Poland’s economic puzzle: Why we are faring better than others

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

Between 2020 and 2025, the Polish economy expanded at an average annual rate of 2.8%. This was second in the region only to Croatia, and on par with Bulgaria, though the latter is a significantly less developed economy. The fastest growth was recorded by Croatia, a relatively small economy, at 3.5%. Other major regional economies lagged clearly behind Poland. Romania grew at an average annual rate of 1.6%, Slovakia 1.4%, and Hungary 1.2%. In Czechia, growth amounted to just 0.8%.

At the same time, Poland maintained a high budget deficit, averaging 5.1% of GDP over the past six years. However, the deficit level alone does not explain differences in growth rates. Romania and Hungary ran even higher deficits, Slovakia’s was similar, yet all three grew noticeably more slowly than Poland. Meanwhile, Bulgaria and Croatia maintained lower deficits while still achieving rapid growth.

Poland’s economy is also unmatched when compared with Western European peers. Since the pandemic, Poland’s GDP has risen by 17.5%. The second fastest-growing country in the period was Spain, at 10.4%. The entire eurozone expanded by just 6.3% over the same period, with Italy, France, and Germany all growing at slower rates.

Pandemic, war, and growth

Viewed through the lens of the pandemic, war, and an inflation shock, Poland’s rapid growth takes on something of a Faustian character. “I am part of that power which eternally wills evil and eternally works good,” Goethe wrote in Faust. The quote captures the reality of recent years remarkably well.

Events that might have weakened the Polish economy have, in the longer term, served to strengthen it. The pandemic struck societies and economies hard, yet Poland rebounded far faster than other countries, closing developmental gaps. In addition, the country has attracted investment relocated from Asia, driven by concerns over renewed supply chain disruptions. The war in Ukraine triggered a wave of refugees, many of whom joined the labor market. It also loosened fiscal rules, allowing Poland to avoid a sharp reduction in the deficit. Numerous other examples point in the same direction.

What makes the Polish economy exceptional?

What allows the Polish economy to turn negative events to its advantage? Several key factors are at play.

In recent years, economic policy has been crucial. Both the previous and current governments avoided rigid dogmas in this sphere. Public spending was significantly increased where needed – support packages for businesses during lockdowns, defense spending, infrastructure investment – while major cuts were avoided. The budget deficit was treated as a tool to achieve policy goals, rather than an objective in itself. This was complemented by relatively prudent monetary policy.

In a way, Czechia offers the opposite approach. It pursued a conservative economic policy in line with macroeconomic textbooks. The country maintained a deficit lower than Poland’s – by an average of 1.6 percentage points between 2020 and 2025. Interest rate hikes started earlier, and minimum wage increases were very cautious. The results of this policy proved weaker than in Poland: over the past six years, the growth gap reached 2 percentage points. Czech GDP grew by just 0.8% per year on average, compared with 2.8% in Poland.

A second factor is the economy’s high flexibility. Poland has a large domestic market, which makes it less dependent on Western Europe’s economic cycles. Its export sector is highly diversified, so slowdowns in one area are offset by upswings in others. The country’s own currency also plays an important role. The zloty weakened sharply at the start of the war, giving exporters an additional competitive boost.

Soft factors also play a role. Polish society remains “hungry for success,” and past achievements reinforce motivation for further progress. Many sectors are highly competitive – a point frequently highlighted by foreign investors.

And then there’s luck. In recent years, numerous circumstances have aligned favorably for Poland. A case in point is the outbreak of war in Ukraine. Had Russia succeeded in quickly capturing Kyiv and toppling the Ukrainian government, Poland would have faced a very different geopolitical reality. This scenario was by no means implausible. Under such conditions, the country would have had to contend with capital flight, stalled investment, and the need for a far more rapid increase in defense imports.

Looking to the future

Success has many fathers, while failure is an orphan. When the economy grows, it is easy to point to the factors that made it happen. The reverse works similarly – one can list many reasons why Germany has remained mired in stagnation for the past six years.

The key is to maintain a focus on development without falling into excessive self-admiration. In the coming years, shocks will undoubtedly continue. What matters most is to navigate them as smoothly as possible and, whenever feasible, to recognize new opportunities for growth within them.

Between 2020 and 2025, Poland recorded an average annual GDP growth rate of 2.8%, placing it among the top performers in the EU and well above the eurozone average. Cumulative growth since the pandemic reached 17.5%, substantially outpacing the largest Western European economies. This high growth was accompanied by an elevated public finance deficit, which alone does not explain the differences in growth rates compared with other countries in the region.
External shocks, such as the pandemic and the war in Ukraine, did not lead to a lasting weakening of the economy; in some channels, they proved growth-enhancing. Rapid recovery of activity, an inflow of workers from Ukraine, relocation of certain investments, and a flexible approach to fiscal and monetary policy supported both demand and supply. A large domestic market, diversified exports, and a currency that cushioned shocks also played a significant role.
Maintaining a high growth trajectory requires a consistent focus on development. In the coming years, new shocks are inevitable, making the ability to navigate crises as smoothly as possible a critical factor.