from ING economists.

It explores the key directions Poland should take to sustain its economic growth amid evolving global and domestic challenges. Topics such as innovation, investment, workforce skills, and the need to transition from the current growth model are at the heart of the report. We prepared a summary of the most important insights and conclusions from the report.

Two Decades of Success: Poland’s Economic Rise in the EU

Poland stands out as one of the European Union’s most impressive economic success stories, achieving robust and sustained growth over the last two decades. Since joining the EU in 2004, Polish GDP per capita has tripled, and by 2024 it has reached nearly 80% of the EU average, up from just 52% in 2004 and below 44% in the mid-1990s. Despite global shocks such as the 2008 financial crisis and the COVID-19 pandemic, the country’s economy has proven to be remarkably resilient.

Strong Fundamentals and Strategic Advantages

Engines of Polish economic growth are underpinned by several core strengths:

• A large internal market and a strategic location in the heart of Europe
• A diversified economy not dependent on any single sector
• EU membership and access to structural funds
• Dynamic export growth and integration into global supply chains
• High-quality infrastructure and a rapidly developing logistics sector
• A strong SME sector and a healthy banking system
• Access to a pool of nearly 500,000 skilled IT specialists
• A hard-working population with one of the highest average hours worked in Europe

In 2023, Poland was among the fastest-growing economies in the EU, boasting the second-lowest unemployment rate in the bloc and maintaining a balanced foreign trade account, with a significant surplus in services. The structure of the economy continues to evolve, with an increasing share of services reflecting longer-term trends.

Foreign Trade and Investment Power Poland’s Global Integration

Poland has become a crucial player in global supply chains and is now seen by many Western firms as a logistics hub for the future reconstruction of Ukraine. Foreign investment continues to flow in, drawn by the country’s stability, strategic position, and access to a growing consumer market.

Poland has also excelled in services exports, with their share of GDP rising from 3% to 13% over three decades. Meanwhile, EU funds have provided long-term support for infrastructure and competitiveness, helping transform Poland into a critical economic gateway between East and West.

Challenges on the Horizon: Labour, Energy, and Innovation Gaps

Despite these achievements, Poland faces a range of structural challenges. These include an ageing population, labour shortages in key industries, insufficient R&D investment, and a dominance of small firms that cannot often scale or innovate.

Rising labour and energy costs have started to erode some of Poland’s traditional cost advantages. Labour costs, driven by a sharp increase in the minimum wage, have risen rapidly and are now about half the EU average, compared to one-third in 2008. Meanwhile, electricity prices remain among the highest in the EU, largely due to a coal-heavy energy mix and the impact of EU climate regulations. These trends pose competitiveness risks, particularly for energy-intensive industries and future sectors like AI and data services.

Additionally, overregulation at both the EU and national levels is a growing concern for business leaders, who also cite inefficiencies in the public administration and judicial systems as barriers to investment and growth.

Turning Challenges into Opportunities

However, Poland is not without solutions, and many of them are already within reach.

1. Transitioning to an Innovation-Driven Economy:
   To maintain momentum, Poland must move from an extensive growth model (more workers, more hours) to an intensive one, based on productivity, innovation, and technological development. Investment in automation, robotics, and AI is essential, especially given the country’s strong IT and engineering talent base.
2. Energy Transformation as an Opportunity:
   While high energy prices are a concern, the energy transition also presents a major investment opportunity. EU funds from the Recovery Plan and cohesion policy can help modernise the grid and shift the energy mix toward renewables. Experts argue that reliable, affordable energy is the foundation of any competitive economy.
3. Boosting R&D and Venture Capital:
   Poland currently invests just 1.4% of its GDP in R&D – less than half the level of innovation leaders. Scaling up R&D spending, fostering science-business cooperation, and deepening capital markets are essential. A more developed venture capital and private equity ecosystem would help Polish start-ups grow domestically rather than seeking foreign buyers.
4. Strategic Migration Policy:
   With few options left to expand the domestic labour pool, a forward-looking migration strategy – focused on attracting qualified professionals – is critical. Poland has already become a destination for workers from beyond the region. Thoughtful integration policies, coupled with incentives for the Polish diaspora to return, could help offset demographic pressures.
5. Scaling SMEs and Encouraging Consolidation:
   Poland’s economy is dominated by small firms, which tend to underperform in innovation and productivity. Supporting scale-up initiatives and reducing regulatory privileges that inadvertently trap businesses in the SME category could drive more dynamic growth.
6. Clear Vision and Strategic Sectors:
   Business leaders agree that Poland needs a coherent long-term economic strategy. Key sectors identified include high-tech, biotech, pharmaceuticals, electromobility, and renewable energy. Public policy should target these industries with tailored support to build global competitiveness.

Looking Ahead: From Quantity to Quality

Poland’s economic future depends on shifting the growth engine from cost-competitiveness to value-added innovation and quality. The country’s position in Europe, its skilled workforce, and its economic fundamentals give it a strong base to become a leading knowledge-based economy.

As highlighted by experts in the report “Engines of Polish Economic Growth. Concerns and Postulates of Businesses,” with reforms in energy, public administration, capital markets, and R&D investment, Poland can turn today’s headwinds into tomorrow’s breakthroughs – positioning itself not just as Europe’s factory, but as one of its innovation leaders.

Download a full report: www.think.ing.com

Main photo source: Canva