Poland's Economic Crossroads: Growth or Stagnation?

Poland’s economy in mid-2025 is caught between two narratives: one of robust growth fueled by EU funds, resilient domestic demand, and ambitious infrastructure projects, and another of mounting fiscal risks, trade imbalances, and political uncertainty. Investors navigating this landscape must weigh the allure of sectors like IT and energy transition against the headwinds of rising public debt and inflation. With a presidential election on May 2025, the stakes for policy continuity—and investor confidence—are high.

Economic Outlook: Momentum vs. Vulnerabilities

Poland’s economy is projected to grow by 3.5% in 2025, driven by EU-funded infrastructure and strong consumer spending. However, Q2 2025 growth slowed to 0.7%, as a widening trade deficit (€3.1 billion) and weak exports dragged on net exports. The labor market remains a bright spot: unemployment sits at a record low of 4.8%, while wages are surging. A 20% minimum wage hike in 2024 and large public-sector pay raises have pushed real wage growth to historic highs, which, while boosting purchasing power, risks fueling inflation.

Inflation, at 5.0% as of March 2025, shows no immediate sign of subsiding, despite core inflation easing to 3.5%. Persistent wage growth (8.4% year-on-year) and energy price adjustments are key drivers. The National Bank of Poland (NBP) has held its benchmark rate at 5.75% since late 2023 but expects to begin cutting rates later this year, targeting a 4.0% rate by year-end.

The fiscal picture is less rosy. The public debt-to-GDP ratio has surged to 57.7% in 2025, up from 49.6% in 2023, due to rising deficits driven by defense spending (2.7% of GDP) and energy subsidies. The OECD has warned that debt is likely to exceed the constitutional 60% threshold by 2026, risking future fiscal flexibility.

Political Crossroads: Election and Reforms

The May 2025 presidential election is a pivotal moment. Prime Minister Donald Tusk’s Civic Coalition (KO) is pushing a PLN 700 billion (€167 billion) investment plan targeting science, energy, and infrastructure. Key projects include a nuclear power plant in Kashubia, the 1.2 GW Baltic Power offshore wind farm (see image below), and rail/port modernization. Tusk frames 2025 as a “breakthrough year,” echoing Poland’s historical resilience.

Opposition candidates, including Warsaw Mayor Rafał Trzaskowski, critique Tusk’s governance execution and fiscal profligacy. The election outcome could determine the pace of reforms, including judicial depoliticization and anti-corruption measures. New immigration rules, effective May 2025, aim to attract high-skilled workers via a point-based system while curbing irregular migration.

Market Opportunities: IT, Energy, and Infrastructure

• IT Sector: Poland’s IT industry is booming, with revenue reaching €30 billion in 2025, fueled by labor shortages and new visa pathways for non-EU tech professionals.
• Energy Transition: The Baltic Power wind farm (online by 2026) and grid modernization (PLN 65 billion investment) align with EU climate goals.
• Infrastructure: Rail upgrades (€43 billion by 2032) and port expansions (cargo capacity to triple by 2030) are boosting Poland’s role as a logistics hub.

The Warsaw Stock Exchange (WSE) is undergoing reforms to attract listings, including tax incentives and deregulation. However, 5-year government bond yields remain elevated at 5.7%, reflecting fiscal concerns.

Key Risks: Fiscal, Inflation, and Trade

1. Fiscal Sustainability: Debt exceeding 60% of GDP by 2026 could constrain future spending, especially for defense and social programs.
2. Inflation Lingering: Persistent wage growth and supply-side bottlenecks may delay rate cuts, prolonging uncertainty.
3. Trade Deficit: Imports outpacing exports could pressure the zloty, raising import costs for businesses reliant on foreign inputs.

Conclusion: Balancing Growth and Caution

Poland’s economy presents a compelling mix of opportunities and risks. Sectors like IT, energy transition, and infrastructure offer high-growth potential, particularly as EU funds flow and reforms attract talent. However, investors must remain vigilant about fiscal sustainability, zloty volatility, and the election’s impact on policy continuity.

With debt set to breach 60% of GDP by 2026 and inflation stubbornly above the NBP’s target, the government’s ability to balance fiscal discipline with growth ambitions will be critical. Investors should prioritize sectors tied to reform momentum—such as IT and renewables—while monitoring WSE performance, bond yields, and the election’s outcome. Poland’s future hinges on whether its policymakers can steer it past the crossroads toward sustainable growth.