Crisis-proof? Poland’s uncommon macroeconomic resilience

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

How resilient has Poland been to macroeconomic crises in its postwar history? Three distinct periods stand out. The first covers the communist era and the debt crisis. This was followed by a relatively rapid recovery, especially compared with other countries in the Eastern Bloc, after the systemic transformation. Over the past 30 years, Poland has ranked among the world’s most crisis-resilient economies.

This analysis draws on annual data from the Penn World Table 11.0.

The Debt Crisis

Data for Poland are available from 1970. The country’s largest and longest crisis began at the end of that decade, with recovery only starting in 1985. At the trough in 1982, GDP per capita was more than 18 percent below its pre-crisis level.

The decline in living standards was linked to mounting debt problems, stemming from the rapid growth of foreign debt in the 1970s under Edward Gierek’s government. Domestic factors were compounded by severe international turbulence: the second oil shock and a significant hike in interest rates by then-Federal Reserve Chair Paul Volcker. Rising debt servicing costs and a stronger dollar left Poland practically insolvent by 1981. Similar crises soon hit Latin American countries – especially Mexico – ushering in the so-called “lost decade” (La Década Perdida).

Explainer

Edward Gierek served as First Secretary of the Polish United Workers’ Party (effectively Poland's leader) from 1970 to 1980. He came to power after workers' protests in December 1970 forced out his predecessor Władysław Gomułka.

His tenure is remembered as a period of contradiction. Mr. Gierek presented himself as a modernizer who would improve living standards and make Poland a prosperous, modern socialist state. Having spent years working in Belgian and French coal mines before returning to Poland, he had exposure to Western standards of living and attempted to replicate some of that prosperity.

He embarked on an ambitious program of economic development funded by massive Western loans. Poland imported technology, built new factories and housing estates (the concrete blocks that still dominate many Polish cityscapes), and consumer goods became more available. For ordinary Poles, the early 1970s brought real improvements – better access to cars, televisions, and other consumer products. There was a sense of optimism that Poland was catching up to the West.

The strategy was fundamentally flawed. Poland borrowed heavily but the investments often didn’t generate the productivity or exports needed to repay the debt. By the late 1970s, the economy was in crisis. Food shortages returned, prices rose, and the debt burden became unsustainable. Mr. Gierek’s attempt to raise food prices in 1976 sparked worker protests, and another attempt in 1980 triggered the strikes that gave birth to Solidarity.

Mr.Gierek was removed from power in September 1980 as Solidarity gained momentum. He’s remembered as a leader who promised prosperity but left Poland with crippling debt.

Poland’s rapid post-transition recovery

The next economic shock was the systemic transformation. After the fall of communism, the transition to a market economy proceeded at varying speeds across Eastern Bloc countries, producing markedly different macroeconomic outcomes. Poland belonged to the group of countries that – despite a deep initial decline – returned to a growth path relatively quickly, clearly outpacing much of the region.

The chart above illustrates how many years it took for GDP per capita to recover in selected post-transition countries. According to Penn World Table data, Poland was the fastest to return to its pre-crisis level – taking just four years. Recovery took only slightly longer in Hungary (five years). Czechia, Slovakia, Russia, Romania, and Bulgaria each required over a decade to rebuild GDP per capita.

Ukraine: Crisis after crisis

The process took the longest in Ukraine – an astonishing 29 years. In addition to the peculiarities of its economic model and institutional weaknesses, the country faced successive macroeconomic shocks.

First, the negative effects of Russia’s 1998 crisis spilled over into Ukraine, whose economy remained heavily integrated with its eastern neighbor. This was followed by the global financial crisis of 2008–2009, which interrupted a decade of relatively solid growth driven largely by commodity exports.

By 2013, Ukraine’s GDP per capita was still only 1 percent below its 1990 level. However, the following year saw the annexation of Crimea, which triggered a currency collapse and a banking crisis. Ukraine did not surpass its post-transition GDP per capita level until 2019 – just one year before the COVID-19 pandemic and three years before Russia’s full-scale invasion.

Caveat: Poland’s GDP level in 1990

When analyzing the length of recovery, a crucial factor remains the level of GDP per capita at the pre-transition peak. The first year for which the Penn World Table provides comparable GDP estimates for all the countries analyzed is 1990. In that year, Poland’s GDP per capita was among the lowest in the set – higher only than Romania’s. It amounted to roughly 80 percent of Ukraine’s level, 70 percent of Bulgaria’s, 60 percent of Russia’s, and just 40 percent of Czechia. This is illustrated in the chart below.

The higher the GDP per capita in 1990, the longer, in theory, the post-transition recovery could take. There is also an inherent difficulty in comparing these data, stemming from the need to translate former communist national accounts into contemporary statistical standards. For this reason, such comparisons should be approached with a degree of caution.

Poland’s extraordinary resilience since 1995

From 1995 onward, data compiled according to modern national accounting standards – considered far more reliable – become available. During this period, Poland has ranked among the world’s most stable economies, both in terms of the frequency of crises and their severity.

Between 1995 and 2023, Poland’s GDP per capita fell on only three occasions: 2003, 2013, and 2020. By comparison, the average for other countries is 7.7 years with GDP declines, and the median is seven. In other words, half of all countries experienced fewer than seven years of per capita GDP decline, while the other half experienced more. Crucially, since the mid-1990s, Poland has never recorded a drop in GDP per capita exceeding 3 percent. Globally, the average country experienced four such declines over the same period, with a median of three.

These differences become even more striking when considering the depth of declines. According to Penn World Table data, Poland’s largest single-year drop in GDP per capita during this period was just 0.7 percent (between 2012 and 2013). By contrast, the global median for the deepest one-year decline was 9.3 percent, with a mean exceeding 13 percent.

The map below shows these values alongside the year in which the decline occurred in each country. The only country in the entire sample that did not record a single drop in GDP per capita during this period was China. Its lowest per capita GDP growth occurred in 2020, at 2.2 percent. A caveat remains: as noted earlier, Penn World Table relies here on official Chinese government data.

Summary

The table below compiles the statistics discussed above for Poland and selected countries worldwide. Poland’s economic growth since 1995 has been marked by exceptional stability – crises have been relatively rare and shallow. Only Vietnam (aside from the aforementioned China) recorded an even more stable growth trajectory during this period. Yet Poland stands out positively compared with developed countries such as the United States, Germany, and Czechia. At the opposite end of the spectrum are countries like Turkey and Argentina. During the period studied, Argentina experienced a decline in GDP per capita in twelve separate years, seven of which saw drops exceeding 3 percent.

The table also includes information on the cumulative depth of declines during each crisis episode. In Poland – since per capita GDP never fell in two consecutive years – this measure is identical to the deepest single-year drop (0.7 percent). Globally, the median depth of the largest crisis episode is 14 percent, with a mean of 20 percent. In the United States, the largest cumulative decline was 5 percent (reaching its trough in 2009), while in Argentina it was 25 percent during the 1997–2002 crisis.

Poland experienced one of the deepest crises in its pre-transition history, but it was exceptional in nature. The downturn at the turn of the 1970s and 1980s – driven by excessive debt, external shocks, and a sudden tightening of global financial conditions – led to a drop in GDP per capita of more than 18 percent and years of stagnation.
The systemic transformation was relatively short and shallow for Poland compared with the region, despite a low starting point. Data show that Poland was the fastest in the region to return to its pre-transition GDP per capita level – taking just four years. In most other Eastern Bloc countries (including Czechia, Romania, and Russia), this process took more than a decade. However, it should be noted that in 1990 Poland was among the poorest countries in the comparative group, which may have statistically facilitated a faster recovery.