Poland

According to official data provided by Poland’s parliamentary committee of national defence, the defence budget of 2016, was to reach 35.89 billion Polish Zloty -PLN- (approximately 8.5 billion US dollars), a rise of 8.6%, compared to the previous year. As of 2016, Polish authorities are committed to spend 2% of the country’s Gross Domestic Product (GDP) on defence, instead of 1.95% spent until 2016. With the implementation of the 2016 defence budget, Poland is set to join a handful of NATO members, who meet the alliance's target of investing at least 2% of national GDP on defence. Expenses on military and civilian personnel, represent 23.4% of the total military budget, accounting for 8.281 billion PLN (approximately 2 billion US dollars), while capital investment represents 28.9%, hence some 10.247 billion PLN (approximately 2.4 billion US dollars). Pensions and other Operational and Maintenance (O&M) expenditures, as well as training expenses, represent 20.7% and 17.4% of the total military budget, respectively.

Poland has the largest economy in Central Europe. The growth of Poland’s economy has been constant, since 1990. This growth has been somewhat halted during the global economic crisis as of 2008, with respective growth rates in 2008 and 2009, significantly slowed down. Nevertheless the structural wealth accumulated in the Polish economy throughout the years managed to lessen the consequences of this crisis and the country avoided a prolonged recession. In the second quarter of 2015, the economy expanded by 3.4% year on year, while in the 3rd quarter of 2016, GDP increased by 0.2%, when compared to the 2nd quarter of 2016 and by 2.2% compared to the corresponding quarter of 2015. According to a report prepared by the Organisation for Economic Co-operation and Development (OECD), Poland’s GDP is projected to rise by around 3% annually in 2017-18, mainly due to higher social transfers, low interest rates and rising distribution of the available EU funds.

Poland has a sound economy, characterised by macroeconomic stability, healthy public finances and a long-term predictability. Additionally, this Central European country is open to foreign trade, has an efficient regulatory system and offers a competitive taxation scheme. This positive socioeconomic environment, has facilitated the inflow of foreign investment and has transformed Poland into one of Europe’s most attractive places for investment. It is indicative that according to Ernst and Young’s European Attractiveness Survey 2016, Poland was the most attractive Foreign Direct Investment (FDI) destination in Central Europe and the 5th most attractive in Europe, only behind Germany, the UK, France and the Netherlands.

More on that direction, the country scores rather well, in several international indicators measuring the ‘openness’ of a country’s economic and business environment. Poland ranked 24nd out of 190 countries in the World Bank’s Doing Business 2017 report, 39th out of 178 countries in the 2016 Heritage Foundation’s Index of Economic Freedom, and 39th out of 128 in the Global Innovation Index 2016.

Year

Measure/Indicator

Rank

Website Address

2017

Doing Business report

(24 out of 190)

www.doingbusiness.org/

2016

Index of Economic Freedom

(39 out of 178)

www.heritage.org

2016

Global Innovation index

(39 out of 128)

www.globalinnovationindex.org

The openness of the local economy has attracted a relatively significant amount of FDI. Poland’s inward FDI stock reached 159 million, at the end of 2015. EU member states are the main investors in Poland. More specifically the countries that ‘injected’ the biggest amounts of FDI in the country, were the Netherlands (30.3 billion Euros), Germany (27.3 billion Euros), Luxembourg (19.34 billion Euros) and France (17.9 billion Euros). The bulk amount of investment was concentrated in manufacturing, accounting for 53.8 billion Euros, financial and insurance activities (31.4 billion), wholesale and retail trade including repair of vehicles (25.5 billion) and activities related to real estate services (13.1 billion).  

As was already mentioned in previous, the Polish economy is open to commerce and foreign trade. As a result, in 2013, exports represented nearly 50% of the national GDP, significantly increased when compared to 2001, when they accounted for only 27% of the GDP. The main markets for Polish exports for 2015, were the following: Germany 26.88%, the UK 6.81%, the Czech Republic 6.52%, France 5.57%, Italy 4.8%, the Netherlands 4.39% and Russia 2.93%. On the other hand, the main countries from which Poland imported, were the following: Germany 22.61%, China 11.8%, Russia 7.57%, Italy 5.18%, the Netherlands 3.78%, France 3.72% and the Czech Republic 3.35%. The main products Poland exported in 2015, were the following: consumer goods (42.68%), capital goods (29.86%), machinery and electrical equipment (25.22%), intermediate goods (17.82%), and transportation (services) (14.63%). On the other side, in 2015, Poland mainly imported capital goods (32.4%), consumer goods (29.6%), machinery and electrical equipment (26.11%), intermediate goods (23.77%), raw materials (11.43%), and transportation (services) (11.29%).

Overall in 2015, according to official data, exports reached some 750.8 billion PLN (178 billion US dollars), while imports amounted to 740.9 billion PLN (175.7 billion US dollars), creating a trade surplus of 9.8 billion PLN (2.3 billion US dollars).       

Despite the fact that the Polish economy has taken tremendous steps towards becoming a prosperous and robust economy, there are still structural reforms that are required to be introduced. For example the labour market stills remains ‘rigid’ and the rule of law is hindered by delays in the court system. Unemployment, is another problem Poland is currently facing. It is indicative that in November of 2016, the rate of registered unemployment still remained relatively high at 8.2%, although improved when compared to November of 2015, when it was 9.6%.