Why is Poland’s economy booming?

0:00This BBC Podcast is supported by ads outside the UK. Today's episode is sponsored by Smart Travel, a podcast from NerdWallet. You know that one friend who always finds the best travel deals, picks the right credit cards, and somehow ends up in first class for the price of coach. Smart Travel is like that friend, but in podcast form. NerdWallet's travel journalist sought out what's worth paying for, from lounge access to travel advisors to hotel loyalty programs. Make your travel dollars work harder. Follow Smart Travel on your favourite podcast app. Decisions made in Washington can affect your portfolio every day, but what policy changes should investors be watching? Listen to Washington Wise, an original podcast for investors from Charles Schwab to hear the stories making news in Washington right now. Host Mike Townsend, Charles Schwab's managing director for legislative and regulatory affairs, takes a non-partisan look at the stories that matter most to investors,

1:00including policy initiatives for retirement savings, taxes and trade, inflation concerns, the federal reserve, and how regulatory developments can affect companies, sectors, and even the entire market. Mike and his guests offer their perspective on how policy changes could affect what you do with your portfolio. Download the latest episode and follow at Schwab.com slash Washington Wise, or wherever you listen. Welcome to the inquiry from the BBC World Service with me, Tanya Beckett, one question, four expert witnesses, and an answer. In February, the Prime Minister of Poland Donald Tusk posted a video on X, celebrating figures that marked a symbolic moment in the country's membership of the European Union. Can you guess what this is? This is a chart from the latest International Monetary Fund report.

2:02Poland has overtaken Spain in income per capita. We're now in the European economic elites, and we're winning against Spain, famos. Data from the International Monetary Fund showed that the average person in Poland had slightly more spending power than the average person in the EU's fourth largest economy, Spain. The measure is one sign that shows how an economy is performing. In this case, it shows that Poland has been growing more consistently than many of its European neighbours. In September 2025, the country's economy passed the trillion dollar mark, placing it amongst an elite group of just 20 nations worldwide. Poland's journey to this point has been nothing short of remarkable. This week on the inquiry, we're asking why is Poland's economy booming? Part one, Poland's economic miracle. My name is Pablo Bukowski, I'm a lecturer in economics at

3:05the University College London. Our first expert witness takes us back to a four-decade stretch between the mid-1940s to 1989, when Poland was in the grip of communism. The country's commercial activity was entirely directed and controlled by the government. The reach of these so-called central planners extended beyond the level of goods being manufactured and services provided, even to how much people got paid. Because the government decided what

4:07would be the wages of workers, effectively the wage differences were pretty small. So to give an example, for instance, if you're a white colour like manager, engineer in a state-owned company, you'd probably earn maybe 10% to 20% more than the typical blue colour when you were working, right? So that's very, very big what we call the wage compression. And so that was kind of very, very unique, but also quite traditional for the social-extric economy setup. Unsurprisingly, at that time, both wages and unemployment were kept low. But when the iron curtain came down in 1989, it was clear that communism hadn't just been politically unpalatable, but also financially unaffordable. Pavel describes the collapse of this system in 1989 as one of the largest institutional shocks in human history, and it unfolded over a very short period of time, just two or three years. In economic terms, that's almost overnight.

5:11So things didn't go as nice and smooth as we would like them to happen. There was a big recession in that period, early 90s, whereas previously unemployment was officially nonexistent. There is a situation when someone wants to work but cannot find the job because the local company doesn't want to hire that. So it's very new and kind of shocking thing to people. To make matters worse, when government price controls were lifted in 1990, prices shot up, with inflation reaching nearly 600%. Food prices doubled in the space of a single month. Nonetheless, Pavel says people were optimistic, focusing on the future that lay ahead. I remember this time for myself. It was quite exciting. I was a little child, but I could feel there's some excitement. People were really craving for this new system. They were completely fed up with the communist regime, not only because of economy, which was inefficient, but also because of the liberties and political rights. But at the same time, people were scared, it was massive

