Download PDF
Quick Facts
- Population:
- GDP (PPP):
- $1.1 trillion
- 4.6% growth
- 3.2% 5-year compound annual growth
- $29,521 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
Poland’s economic freedom score is 67.8, making its economy the 46th freest in the 2019 Index. Its overall score has decreased by 0.7 point, with a plunge in the score for judicial effectiveness not fully offset by improvements in investment freedom and fiscal health. Poland is ranked 23rd among 44 countries in the Europe region, and its overall score is below the regional average but above the world average.
Poland’s positive economic reputation was earned through structural reforms: trade liberalization, low taxes, and business-friendly regulations. Enthusiasm for reform has waned in recent years amid political and policy uncertainty that has contributed to currency volatility and weakened rates of investment. Challenges include deficiencies in road and rail infrastructure, a rigid labor code, a weak commercial court system, government red tape, and a burdensome tax system for entrepreneurs. Reforms are also needed to buttress the independence of the judiciary and reduce opportunities for corruption.
Background
Poland helped to bring down the Soviet Union in 1989, joined NATO in 1999, and became a member of the European Union in 2004. The conservative and Euroskeptic Law and Justice Party won a parliamentary majority in 2015, and former Minister of Finance Mateusz Morawiecki became prime minister in 2017. The government continues to clash with the EU over mandatory migrant quotas. Encouraged by a strong manufacturing sector and infrastructure investment, Poland has become the EU’s eighth-largest economy, although it is somewhat constrained by labor shortages in such key sectors as construction and information technology. Tensions exist between the poorer and rural eastern region of the country and the more prosperous and industrialized western region.
The right to acquire and dispose of property is protected by law, and the judiciary is independent, but frequent complaints about the slow and sometimes politicized judiciary have diminished confidence in the government’s ability to uphold property rights. Allegations of corruption occur most frequently in government procurement, where regulations or permits are alleged to have been issued to benefit particular companies.
The top income tax rate is 32 percent, and the corporate tax rate is a flat 19 percent. Other taxes include value-added and property taxes. The overall tax burden equals 33.6 percent of total domestic income. Over the past three years, government spending has amounted to 41.3 percent of the country’s output (GDP), and budget deficits have averaged 2.3 percent of GDP. Public debt is equivalent to 51.4 percent of GDP.
Modernization of the regulatory environment has facilitated the transition to a market-oriented economy. The nonsalary cost of employing a worker is relatively high. Unions exercise considerable influence on contract termination and other labor issues. Poland has been the largest recipient of EU subsidies, but the European Commission has threatened to freeze its subsidies unless Poland cooperates with the “founding values of the EU.”
The combined value of exports and imports is equal to 102.8 percent of GDP. The average applied tariff rate is 2.0 percent. Poland implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas. A new investment promotion law was adopted in 2018. The financial sector continues to expand. FTSE Russell has upgraded the Polish stock market to “developed market” status.