Poland’s Economy is in Good Shape

 By Henry Srebrnik, [Saint John, N.B.] Telegraph-Journal

The Polish economy rebounded sharply in 2024. Real GDP is expected to pick up from 0.1 per cent in 2023 to three per cent this year. Private consumption is set to be the main growth driver, supported by rapidly rising wages, increased government spending on support to families, improved consumer sentiment, and receding inflationary pressures.

The news was welcomed by Prime Minister Donald Tusk. “Everyone was surprised by the growth of the Polish economy,” he wrote on X. “We are better than all the big European Union (EU) countries, and we beat the Germans by a long shot.”

Poland is the largest country in eastern Europe and the sixth largest in Europe. For most of eastern Europe, the 1989 fall of Communism and the 2004 accession to the EU came as a long-awaited escape from the decades of economic stagnation.

Joining the EU meant higher standards of living, unprecedented economic growth and life chances. It opened a cashflow for governments, freedom of movement and a vast labour market for workers. And it supercharged Poland’s economy. Its GDP has increased tenfold during that time.

Twenty years ago, Poland’s GDP per capita was 48 per cent of the EU average. Today it stands at 82 per cent. “What has happened in 20 years is a miracle,” remarked Brunon Bartkiewicz, the president for Poland at Dutch bank ING, at the European Economic Congress held in Katowice last May.

The fact that Poland was the only country in Europe not affected by the 2008-2010 recession testifies to its exceptionally healthy development foundations. Despite suffering a setback in 2020 due to the global coronavirus pandemic and another slowdown in 2023, it has done well.

The nation economy has weathered global and regional external shocks thanks to a well-diversified economic structure, integration into regional value chains, a commitment to macroeconomic stability, a sound financial sector, and domestic labour markets that have supported significant wage growth and private consumption, feeding into long-term poverty reduction and median income growth.

Polish products and companies figure strongly in the European production chains, and the priority for the Polish authorities is to provide solid foundations for business development and entrepreneurship. Currently, the main drivers of economic growth are exports and domestic consumption.

A Polish-Finnish firm recently launched pioneering satellites with cloud-penetrating technology. Some Polish start-ups, such as molecular diagnostics firms, are being sold for hundreds of millions of dollars. And the Polish electric car Izera will hit the market in 2026 with plans to produce 60 per cent of components locally.

Historically, Poland has not been a major destination for migrants, but its growing economy has become a significant pull factor. That success creates new responsibilities that those in power did not have to worry about before.

Poland is facing significant threats to its economic prosperity due to severe labour shortages. Some of the reasons include low fertility rates and an aging population. Over the past 30 years, the birth rate decreased by 40 per cent. The country’s statistical agency forecasts that the population will continue to shrink in the coming decades and that by 2060, the number of people of working age will decrease by at least seven million.

Approximately one million foreigners are employed in Poland right now, making up 6.6 per cent of the total workforce. Of these, 68.7 per cent come from Ukraine, followed by 11.4 per cent from Belarus and 2.5 per cent from Georgia.

That is not enough. In the first quarter of this year, Polish employers reported 112,000 job vacancies that could not be filled despite active recruitment efforts. Estimates suggest that Poland's labor shortage could reach up to 1.5 million workers by 2026.

More than 80 per cent of small and medium-sized enterprises report that they are struggling to find enough workers. In some industries, such as construction, manufacturing, transportation, hotel and catering, staffing shortages affect half or more of the companies.

According to a June study by the Polish Economic Institute, half of the companies surveyed said that labour shortages were a significant barrier to their operations. The problem is particularly severe in the construction industry, where nearly seven out of ten businesses are affected. The country also needs about 150,000 IT specialists and the same number of professional drivers.

Polish businesses seeking to employ migrants face many bureaucratic hurdles. Andrii Arkaniuk, employment legalization specialist at Contrain Group, a recruitment agency, reported it can take eight to 10 months for a worker from outside the EU to receive a permit.

So Polish companies will need even more workers going forward as a result of demographic challenges. In Poland, almost two million documents giving foreigners the right to work were issued in 2023 alone. But more needs to be done. Poland has changed from a country of emigration to a country of immigration.

In August, eleven business associations urged the government to adopt a “favourable approach to legal, sustainable labor immigration.” Developing a comprehensive, responsible, and selective migration policy should be one of the government’s most urgent priorities.

This is producing results. To attract more foreign workers and fill labour market gaps, the government has developed its first comprehensive migration strategy, “Regaining Control. Ensuring Security,” which was unveiled Oct. 17. It is expected to simplify the process of hiring foreign citizens.