Geopolitical Risks and the Polish Economy: Implications for Foreign Investors

Poland's economy stands at a crossroads in 2025, navigating a volatile geopolitical landscape while implementing strategic resilience measures to safeguard its growth trajectory. For foreign investors, understanding the interplay between these risks and Poland's adaptive strategies is critical to identifying opportunities in a market poised for transformation.

Geopolitical Risks: A Dual-Edged Sword

The war in Ukraine has cast a long shadow over Poland's economic stability. Supply chain disruptions, labor shortages, and rising operational costs have created a “perfect storm” for businesses, particularly in manufacturing and agricultureTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2]. According to a report by Poland Insight, economic uncertainty now ranks as the second-greatest risk for Polish firms, trailing only rising labor costsTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2]. Compounding this, U.S. trade policies under former President Donald Trump—marked by tariffs on EU imports—have forced companies to stockpile goods and diversify supply chainsTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2]. By early 2025, U.S. imports to Poland had doubled, making the U.S. the country's third-largest trade partnerTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2].

Meanwhile, Poland's eastern border remains a flashpoint. The return of Polish labor to Ukraine to fight has exacerbated workforce shortages, while hybrid threats from Belarus and Russia necessitate heightened security spendingTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2]. Credit rating agencies like Moody's have downgraded Poland's outlook to “negative,” citing fiscal pressures from defense spending, social benefits, and political gridlockMoody's cuts Poland's outlook to 'negative' on weaker fiscal …^[1]. These risks underscore the fragility of Poland's economic foundations but also highlight the urgency of strategic adaptation.

Strategic Resilience: Defense, Energy, and Digital Transformation

Poland's response to these challenges is multifaceted, blending military preparedness, energy diversification, and technological innovation. Prime Minister Donald Tusk has championed a “full mobilization” strategy, including legislative reforms to accelerate defense spending and deepen EU-NATO cooperationMoody's cuts Poland's outlook to 'negative' on weaker fiscal …^[1]. The country now plans to allocate 5% of GDP to defense—a historic commitment that positions it as a leading NATO memberPoland: Optimistic growth outlook but fiscal pressures^[4].

Energy security is another cornerstone of resilience. Poland is pivoting away from Russian gas by investing in nuclear power and offshore wind farms. The National Recovery and Resilience Plan (KPO) includes PLN 65 billion over a decade for transmission networks and new power generationTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2]. These moves align with the EU's RePowerEU strategy, which seeks to reduce dependency on volatile energy marketsPoland Prepares Final Revision of Recovery and Resilience Plan^[3].

Digitally, Poland is doubling down on AI and science. A PLN 500 million investment in the National Science Centre and PLN 340 million for AI infrastructure—such as a supercomputer and an AI factory—signal a long-term bet on innovationTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2]. The KPO's revised credit guarantee system for SMEs further bolsters resilience, addressing the vulnerability of smaller firms to global shocksPoland Prepares Final Revision of Recovery and Resilience Plan^[3].

Sectoral Preparedness: Where to Invest?

Foreign investors must evaluate sectoral preparedness to navigate Poland's evolving economy.

1. Defense and Security: With defense spending projected to surge, the sector offers growth potential. Poland's collaboration with the EU on the ReArm Europe plan—allocating €800 billion for defense—creates opportunities for firms supplying military technology, logistics, and cybersecurityMoody's cuts Poland's outlook to 'negative' on weaker fiscal …^[1].

2. Energy Transition: The shift to nuclear and renewable energy is a high-stakes bet. Offshore wind projects and nuclear plant development require significant capital, but EU funding (over EUR 50 billion unlocked) provides a tailwindTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2]. Investors in clean energy infrastructure could benefit from Poland's 2030 decarbonization targets.

3. Technology and AI: Poland's AI push is a strategic priority. The PLN 340 million allocated to AI infrastructure and the National Science Centre's funding could attract foreign tech firms seeking to tap into a skilled workforce and EU-backed innovation ecosystemsTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2].

4. SMEs and Credit Guarantees: While SMEs face risks from trade volatility, the KPO's credit guarantee system mitigates some exposure. Investors with a risk appetite for smaller enterprises might find opportunities in sectors like manufacturing and agriculture, where EU grants are being redirectedPoland Prepares Final Revision of Recovery and Resilience Plan^[3].

Risks and Mitigants for Foreign Investors

Despite Poland's resilience measures, investors must remain cautious. Fiscal pressures—driven by rising deficits and uncertain EU funding—could strain public financesPoland: Optimistic growth outlook but fiscal pressures^[4]. Additionally, geopolitical tensions may escalate trade wars, as seen in the U.S.-EU tariff standoffTrade Wars and Geopolitical Tensions: A Growing Threat to Business Stability in Poland^[2]. However, Poland's proactive reallocation of resources to defense and energy, coupled with its EU membership, provides a buffer against external shocks.

A key mitigant lies in Poland's ability to leverage EU funding. The revised KPO extends deadlines for key investments, ensuring better utilization of grantsPoland Prepares Final Revision of Recovery and Resilience Plan^[3]. For foreign investors, partnering with Polish firms that have access to these funds could reduce capital risk.

Conclusion: Balancing Risk and Resilience

Poland's economy is a study in contrasts: it faces acute geopolitical risks but is also deploying one of the most comprehensive resilience strategies in Europe. For foreign investors, the path forward lies in aligning with sectors that are both shielded from volatility and positioned for long-term growth. Defense, energy transition, and AI represent the most compelling opportunities, while SMEs and credit guarantee programs offer niche potential.

As Poland navigates this turbulent era, its ability to transform risk into resilience will define its economic trajectory—and, by extension, the returns for those who invest wisely.