COMMISSION STAFF WORKING DOCUMENT Country Report Poland 2018 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2018-03-07
Institutions: European Commission, Secretariat-General
Subjects: Poland, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 7.3.2018 SWD(2018) 219 final  COMMISSION STAFF WORKING DOCUMENT Country Report Poland 2018 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2018) 120 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Reform priorities 

3.1.  Public finances and taxation 

3.2.  Financial sector 

3.3.  Labour market, education and social policies 

3.4.   Investment 

3.5.  Sectoral policies 

Annex A: Overview table 

Annex B: Macroeconomic Imbalance Procedure scoreboard 

Annex C: Standard tables 

References 

LIST OF TABLES 

Table 1.1: 

Key economic, financial and social indicators - Poland 

Table 2.1: 

Assessment of 2017 country-specific recommendations 

Table 3.2.1: 

Banking sector financial stability indicators, 2015-2017 

Table 3.3.1:  Differences between activity rates in Poland and EU – by age class and educational 

attainment, Q3 2017, percentage points 

Table B.1: 

The Macroeconomic Imbalance Procedure scoreboard for Poland (AMR 2018) 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

1 

4 

11 

15 

15 

20 

22 

28 

32 

36 

40 

41 

47 

10 

12 

20 

22 

40 

41 

42 

43 

44 

45 

46 

 
 
 
 
 
LIST OF GRAPHS 

Graph 1.1: 

Contributions to real GDP growth, 2008-2019 

Graph 1.2: 

Estimated potential growth and its components, 2007-2019 

Graph 1.3: 

Employment, wages and unemployment rate, 2013-2017 

Graph 1.4: 

Share of companies indicating shortage of labour among factors limiting activity in 

selected sectors, 2000-2017 

Graph 1.5:  Gini coefficient of disposable income, 2005-2016 

Graph 1.6: 

Average quality rank of manufacturing exports to the EU, 2016 and 2011 

Graph 1.7: 

Headline and structural fiscal balances, 2011-2019 

Graph 2.1:  Overall multiannual implementation of 2011-2017 CSRs to date 

Graph 3.1.1: 

Tax revenue as % of GDP, 4 quarter moving average 

Graph 3.1.2:  Medium-term public debt scenarios 

Graph 3.2.1:  Credit growth, 2012-2017 (annual % change) 

Graph 3.3.1:  Pre-school participation by 3-5 year olds, 2013-2017 

Graph 3.4.1: 

Investment outlays per person employed by firm size, 2015 

Graph 3.5.1: 

Total international scientific co-publications as % of total scientific publications, 2007 

and 2016 

Graph 3.5.2:  Network of high-speed roads until 2023 

Graph 3.5.3:  Gross electricity generation by fuel - TWh, 2015 

LIST OF BOXES 

Box 2.1: Tangible results delivered through EU support to structural change in Poland 

Box 3.1.1: Policy highlights: measures to improve tax compliance 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights 

Box 3.4.1: Investment challenges and reforms in Poland 

4 

4 

5 

6 

6 

7 

9 

11 

15 

18 

21 

25 

28 

32 

33 

34 

14 

16 

23 

31 

 
 
 
 
 
EXECUTIVE SUMMARY 

Poland’s  social,  fiscal  and  economic  situation 
offers  a  good  opportunity  to  address  medium-
term  challenges.  Economic  growth  is  strong,  the 
financial  sector  is  stable  and  there  are  no  short-
term  risks  to  fiscal  sustainability.  Poland  could 
safeguard  medium-term  growth  prospects  by 
addressing  the  challenges  connected  to  shrinking 
working-age  population  and  ageing.  Boosting 
private  investment  and  innovation  would  help 
sustain 
towards 
the 
average  EU 
levels,  which  has  been 
observed  in  recent  years.  While  some  policies, 
such as lowering the retirement age, have not been 
conducive  to  growth,  other  measures  have  been 
undertaken to improve the country’s economic and 
social prospects and to improve tax collection (1). 

successful  convergence 
income 

The  economy  has  been  growing  robustly. 
Domestic demand, especially private consumption, 
has  been  the  dominant  driver  of  growth  over  the 
last  few  years.  This  was  particularly  evident  in 
2016  and  2017.  However,  investment  remained 
sluggish 
private 
consumption  has  been  supported  by  a  buoyant 
transfers  and 
increased  fiscal 
labour  market, 
record-high levels of consumer confidence. 

until  mid-2017. 

Strong 

investment, 

The  short-term  economic  outlook  remains 
favourable.  After  increasing  by  4.6  %  in  2017, 
real GDP is forecast to grow by 4.2 % in 2018 and 
3.6 % in 2019, among the highest rates in the EU. 
An increasing utilisation of EU funds should result 
in  particular  public 
in  higher 
investment. Private consumption, driven by rapidly 
rising  wages,  is  projected  to  remain  robust,  albeit 
slowing  from  the  exceptionally  high  rate  in  2017. 
Solid domestic demand is forecast to enable higher 
imports,  but  favourable  developments  in  foreign 
demand and the improving competitiveness of the 
Polish  economy  should  support  a  steady  rise  in 
exports.  Inflation  is  set  to  increase,  driven  mainly 
by strong wage growth.  

Several 
the 
economy's  long-term  growth  potential.  As  the 

factors  weigh  on 

structural 

(1)  This  report  assesses  Poland’s  economy  in  light  of  the 
European Commission’s Annual Growth Survey published 
on 22 November 2017. In the survey, the Commission calls 
on  EU  Member  States  to  implement  structural  reforms  to 
make the European economy more productive, resilient and 
inclusive.  In  so  doing,  Member  States  should  focus  their 
efforts  on  the  three  elements  of  the  virtuous  triangle  of 
economic policy – boosting investment, pursuing structural 
reforms and ensuring responsible fiscal policies. 