6:12uncertainty. My parents themselves became unemployed in this time, and no one really knew what to do. How do you start an enterprise? How do you operate in the modern corporation? That's where the questions which everyone asked themselves and not many people had answers to. And there was more to come. Just as Poland was staggering to its feet, the end of the 90s brought a financial crisis in Asia, which then spread to Russia, dealing a fresh blow. Nonetheless, the economy did manage to rebound by late 1999. It was expanding at an annual rate of over 6%. But the real turning point came in 2004 when Poland joined the European Union. Its focus shifted from trading with the former Communist bloc to nations in Europe and in particular Germany. It was the opening up of a whole new market, eager for the low cost and adaptable labour force that Poland had to offer.

7:12What happened is that a lot of companies in the West, the carbon manufacturers Fiat, Volkswagen, Opel, the beard of factories, which gave out of drops. But also importantly, they brought a lot of technology and know how with them. And that kind of helped a lot of local Polish businesses, which not only supplying those big manufacturers with, let's say, seats or cars or car supply parts. But also, they actually learned how to operate in this kind of globalised world and how to produce things effectively. That was one of the big pushes. So I would say globalization in some sense, Poland was one of the biggest winners of globalization happening in the world during the time, and the joint European Union was the big push for globalization for Poland. In effect, these manufacturing partners were able to assist Poland to navigate a market economy, helping the country to thrive. But our first expert witness says there is another vital cornerstone that has been instrumental in Poland's success, one that sets it apart from several other former

8:14communist countries. And that is the quality of its institutions and more particularly its legal system. To me personally, one of the biggest achievements of Poland in that period, and especially after 2004, was almost complete eradication of corruption. Not only high politics, but also in this everyday life. Nowadays, if you want to give a bribe to the doctor, you can end up in a prison in no time. And so that's one of the things I'm particularly proud, I would say, because it's not something which happened equally in other countries. This was certainly reassuring for companies looking to invest in Poland. But what did it mean for the country's sought-after workforce? Time for our second expert witness. Part 2 The Labour Market When the European Union first opened its doors to Poland in 2004, around two in five people below the age of 25 were unable to find a job. So new labour markets in countries such as

9:16the UK, Germany and Sweden led to a rapid increase in Polish people leaving the country to find employment. Between 2004 and 2007, the first three years of Poland's membership, the number of Polish nationals abroad doubled to over two million. Those who left Poland were disproportionately young, educated and skilled. So my name is Iga Magda, I'm a professor at the Warsaw School of Economics and a researcher at the Institute for Research in Warsaw. Part of the reason that so many young people felt compelled to find work elsewhere was that a baby boom in the early 1980s was now entering the workforce and at a time of already high unemployment. Somehow, all those masses of new people in the Labour market managed to get by either by leading the country or by entering the employment in Poland. So after you entry on the one hand, we had lots of people

10:19in my rating and becoming employed in the UK or Ireland or Scandinavia or staying in Poland for the situation was also improving and skiffed people in particular were also in high demand. But when it came to jobs at home, the tide began rapidly to turn. Not only was the economy growing strongly and jobs were becoming more plentiful, the ushering in of EU standards meant that women were finding it easier to enter the workplace. Well, indeed, the past 20 years, more or less, were a period when a lot has been done in social policy, a lot has been done who there's got to childcare, both crashes, so the youngest children and nurseries and for the kindergarten. Partly, finance with the EU money which offered a large support to new places created for childcare. And I think this is one of the factors behind the strong growth in female labour force and female employment rates and the past two decades. As the number of women in

11:20working increased, they started having fewer children. The past 10, 15 years you have seen the decline in the fertility rate. Quite substantial, you know, it's at the level of 1.1, which is really very low, much below the population replacement rate of 2.1. There were new benefits for parents who are returning to the workforce, those who are combining childcare with the work. But neither of those benefits seems to have impacted on the fertility rate. So, two decades on from struggling to have enough jobs to offer, Poland is now hard pressed to find enough workers and the government has been trying a number of measures to get more people onto the payroll. So, there's a talent of integrating several groups into the labour market and this is more difficult and more challenging than simply bringing migrant workers to Poland, it seems so. Because here, if we look at the data, there are 17 million people working in Poland and

