The World Bank made economic predictions about Poland this July that few skeptics would have thought possible even ten years ago. 

According to the World Bank, Poland’s GDP-adjusted income is poised to surpass that of Japan. The IMF echoed this sentiment in April 2024, noting that Poland is rapidly closing the gap with Japan in terms of per capita income (PPP). For many, particularly those who remember Poland’s days behind the “Iron Curtain,” this development might seem astonishing. However, the data on modern Poland tells a compelling story. A growing number of analysts are recognizing Poland’s rising potential, perhaps for the first time, as they acknowledge that the stifling era of the Polish People’s Republic (PRL) is firmly in the past.

On Stage

On May 7th of this year, Ursula von der Leyen appeared at the Katowice International Conference Center and proclaimed, “Today, I can say it: Poland is back.” This is the same official who, in 2022, faced censure because of her support for the disbursement of RFF funds, to the Polish government. At the time, the previous (PIS) government refused to recognize several ECJ judgements on the freedom of press and the independence of judiciary. In other words, von der Leyen sent funds to a government that was then very unpopular within the EU. 

She continued to disperse funds to Poland, including February of this year, with €137 billion for Poland’s National Reconstruction Plan (KPO). However, these payments came with a few caveats: Poland must reform its judiciary, allow for more freedom for the media, and reform and maintain the rule of law. This time, the current (Civic Coalition-led) government was ready to comply. 

As Ursula von der Leyen stood on the stage in Katowice for the 20th anniversary of Poland’s EU accession, she wasn’t just recounting history—she was affirming her faith in Poland’s potential. Twenty years ago, Poland’s GDP per capita stood at just 48% of the EU average (at PPP); by 2024, it had climbed to 82%, matching that of Portugal. Unemployment, once a daunting 20%, has now plummeted to 2.6% by Eurostat metrics. While millions of Poles once emigrated, with estimates reaching 2.5 million, the tide has turned since 2018. 

Investment is flowing in, people are returning, and as Poland’s fortunes rise, Prime Minister Donald Tusk could proudly state, “Dear Ursula, your presence here is a powerful signal. Poland has indeed become a leader in Europe.” 

Donald Tusk has never been one to hold back when it comes to boasting about Poland. Back in 2008, during his first term as Prime Minister, he boldly predicted that Poland would be "richer" than Britain by 2020. Fast forward to 2024, and Tusk is making the same claim, now extending the timeline to 2030. Citing World Bank forecasts that predict higher income in Poland compared to the UK by 2025, he confidently asserted that Poles will soon outpace Britons. And with a subtle twist of the dagger, he added, "it’s better to be in the EU."

He’s not wrong about it being better in the EU. Poland’s history with its neighbors has been fraught with conflict, to put it mildly, so it seems only fair that it now benefits from its strategic location. Germany has transformed from an erstwhile invader to a key trading partner. While Russia and Belarus remain threats, Warsaw secured its defense by joining NATO on March 12, 1999—a move deeply ironic given NATO’s origins in countering the Russian-led Warsaw Pact. With the security of NATO and the economic opportunities of EU membership, Poland finally had the stability needed to focus on economic growth.

Poland’s transition to democracy in 1989, and its gradual embrace of a more open, free market economy, was a slow process. It took a few decades, but eventually, the world began to recognize Poland’s potential. By retaining the złoty as its currency, Poland kept labor costs relatively low, making the country an attractive destination for foreign direct investment (FDI).

Investments poured in from countries like the US, Germany, and the UK. With a highly educated, skilled, and mobile workforce, Poland also attracted interest from further afield, including South Korea and Japan. 

Yet, much work remains to be done, particularly in expanding Poland’s infrastructure. Significant improvements are needed in the road network, and the country has only begun to move away from coal as a primary energy source.

PPP is another thing altogether

What Donald Tusk means is that Poles will be wealthier than Brits is in terms of Purchasing Power Parity (PPP), rather than GDP. PPP accounts for the relative cost of living and currency flow between countries, reflecting Poland's lower cost of living compared to the UK. According to the World Bank, Poland’s GDP per capita (PPP) is around USD $49,464, while the UK’s is approximately USD $58,906. Japan’s PPP GDP per capita is USD $50,206. This indicates that Poland is rapidly closing the gap and is on track to surpass Japan, highlighting its swift economic progress.

When looking at GDP alone, the comparison shifts. Poland’s GDP stands at $750 billion, while the UK’s is $3.2 trillion, making the UK’s GDP 4.27 times larger than Poland’s. Japan’s GDP, at $4.7 trillion, is 6.3 times larger than Poland’s. Thus, while the prediction that Poles will be wealthier is optimistic, it does not imply that Poland will achieve GDP parity with the UK or Japan. Unless Poland experiences unprecedented growth over the next six years, this scenario is as unlikely as Russia suddenly behaving benevolently—essentially, it’s not going to happen.

But how exactly is PPP measured? 

In economic theory, Purchasing Power Parity (PPP) adjusts GDP to reflect the relative cost of living and inflation rates between countries. It measures how much a standard set of goods and services costs in different currencies, like the Polish złoty or the Japanese yen, providing a view of economic productivity relative to living costs.

For Poland, the złoty makes products and labor cheaper, affecting economic productivity assessments. Despite Poland’s 8.5% inflation rate, higher than the UK’s 6.5%, and a surge in real estate prices in Poland, which outpaced salaries, the PPP adjustment helps gauge relative costs. 

However, PPP does not account for income inequality, where Poland’s Gini coefficient of 30.5 is lower compared to the UK’s 35.6, Japan’s 32.1, not to mention the US’s 41.4, indicating relatively better income distribution in Poland.

Looming shadows

Despite an optimistic outlook, Poland faces significant demographic and economic challenges. The country’s population is declining due to low birth rates, with a median age of 42 years and a birth rate of just 1.4 children per woman, below the replacement level. This demographic shift, combined with minimal immigration, could lead to a future with fewer Poles.

Economically, Poland is feeling the impact of Germany's economic stagnation. Germany’s GDP shrank by 0.1% in Q2 2024, with forecasts for 2025 reduced to a 1.1% growth rate. This stagnation has affected Polish exports to Germany, causing issues in Poland’s trade balance.

Foreign direct investment (FDI) in Europe has declined by 4% year-over-year, with Poland’s FDIs down by 3%. However, the number of jobs created from these investments increased by 21% year-over-year.

The National Bank of Poland reported a positive current account balance of EUR 558 million in June. Exports dropped by 9.1% in PLN terms due to reduced demand in markets like Germany. Imports also fell by 0.2% year-over-year, aligned with forecasts. The strengthening złoty, appreciating by 3.2% against the euro, has impacted export competitiveness. Despite these issues, Poland’s strong external balance and expected inflow of funds from the National Reconstruction Plan and the 2021-2027 budget support a neutral outlook for the złoty.

What does it mean? 

In general, emerging markets like Poland are growing faster than developed markets such as Germany, Japan, and the UK. Many major economies are teetering on the edge of recession due to the adverse effects of sanctions against Russia, which are impacting Europe. 

Despite this, Poland remains relatively steady, bolstered by EU funding, strategic alliances, its advantageous geographic location, a favorable business environment, and a skilled workforce. However, within Poland, people continue to face significant challenges with the rising costs of electricity, housing, food, and transportation. So, while the economic indicators might look positive on paper, the reality for many may not be as promising as for the economy as a whole.