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Poland – The Tiger Economy of Europe
- In today’s Profit Journal:
- Reforms of the 1990s
- Poland in the European Union
- Innovative and stable banking system
- Own currency
Until 1989, Poland operated under a centrally planned economy in which the state set prices and decided what goods were produced. Poland’s main ally at the time was the USSR. Since then, a great deal has changed, and over more than three decades Poland has become one of the fastest-growing economies in the world, second mainly to China in terms of growth dynamics.
Reforms of the 1990s
At the end of the 1980s, in a very difficult socio-economic situation, and alongside a systemic political transformation, Poland introduced deep economic reforms. On January 1, 1990, the Balcerowicz Plan was implemented, developed among others with the participation of Jeffrey Sachs. Its main assumptions included price liberalisation, tight monetary policy, and the privatisation of state-owned enterprises, which was the most controversial element.
The privatisation process is still debated in Poland today, as some industrial plants were closed or sold at prices considered too low. At the same time, it contributed to the modernisation of many sectors of the economy.
An important outcome of these reforms was the rise of entrepreneurship. Citizens were allowed to freely start businesses and invest their own capital. This environment led to the creation of companies such as CCC. Dariusz Miłek began his business activity at local markets in the early 1990s, taking advantage of growing consumer demand.
A similar path was taken by CD Projekt, today known as the producer of the game “The Witcher 3: Wild Hunt”. The company originally started as a distributor of video games that were not widely available in Poland at the time.
Poland in the European Union
Another key factor behind Poland’s development was membership in the European Union. Integration with the European market accelerated economic growth.
Polish companies gained access to foreign markets with fewer barriers, which significantly increased exports. At the same time, access to capital became easier, and foreign companies began investing in Poland by building factories and service centres.
Another important effect of EU membership is European funds. Poland is one of the largest beneficiaries of these resources. Since joining the EU, Poland has received over 270 billion euros, while contributing around 100 billion euros in membership fees.
Poland as the “assembly plant of Europe”
In the 1990s and 2000s, Poland had a significant competitive advantage in the form of low labour costs.
Poland was a unique case on a global scale due to a very favourable balance between labour costs and employee skills. In the 1990s, there was strong social and economic pressure to catch up with Western countries, which translated into high motivation, rapid skill development, and a strong work ethic.
For foreign investors, this was a unique combination of relatively low labour costs and high motivation and willingness to learn. This significantly increased Poland’s attractiveness as an investment location and attracted foreign capital.
For these reasons, companies such as Toyota began producing gearboxes and engines in Poland in 2002. The Stellantis group also developed its investments there, including in Tychy and Bielsko-Biała.
Innovative and stable banking system
Poland’s financial system differs from the model dominant in Western Europe and the United States. In Poland, banks play a central role in financing the economy rather than capital markets.
This has both advantages and disadvantages. One of the main advantages is greater stability of financing during economic downturns. Credit activity is more stable, although less dynamic than in capital-market-based systems.
The Polish banking sector is also one of the most innovative in Europe. mBank was one of the first banks to introduce fully online customer service, which significantly reduced sector costs.
Another example of innovation is the BLIK system, built as a shared infrastructure of the largest banks. It enables mobile transfers, online and in-store payments, as well as ATM withdrawals without using a card.
Own currency
As a member of the European Union, Poland is obliged to adopt the euro in the future. However, maintaining its own currency has proven to be a beneficial solution in recent years.
A national currency acts as a buffer during economic crises. Its depreciation can improve export competitiveness and help support employment. Poland went through the 2008 to 2009 crisis relatively smoothly, partly because the weakening of the złoty supported exporters and softened the effects of the slowdown. Countries in the eurozone do not have the ability to adjust their own currency exchange rates.
Additionally, Poland borrows in its own currency, which increases control over fiscal policy and provides greater security compared to borrowing in a foreign currency.
Challenges
Despite economic success over the past 30 years, some of the drivers of growth are gradually weakening. Poland faces several key challenges.
High debt
Over the past decade, Poland has significantly increased public spending, including social expenditure, which has contributed to a rise in the public finance sector deficit to around 7.3 percent of GDP.
Demographics
In 2025, 238.3 thousand children were born, which is a decline of more than 5 percent compared to 2024. The fertility rate is around 1.1 children per woman. If this trend continues, it may lead to serious challenges for the pension system and healthcare system over the next 20 to 30 years.
Investment
Long term economic growth requires investment, which has been relatively low in Poland for some time. Current investment levels are around 17 percent of GDP, which is below the EU average.
The main issue is the low level of private investment. In the long run, this may significantly slow down the modernisation of the economy.
Graph 1 – GDP per capita, prepared based on Word Bank Group data
Author: Filip Timofiejczuk
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