12:23we have at least 1.5 people who are migrant workers who are registered with the social security who are paying contributions but are also collecting the rights to pensions in the future. Here, Eager is pointing to a problem familiar to many countries and that is an ageing population and the figures are quite acute. The number of people of working age in Poland is dropping sharply and the workforce is expected to shrink by over 12% in the next decade. Already now we can see that if we look at the group of productive age workers, those age 1564, we can see that the share of older workers in that group is increasing, the share of younger workers is decreasing and this is a challenge for employers on how to organize the workplace, it's also a challenge for many systems of health or social security how to adjust for those changes. But I asked Eager surely with a thriving economy in Poland, are we seeing some Polish people return from other parts of the EU? I know there's some anecdotal data evidence on people

13:30indeed returning. I think there are many reasons for that. We move the poor factor is also the many people come back to care for their parents, so they were living 20 years ago, the parents were still young whereas 20 years later many of them required support and speaking of the social policy before building the system of long-term care is one of the challenges and this is something that the government is indeed working on. So that is also linked to those migrant workers who return to Poland. Ironically part of the answer to Poland's labour supply dilemma has come from one of the country's eastern neighbours and is born of the tragedy of conflict. Hmm. One iced coffee. 99 cents please. For real? No way.

14:37What a deal. Your new morning groove. Ice coffee from McDonald's, any size for just 99 cents till 11 a.m. Pricing participation may vary, cannot be combined with any other offer. You're listening to the inquiry from the BBC World Service. We're about to jump into part 3, but before that I'd like you to know that you can listen to more episodes from the inquiry including how will Spain's migrant amnesty work and how did music mega tours become such a money spinner, just search for the inquiry wherever you get your podcasts. Now back to this edition on Poland's economy. Part 3, friends and neighbours. The Polish and Ukrainian languages are often described as being very similar. There's overlap in vocabulary and also comparable structures when it comes to grammar. The language proximity is probably one of the reasons why there is such

15:42high share of population of Ukrainian refugees in Poland. Easiness to speak the language opens also job opportunities. You are able to find employment in better, hey, jobs. In February 2022, Russia launched a full-scale invasion of Ukraine, leading to many people crossing the border into neighbouring Poland. Catagena Gentajeska is chief macro analyst at Austria's Esther Group Research, the economic research arm of Esther Group Bank, one of the region's major banking groups. After 2022, the growth of Ukrainian refugees was exponential. Since then around 1 million of Ukrainian refugees entered Poland, that represents a roughly 3% of population. So we consider that it has been quite substantial change economically and also socially. When the war in Ukraine started, Polish people were very much welcoming. I think that the

16:49seriousness of the situation stroke anyone and the mood was to help as much as possible. So the Ukrainian refugees was welcomed. Obviously they were also welcomed on the job market to find the employment. And all of this became more evident as Ukrainians integrated further, migrating deeper into the country. When the Ukrainian migrants and refugees entered Poland and started to assimilate, we actually have seen an improvement in matching on the labour market. In other words, more jobs were filled in. And these were jobs that were lower paid. So when we think about the Ukrainian refugees' impact on the labour market, they actually improved functioning of the labour market because they filled in those jobs that native population was not interested anymore. When you open the border and you allow such an inflow of people,

17:56they will concentrate closer to the border. But after a while, when Ukrainian refugees will start to look for the opportunities for the jobs, they will have a time to move further. Obviously the spread will be more around the country. Definitely a lot of Ukrainian refugees are present now in war, so where the opportunities for the work are most likely the best. Estimates show that the addition of Ukrainians to Poland's workforce due to its war with Russia added at least half a percent to the nation's wealth. The employment growth that was driven by the inflow of Ukraine migrants and refugees was translated directly in better economic performance of Polish economy. First point is that it comes through the higher employment, so the growth of employment improves the GDP. We also have to remember that with time these people settle, they start to increase

