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Quick Facts
- Population:
- GDP (PPP):
- $1.3 trillion
- 4.1% growth
- 4.2% 5-year compound annual growth
- $34,218 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
Poland’s economic freedom score is 69.7, making its economy the 41st freest in the 2021 Index. Its overall score has increased by 0.6 point, primarily because of an improvement in judicial effectiveness. Poland is ranked 25th among 45 countries in the Europe region, and its overall score is below the regional average but above the world average.
This year, the Polish economy took another small step closer to crossing the threshold into the ranks of the mostly free. To make the final leap, the government will need to take politically painful decisions to make significant cuts in spending. Reforming and strengthening the judicial system would be the other priority area in order to increase economic freedom in Poland.
IMPACT OF COVID-19: As of December 1, 2020, 17,599 deaths had been attributed to the pandemic in Poland, and the economy was forecast to contract by 3.6 percent for the year.
Background
Poland played a pivotal role in ending Soviet domination of Eastern Europe, joined NATO in 1999, and became a member of the European Union in 2004. The conservative and euroskeptic Law and Justice Party (PiS), first elected to power in 2015, won an even bigger parliamentary majority in October 2019. In July 2020, President Andrzej Duda of the PiS was narrowly reelected to a second five-year term. The government has prioritized closer cooperation with the U.S. while clashing with the EU over migration and judicial and media reforms. Tensions exist between the country’s poorer and rural eastern region and its more prosperous and industrialized western region. Poland’s strong economy is expected to rebound quickly after the coronavirus pandemic has ended.
Poland recognizes and enforces secured interests in property and generally upholds the sanctity of contracts. The judiciary is independent, although the courts are slow and overburdened. The Polish legal system is code-based and prosecutorial, based on the Constitution of 1997. There are laws, regulations, and penalties aimed at combating corruption among public officials and counteracting conflicts of interest.
The top individual income tax rate is 32 percent, and the top corporate tax rate is 19 percent. Other taxes include value-added and property taxes. The overall tax burden equals 35.0 percent of total domestic income. Government spending has amounted to 41.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 0.8 percent of GDP. Public debt is equivalent to 46.7 percent of GDP.
Poland is not keeping pace with business freedom reforms in other countries, and the 2021 Index is the fifth in a row in which Poland’s score for this indicator has declined. Dismissing an employee has become easier, improving flexibility in the labor market and encouraging job growth by reducing firms’ reluctance to hire. According to data from the European Commission, Polish farmers are the fifth-largest beneficiaries of EU subsidies.
As a member of the EU, Poland has 45 preferential trade agreements in force. The trade-weighted average tariff rate (common among EU members) is 3 percent, with 639 EU-mandated nontariff measures in force. Poland has an additional 340 country-specific nontariff barriers. Foreign investment is welcome, but foreign ownership in selected strategic sectors is limited. The financial sector continues to expand.