The Organisation for Economic Co-operation and Development (OECD), in its latest report on Poland, maintains its economic growth forecasts for the current and following year, predicting a growth rate of 3% or higher. However, inflation is expected to rise even faster, leading Poland’s Monetary Policy Council to continue its restrictive monetary policy. Despite Poland’s economic resilience, the OECD highlights risks associated with rising national debt, proposing measures such as a progressive property tax based on asset value.
OECD’s Economic Review of Poland
All OECD member states undergo biennial economic reviews. These reports assess each country’s economic situation and provide recommendations for national administrations. Poland’s 23rd OECD economic report was presented in early February at a conference at the Warsaw School of Economics.
“According to the latest OECD economic review, Poland’s economy has navigated global crises exceptionally well in recent years. GDP growth in 2023 was strong at 2.9%, and the outlook for the coming years remains promising,”
— Dr. Tomasz Koźluk, advisor to the chief economist at OECD, speaking to Newseria.
“Of course, there are significant risks surrounding these forecasts, but with low unemployment and solid economic growth, Poland performs well compared to other European countries.”
The OECD predicts that Poland’s GDP will grow by 3.4% in 2025, slowing slightly to 3% in 2026, which would still be the highest growth rate among OECD countries in Central Europe.
Inflation and Monetary Policy Outlook
Economists forecast that wage growth will slow compared to previous years. This trend is already visible—for the first time in a year, in December 2024, the average wage growth rate in enterprises fell to a single-digit figure (9.8%).
However, inflation will remain significantly above the target. In 2025, inflation is expected to average 5%, before declining to 3.9% in 2026. Therefore, monetary policy should be eased gradually, no sooner than the second half of 2025.
According to the report, Poland’s reference interest rate, currently 5.75%, could drop to 4% by the end of 2026.
“As past crises, particularly the Russian invasion of Ukraine, have shown, the Polish economy has remained resilient and strong,”
— Dr. Tomasz Koźluk.
“However, to prepare for future crises, Poland must implement urgent reforms, particularly in areas that will boost productivity and competitiveness, while also ensuring that fiscal policy is prepared to respond to global economic shocks in the future.”
Concerns Over Rising Government Debt and Deficit
The report highlights increased government spending in recent years, driven by higher defense investments and expanded social benefits. As a result, Poland’s budget deficit rose to 5.8% of GDP in 2024, with the same level expected in 2025. By 2026, the deficit is projected to decline slightly to 5.1%.
“In recent years, spending has increased on defense, energy support, and family policies, leading to a significant budget deficit,”
— Dr. Alvaro Pereira, Chief Economist at OECD.
“Although Poland’s public debt level remains lower than in many other countries, caution is needed. Maintaining a high deficit for an extended period is unsustainable, and policy changes are required. The OECD supports the government’s proposed tax reforms, as they are crucial for reducing the budget deficit and public debt over the next three years.”
Proposed Fiscal Reforms: Taxation and Spending Optimization
To control public spending, the OECD suggests:
- Optimizing social support (e.g., directing child benefits to families in need rather than universal payments).
- Increasing tax revenues, including:
- Phasing out energy subsidies (initially extended until September 2025 but recommended for full removal).
- Raising environmental and property taxes.
- Introducing a vehicle tax based on carbon emissions.
- Reducing VAT exemptions and preferential rates.
“We see potential for raising revenue through VAT adjustments. Poland has many exemptions and reduced VAT rates, which could be revised to increase government income. Additionally, as seen in many OECD countries, a property tax based on market value rather than surface area could be a logical step forward,”
— Dr. Alvaro Pereira.
“According to our analysis, the best approach is a mix of spending cuts, expenditure reviews, and selective tax increases to reduce the public deficit,”
— Dr. Tomasz Koźluk.
As Poland navigates economic growth, inflation pressures, and rising debt, the OECD’s recommendations emphasize striking a balance between fiscal responsibility and continued development.
Source: CEO.com.pl