19:02their private consumption, they spend not only on day-to-day goods, but also on durable goods. And that's another positive contribution to economic development in Poland. In contrast then to the struggles experienced by many countries in the last few years, Poland appears to have thrived, time for our final expert witness. Part 4. Where next? All the economy is surprising on the upside in the last two decades, but also in the last two years. Poland has experienced consistent growth now for over 28 years, the longest period of uninterrupted economic expansion in European history. Part of that can be put down to support from the European Union. Poland is consistently the bloc's largest beneficiary, receiving billions in funding for

20:03agriculture, transport, green energy and defence. But there are multiple other factors underpinning its economic expansion. Rafal Beneki is chief economist in ING-Bant Slaski in Poland. So last 20 years, it was growing very quickly, outperforming rest of the region, in terms of real nominal GDP, but also GDP per capita. So now it's placed at the level of 80% of average EU GDP per capita, but also last two years were very surprising. Economy is growing, outperforming, even with sluggish manufacturing. Manufacturing was the growth engine of Germany, central Europe and Poland as well. So rest of the region and Germany is in stagnation, Poland is delivering over 3% growth. So that's the source of the surprise in the last two years. There are many reasons for Poland's ongoing success, but one of them is its variety of business activities, which insulates it from economic downturns. Poland is the multi sector economy,

21:09and this is really paying off in many very critical moments. So after global financial crisis, or during COVID and in other difficult moments, the economy is performing because we have a lot of sectors, and sometimes the driver is the production of the consumer durable goods. In other moments, the driver of the growth was the automotive sector. So this diversify structure is really immune economy to slow down, which we can see in the neighboring economies. Our fourth expert witness says it's also well prepared for the technological challenges of the future. Poland has also quite well educated and skilled IT engineers. So if you look at the AI business, Polish companies' investment in the AI business are at the level of 30 globally, but Polish talents' participation in the AI revolution is top 5. So IT development of a software at some point AI, this is also quite promising because the

22:15country has resources to grow in that area. When it comes to research and development in other areas, our fourth expert witness says Poland has under-invested. Here, curiously, Russia's war with Ukraine has also played a role. Poland has pushed defense spending to unprecedented levels rising from just over 4% of GDP to nearly 5. This in turn has led to more money for scientific advancement than the country has seen for some two decades. We hope that those kind of spending on defense will spread across the private business and economy and also improve this important weakness of the Polish economy, which are innovations and R&D investment. Going forward, there's also the question as to what will happen when the Ukraine conflict comes to an end. I think everybody wants Ukraine as to stay and that's the intention of the government and also

23:16Polish citizens. They fill the gap on the labour market. Of course, the question is what they will do after and the ceasefire when war will end. A lot of Ukrainians probably will come to Poland when the war will end. So we hope the net balance of migration will stay flat, low or zero, but not negative. Otherwise, if one with the Ukrainians would live, that will be quite a negative shock for the Polish economy because they are feeding the gap on the Polish labour market and they integrate very quickly, so contributing to Polish growth. Now we've returned to our question. Why is Poland's economy booming? The country has built on its wealth progressively over a period of three decades in the face of multiple challenges, the switch from communism, hyperinflation and in more recent years conflict across its border to the east. Poland has been able to draw heavily on its adaptable

24:23workforce and trust in its post cold war institutions which have helped to detract both private investment and EU funding. The question now is if it can preserve its edge when it comes to labour and part of that depends on what happens when the Ukraine war comes to an end. You've been listening to the inquiry from the BBC World Service. You can listen to more editions of our podcast including Howell Spain's migrant amnesty work and is the 2026 World Cup an own goal. Just search for the inquiry wherever you get your podcasts and while you're there. Why not also subscribe to hear all future editions of the inquiry podcast. This edition of the inquiry was presented by me, Tanya Beckett, the producer was Matt Tulson, the researcher Yvi Yabsli, the editor Tom Bigwood and the technical producer Cameron Ward.

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