Polska Gospodarka Przyśpiesza: Assessing Poland's GDP Growth Amid Rising Interest Rates and EU-Driven Resilience

Poland's economy has long been a standout in Central Europe, and 2025 is no exception. Despite global headwinds and domestic challenges, the country's GDP growth accelerated to 3.4% year-on-year in Q2 2025, driven by robust private consumption and a surge in public investment. Yet, as interest rates remain elevated and private investment slows, investors must ask: Is this growth sustainable? The answer lies in Poland's strategic use of EU funding, its resilient labor market, and the interplay between fiscal policy and monetary tightening.

The Engine of Growth: EU Funds and Public Investment

Poland's economic resilience in 2025 is underpinned by its aggressive absorption of EU funds. With €140 billion allocated for 2025 alone, the country is leveraging these resources to modernize infrastructure, expand renewable energy, and bolster defense capabilities. Public investment, particularly in EU-backed projects, has offset a decline in private sector activity. For instance, the construction of Poland's first nuclear reactors at Zarnowiec and the expansion of offshore wind farms in the Baltic Sea are not just strategic energy moves but also major contributors to GDP.

The National Bank of Poland (NBP) acknowledges that these projects are critical for sustaining growth. While private investment dipped by 1% in Q2 2025, public investment surged, supported by EU grants and loans. This dynamic is expected to continue into 2026, with the Recovery and Resilience Facility (RRF) entering its final phase.

Rising Interest Rates: A Double-Edged Sword

The NBP has maintained a hawkish stance, keeping the benchmark interest rate at 5.75% since October 2023. This policy, aimed at curbing inflation (which peaked at 4.7% in December 2024), has increased borrowing costs for businesses and households. However, the high rate has also strengthened the zloty, stabilizing import prices and providing some relief to inflationary pressures.

For investors, the challenge lies in balancing the risks of high debt servicing costs with the opportunities in sectors insulated from interest rate volatility. Public infrastructure and defense projects, for example, are largely funded by EU grants, reducing reliance on domestic credit. Meanwhile, companies in energy transition and green technology are benefiting from long-term contracts and subsidies, making them less sensitive to rate hikes.

Sectors and Companies to Watch

1. Energy Transition and Nuclear Power:
2. Polska Grupa Energetyczna (PGE): Leading Poland's shift to renewable energy, PGE is expanding wind and nuclear projects, including the Zarnowiec reactors. With €1.4 billion in EU funding, its long-term margins are secure.

3. Energa: A regional grid operator modernizing infrastructure to integrate renewables, Energa is positioned to benefit from EU-backed grid upgrades.

4. Defense Manufacturing:

5. Zachodniokrzewski Okręg Przemysłowy (ZOP): Securing contracts for hydrogen-ready power plants and military equipment, ZOP is capitalizing on Poland's 4.7% of GDP defense budget.

6. ArcelorMittal Poland: Investing €12.3 million in hydrogen-powered furnaces, the company is aligning with EU green steel initiatives.

7. Infrastructure and Transport:

8. PKP Energetyka: Benefiting from rail electrification projects, this firm is a key player in EU-funded transport upgrades.
9. Polskie Sieci Elektroenergetyczne (PSE): Investing 65 billion zloty in grid modernization, PSE is critical to Poland's energy transition.

Navigating the Risks: Debt and Fiscal Sustainability

Poland's public debt-to-GDP ratio is projected to rise to 59.6% by 2026, driven by high deficits and EU loan absorption. While this is concerning, the country's fiscal discipline—evidenced by its efficient use of EU funds—mitigates some risks. The government's focus on defense and infrastructure, rather than populist spending, ensures that debt is directed toward growth-enhancing projects.

For investors, the key is to avoid sectors with high leverage and instead focus on companies with EU-backed revenue streams. The Polish stock market, currently trading at a 15% discount to the STOXX Europe 600, offers compelling value in undervalued names like PKN Orlen (biofuels and hydrogen) and iShares MSCI Poland Capped ETF (EUP) for broad exposure.

Conclusion: A Strategic Bet on Resilience

Poland's GDP growth in 2025 is not a flash in the pan. The country's ability to absorb EU funds, its strategic focus on energy security, and its resilient labor market (with unemployment at 2.8%) create a solid foundation for sustained expansion. While rising interest rates pose challenges, the emphasis on public investment and green technology ensures that growth is both resilient and future-proof.

For investors, the message is clear: Poland's economy is accelerating, and those who act now—before the market fully prices in its potential—stand to benefit from a unique confluence of policy, capital, and geopolitical momentum.