Large cities with county status show the greatest optimism regarding future development prospects, while the lowest level of confidence is recorded in rural municipalities. Overall, the authors of the Local Government Development Activity Index (WARS)—a research initiative conducted by scholars from the Warsaw School of Economics (SGH)—describe the current sentiment among local governments as moderately optimistic. They emphasize that entities with stronger economic bases have easier access to external funding sources and greater capacity to carry out investments, while smaller units require significantly more support.
The Local Government Development Activity Index (WARS) is a research initiative developed by the Warsaw School of Economics aimed at forecasting the development potential of local government units (LGUs) based on the opinions of their managers. The survey examines local governments’ development processes in areas such as revenue generation capacity, the ability to finance investments, the scale of public services provided, employment levels, and changes in budget debt.
“The results are balanced when we look at the index for all local government units combined. We can say that we are approaching the initial value recorded during the first measurement. The result is slightly better than six months ago, but it still reflects very moderately optimistic sentiment,” said Dr. hab. Jacek Sierak, Professor at SGH, from the Department of Local Government Economics and Finance, speaking to the Newseria news agency.
The WARS index has been published every six months since spring 2023, when it first reached a level of 0.187. In the most recent edition—autumn 2025—the index stood at 0.188, which represents an improvement compared with spring 2025 (0.170).
“There is very significant variation between different types of local government units. The most optimistic outlook is seen in large cities, followed by regions (voivodeships), while clearly weaker sentiment is observed in rural municipalities and small towns,” explained Professor Sierak.
The WARS index for rural municipalities reached 0.110, indicating relatively cautious expectations about future development. Slightly more optimistic assessments were recorded among counties (0.128) and urban-rural municipalities (0.202). At the higher end of the scale were voivodeships (0.264) and urban municipalities (0.303). The strongest confidence in future development was recorded in cities with county rights, where the index reached 0.345, the highest among all categories of local governments.
Interestingly, when the survey was first launched in 2023, large cities had the most pessimistic outlook.
“When we began the research in 2023, large cities viewed the future most negatively. They were in a difficult financial situation, partly because tax policy changes reduced their revenues. They had to increase borrowing significantly and had limited access to external funding,” Sierak explained.
At that time, smaller municipalities were the main beneficiaries of financial support mechanisms, including various grants and discretionary subsidies. As a result, rural municipalities initially expressed much more optimistic expectations about their development prospects.
In spring 2023, the highest WARS index was recorded by voivodeships (0.464), followed by rural municipalities (0.294). Meanwhile, cities with county rights ranked near the bottom with a score of 0.113, while urban municipalities recorded the lowest index at 0.088.
The latest results also highlight differences in investment potential between urban and rural areas. The WARS index for nominal investment spending in 2026 stood at -0.040 for rural municipalities, compared with 0.523 for cities with county rights. These differences are particularly visible in the ability to absorb European Union funds, where urban municipalities tend to be much better prepared to obtain financing.
“Support funds, including those from the National Recovery Plan (KPO), represent an opportunity for local governments. However, municipalities have different capacities to access these funds. Much depends on their own financial potential, because most funding mechanisms require either co-financing or take the form of repayable instruments,” Sierak noted.
In November 2025, Minister of Funds and Regional Policy Katarzyna Pełczyńska-Nałęcz stated that local governments in Poland could receive a total of 36 billion złoty from the National Recovery Plan.
“In Poland, investment needs are highly diverse. In many local government units they concern basic services such as local roads, water supply systems and sewage infrastructure. Not always does the funding offered through grant programs correspond to these fundamental needs,” Sierak explained.
In practice, financially stronger municipalities with larger economic bases are better positioned to benefit from such programs. These units typically possess the organizational, financial and technical capacity required to implement complex investment projects.
According to data from Statistics Poland (GUS), the share of the population connected to the sewage network increased from 68.7% in 2014 to 72.9% in 2024. However, significant disparities remain between urban and rural areas. By the end of 2024, 91.2% of city residents were connected to the sewage network, compared with only 46.2% of rural residents.
“Small local government units require additional external sources of financing. Their revenue base may not allow them to fund necessary investment expenditures, especially in municipal infrastructure,” said Dr. hab. Sebastian Skuza, Professor at the University of Warsaw’s Faculty of Management.
He emphasized that small municipalities may struggle to achieve an adequate level of infrastructure development without dedicated support programs.
“In the long term, smaller local governments may need a program similar to the Polish Deal initiative,” Skuza added. Under that initiative, the Strategic Investment Programme provided non-repayable funding for public investments in more than 30 areas of the economy, including water and sewage infrastructure, modernization of heating systems toward zero-emission solutions, waste management, and social investments such as nurseries, kindergartens, and bicycle infrastructure.
“Small local government units simply cannot generate sufficient own revenues or take on enough debt to close the gap in standard municipal infrastructure investments,” Skuza stressed.
The challenges facing local governments are also evolving.
“Just a few years ago, the main problems identified by local governments were inflation, the high cost of daily operations, financial constraints and difficulties in obtaining additional funding,” said Kamil Flig, assistant professor at the SGH Department of Local Government Economics and Finance.
“Today we are seeing a major shift. This edition of the study shows that security and defense are becoming a key challenge. Perhaps with some delay, but this issue is increasingly reaching local governments. It concerns matters related to public safety and the implementation of civil protection tasks.”
Civil defense and security were identified as one of the challenges by 27% of respondents in the SGH study. Other major issues included public finances and budgets (54%), investment and infrastructure (47%), education (32%), demographic change (23%), and rising living costs (23%).
“Respondents recognize the need to prepare plans for protecting critical infrastructure, building shelter systems and preparing for potential crisis situations. However, funding and dedicated programs are still lacking,” Flig emphasized.
Under the Polish Act on Civil Protection and Civil Defense, initiatives aimed at protecting citizens will be carried out jointly by the national government and local governments. According to information provided by the Ministry of the Interior and Administration, 17.2 billion złoty has been allocated for the Civil Protection and Civil Defense Programme in 2026, out of 34 billion złoty planned for the years 2025–2026.
