Is Poland’s economy uncompetitive?

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

Every so often, the debate over the competitiveness of the Polish economy resurfaces. Usually, the argument goes that Poland has grown rapidly so far, but that this will not last because the country’s competitiveness is deteriorating. A range of explanations is typically offered: from tax levels and the complexity of the tax system, to low spending on research and development, weak innovation, poor university quality, and the lack of large private companies.

The problem is that even if some of these arguments are valid, the relationship between competitiveness and growth is far more complex.

A dangerous obsession?

Economists have long been divided over what national competitiveness actually means and how much it matters for economic development. The concept itself originates in management theory and was initially applied to companies. Firms compete for customers, and those that do so more successfully – typically by gaining larger market shares – can be regarded as the most competitive. Competitiveness, by definition, is always measured against other players.

In the case of countries, however, competitiveness is a far more complicated matter. There is no single, straightforward metric that can capture a country’s position relative to others. Moreover, countries may be highly competitive in certain areas – for example, maintaining strong wage competitiveness through low labor costs – while being entirely uncompetitive in others, such as technologically advanced industries.

Paul Krugman, the Nobel laureate in economics, once described competitiveness as a “dangerous obsession”. In his view, competition between countries is not a zero-sum game in the way it is for companies. One firm wins the battle for customers while the others lose. International trade, by contrast, generates added value from which many countries can benefit simultaneously. Krugman also argued that an excessive fixation on competitiveness for its own sake may push governments to cut taxes, reduce spending on education or suppress wage growth. Such measures may deliver short-term gains, but over the longer run they weaken a country’s capacity to compete.

There are, however, economists who defend the concept of national competitiveness. Among them is Michael Porter, one of the leading authorities on strategic management, who also developed theories of competition between nations. He argues that countries compete across different industries and on multiple fronts, which is why it makes sense to assess their economic potential.

Which economies are the most competitive?

National competitiveness is measured through several international rankings. One widely cited index of overall competitiveness is the World Competitiveness Ranking, compiled since 1989 by IMD Business School. Until 2020, a similar ranking was also published by the World Economic Forum (its final edition assessed competitiveness in 2019).

The methodology behind the latest World Competitiveness Ranking is based on 262 indicators across four broad categories: economic performance, business efficiency, government efficiency, and infrastructure. Most of them – 170 indicators, to be precise – consist of “hard” statistical data, while the remainder come from surveys conducted by the ranking’s local partners in each country (in Poland, the partner institution is SGH Warsaw School of Economics). These inputs are then used to compile the country rankings. The most competitive economy receives a score of 100 points, while the scores of all other countries are scaled relative to that benchmark.

Poland near the bottom. Does it matter?

In the latest 2025 edition of the ranking, Switzerland was named the world’s most competitive economy. It was followed by Singapore, Hong Kong, Denmark and the United Arab Emirates. The United States ranked 13th (84 points), China 16th (82 points), and Germany 19th (78 points). The highest-ranked country in Central and Eastern Europe was Lithuania, which came in 21st. In total, the ranking covered 69 economies, mainly developed countries and those aspiring to join their ranks.

Poland placed only 52nd, with a score of 54 points. It ranked between the Philippines and Croatia. The results attracted considerable attention in Poland because the country suffered a sharp decline – falling by as many as 11 places. At the same time, it was Poland’s lowest position in the history of the ranking. The country ranked similarly low in 2007, although the index then covered a somewhat smaller number of economies.

Do more competitive economies grow faster?

Can we conclude, then, that Poland sits near the bottom of the developed world in terms of competitiveness? We will return to whether that is even true, but first it is worth asking a more important question: does it actually matter? The answer, it turns out, is not very much.

The chart above compares countries’ scores in the first edition of the ranking in 1997 with changes in per-capita income between 1997 and 2024. The underlying assumption is that if a country is among the most competitive relative to others, it should also achieve better long-term economic results. At the same time, this approach overlooks starting levels of per-capita income, which vary enormously across countries.

The data reveal no meaningful correlation between competitiveness scores and economic growth. Countries considered less competitive in theory were sometimes able to grow both faster and slower than economies ranked more highly. Poland is an excellent example. In 1997, the competitiveness of the Polish economy was rated on a par with South Africa, yet by 2024 Poland’s per-capita income had risen by more than 180%, nearly tripling. In South Africa, by contrast, it increased by just 26% over the same period.

The data also show clearly that initial income levels were not nearly as decisive as might be expected. For example, South Korea was already far wealthier in 1997 than either Brazil or Mexico, yet it expanded at an incomparably faster pace through to 2024. At the same time, it was not rated as significantly more competitive than either of them.

Getting richer doesn't always boost competitiveness either

Nor is there any obvious relationship between growth and changes in competitiveness. The chart above shows the change in countries’ scores in the World Competitiveness Ranking between 1997 and 2024 alongside changes in per-capita income over the same period. Some countries that recorded strong growth are now considered substantially more competitive – Czechia is one example. But there are also cases pointing in the opposite direction, such as Italy. Despite posting the slowest growth of any country in the comparison, Italy was rated as more competitive in 2024 than it had been in 1997.

In general, then, competitiveness rankings do not justify overly far-reaching conclusions. This is also evident when one compares Poland’s position in the ranking with its GDP per capita. Competitiveness appears to have had no clear impact either on the pace of growth or even on the simple fact that growth occurred at all.

Measure what actually matters

Why is this the case? Two explanations can be offered. The first concerns the construction of the ranking itself. It takes into account a vast range of different areas and assigns each of them the same weight. The result is that it compares proverbial apples and oranges. Developing countries such as Indonesia should be assessed using entirely different measures of administrative or business efficiency than developed economies such as the United States, Germany or Poland. Yet according to the latest edition of the ranking, Indonesia’s public administration is substantially more efficient than Poland’s. One may reasonably question whether that is really the case.

The second explanation concerns the broader relationship between competition and growth. Economic growth stems from different sources in different countries. That is why a better approach is to focus on specific factors rather than aggregate rankings. In Poland’s case, for example, one such factor is the quality of human capital. Is it improving? What is being done to improve it? How does Poland compare internationally in this respect? These are more important questions than whether, after aggregating a gazillion different variables, the country manages to outrank the Philippines or Indonesia.

Competitiveness is a complex and contested concept. Economists remain divided over what national competitiveness actually means and whether it is even a useful concept. Paul Krugman famously described it as a “dangerous obsession”, arguing that international trade is not a zero-sum game and that an excessive focus on competitiveness can lead governments into harmful policy decisions.
Competitiveness rankings are poor predictors of economic growth. An analysis of data from the IMD Business School ranking shows no meaningful relationship between competitiveness scores and economic growth rates. Poland is a good example. In 1997, its competitiveness was rated similarly to that of South Africa, yet over the following decades the Polish economy expanded many times faster.
Specific growth drivers matter more than rankings. Aggregate competitiveness rankings suffer from a major flaw: they assign equal weight to vastly different areas and compare economies with entirely different structures. A better approach is to focus on concrete growth factors – such as the quality of human capital – rather than on a country’s aggregate position in a ranking table.