The year 2025 in the Polish economy almost resembled an economic fairy tale. GDP growth of 3.6%.private consumption driven by real incomes, investments at the level of 7%, decreasing inflation and easing monetary policy – all this gave the image of a stable economy, rapidly converging to the EU average.
Another year even betteralmost double-digit investment spending, still solid consumption and further falling interest rates, which could reach 3.25% and maybe even 3%. at the end of the year. I myself write and talk about the golden-haired economy, i.e. neither too hot nor too cold, but it cannot be denied that this looks like the last good year for Poland's growth. If we look closely, there are shadows that may interrupt the story.
Structural risks instead of cyclical problems
Public finances remain the biggest constraint. The public finance sector deficit will remain high and its reduction is politically difficult. This limits the room for maneuver in the event of shocks and increases Poland's sensitivity to market sentiment and the cost of debt servicing. I assume that the government presented a worse path of deficit and debt growth in the “Debt Management Strategy”, but this does not mean that if our deficit shrinks by 0.5 percentage points, it means that some great reform has taken place, but that we are managing expectations well. A response to the crisis similar to that during Covid-19 would not be possible to replicate today.
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At the same time, there is a risk of “flattening” the growth model. Poland has still not reached the average labor productivity of OECD countries, the growth potential is significant, but realized slowly. Rapid increase in wages without a parallel increase in productivity, mismatch of competences with the needs of the economy and slow pace of innovation in the SME sector may limit further convergence in 2026. This means that Poles will be more expensive than Indians, who can work in software houses that have sprung up in recent years and may soon emigrate to distant India.
Technology could be a remedy for these limitations. Eurostat reports indicate that approximately several percent of Polish companies already declare the use of AI, mainly in data analysis and process automation. The real percentage is probably higher, but this means that most of the economy has not yet found this growth engine, which limits the potential to increase productivity. The same can be seen in the data on the use of robots in industrial production.
EU funds – the challenge of efficiency
The year 2026 is a critical moment for the KPO and the 2021–2027 perspective. The risk is not only whether the funds will be spent, but whether they will be used effectively and sustainably to improve the production potential and innovativeness of the economy. If this does not happen, investments, although nominally high, may not translate into real productivity growth.
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The experience of Western European countries is poor in this area. NextGen funds have so far not been successful in spurring productivity growth. Looking at the race against time in Poland, we can also see only point changes that may not affect the structure of our economy apart from additional private consumption.
Geopolitics and internal politics
Geopolitical risk cannot be ignored. Attempts to end the war in Ukraine carry the risk of a “bad peace” that freezes the conflict without solving its sources. Such a scenario increases investment uncertainty and perpetuates geopolitical pressure on Central and Eastern Europe, including Poland. The greatest concern is the risk that, as part of the peace agreement, the US will commit to limiting the security of NATO's Eastern Flank, which would mean the emergence of second-class members of the Pact.
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Similarly, the polarization of the political scene and difficulties in implementing reforms, from public finances to health care, create an environment of regulatory uncertainty. For investors, this means caution, and for entrepreneurs, it means difficulties in strategic planning, because it is not known what government plans will actually come into force. Which new sectors will pay new taxes while looking for ways to save Poland's fiscal situation?
There is another shadow on the horizon: the poor condition of the German economy and stagnant demand in the euro zone. Germany, as Poland's largest trading partner, may limit exports and industrial investments, slowing down the traditional growth impulse for Polish industry. We've been dealing with this for five years now, but that means we're permanently losing some of our growth potential.
The fairy tale continues, but it may end
According to forecasts, the Polish economy in 2025–2027 resembles a success story: high investments, rising wages and stable consumption. However, the foundations: productivity, effective absorption of EU funds and fiscal and political stability remain the sources of a potential economic slowdownwhich may follow the summit next year.
If these challenges are not resolved, Poland's growth story could quickly turn into a tale of difficulties: the depopulating country would struggle with an outflow of foreign investment, low productivity and a debt crisis that would require far-reaching reforms that could temporarily hamper economic dynamics through tightening fiscal policy.
Author: Piotr Arak, chief economist at VeloBank