1 

sources  of  strong  past  growth  gradually  diminish, 
Poland  faces  the  challenge  to  become  more 
innovative and to better position itself in the global 
value  chains.  An  expected  decline  in  the  working 
age  population  underlines  the  need  for  increasing 
labour  market  participation.  The  country’s  ability 
to do so will also depend on its success in building 
up  the  skills  of  its  population.  A  more  skilled 
workforce can stimulate innovation and associated 
productivity  gains,  which  are  key  drivers  of 
economic  growth.  This  is  also  recognised  in  the 
government’s  responsible  development  strategy. 
Future  private  investment  will  largely  depend  on 
macroeconomic  outlook  and  on  the  stability  and 
quality of law and institutions, including the policy 
and  regulatory  environment.  The  rule  of  law, 
including  the  independence  of  the  judiciary  and 
legal certainty, are also of key importance.  

the 

Overall, Poland has made limited progress (2) in 
country-specific 
2017 
addressing 
recommendations  (CSRs).  Limited  progress  was 
made in addressing the recommendations on public 
finance.  First  steps  were  taken  to  reform  the 
budgetary  framework,  while  the  extensive  use  of 
reduced  VAT  rates  has  not  been  addressed. 
Limited  progress  has  been  made  on 
taking 
measures  to  get  more  people  into  the  labour 
market.  No  effective  measures  were  taken  to 
increase the effective retirement age and to reform 
special  pension  arrangements.  There  was  limited 
progress  on  removing  obstacles  to  investment, 
including in the transport sector. 

Poland  is  making  good  progress  in  reaching  the 
national targets under the Europe 2020 strategy in 
the  following  areas:  greenhouse  gas  emissions, 
tertiary  education, 
poverty,  energy  efficiency, 
reducing early school leaving and the employment 
rate. Progress is limited in R&D investment and in 
renewable energy. 

Poland  performs  relatively  well  on 
the 
indicators  of  the  Social  Scoreboard  supporting 
the  European  Pillar  of  Social  Rights.  A 
significant  gender  employment  gap  is,  inter  alia, 
related  to  limited  access  to  childcare  for  children 
under  three  and  shortcomings  in  the  provision  of 

(2)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the Overview table in the Annex. This 
overall  assessment  does  not  include  an  assessment  of 
compliance with the Stability and Growth Pact. 

 
 
                                                           
                                                           
Executive summary 

long-term care. High unmet needs in the healthcare 
system also emerge as an important challenge. 

The  main  findings  of  this  report  and  the  related 
policy challenges are as follows: 

is  currently  not  available. 
benefit  system 
Safeguarding 
support 
important  social  policy  areas,  such  as  health 
and long-term care, is likely to be challenging. 

resources 

the 

to 

  There 

to 

is  no  short-term  risk 

fiscal 
sustainability. The headline deficit, unlike the 
structural  one,  is  estimated  to  have  strongly 
declined  in  2017  and  is  projected  to  broadly 
stabilise in 2018-2019. This improvement is to 
a  large  extent  driven  by  strong  economic 
growth.  In  the  short  term,  no  major  risks  to 
fiscal  sustainability  are  foreseen.  Longer  term 
risks  stem  primarily  from  high  expected  age-
related expenditure. 

  Measures  taken  to  increase  tax  revenue  are 
bearing fruit. In 2017, tax revenues increased 
significantly.  This  was  due  to  the  improved 
macroeconomic conditions and to a number of 
measures  implemented  in  recent  years.  New 
measures  are  also 
the  pipeline.  Two 
in 
important  challenges  emerge  in  this  respect: 
ensuring permanency of stronger revenues and 
preventing  an  increase  in  the  cost  of  tax 
compliance. In 2017, Poland did not tackle the 
extensive  use  of  reduced  VAT  rates.  This 
results  in  large  foregone  tax  revenues  and 
overly complicates the tax system. 

  Overall,  the  fiscal  framework  is  strong. 
Fiscal  rules  are  effective  and  stable.  The 
authorities  plan  to  address  deficiencies  in 
budgetary  planning  and  procedures.  Poland  is, 
however,  the  only  EU  Member  State  that  has 
not yet set up an independent fiscal council. 

to 

further 

  The effectiveness and efficiency of increased 
social spending and future pension adequacy 
raise  concerns.  Higher  social  benefits  are 
reduce  poverty  and 
expected 
inequality  that  have  continued  to  decline  for 
several  years.  However,  some  elements  of  the 
benefit 
creating 
appear 
disincentives to work, in particular for the low-
skilled.  Unless 
counteracting 
measures  are  taken,  the  significantly  lowered 
statutory  retirement  age  will  depress  pensions 
with  consequences  for  inequality  and  poverty 
among  older  people.  A 
comprehensive 
assessment  of  the  efficiency  of  the  social 

effective 

to  be 

system 

increase 

structurally 

  Work to improve the management of public 
expenditure  has  started.  Since  many  recent 
public 
measures 
expenditure,  its  effective  management  is  of 
crucial  importance  for  both  short-term  and 
long-term  fiscal  sustainability.  Poland  has 
initiated work to reform the  budgetary process 
with  a  view  to  increase  the  effectiveness  and 
efficiency of spending. 

  The banking sector has remained liquid and 
well capitalised.  Banks’ profitability has  been 
reduced  by  low  interest  rates,  the  tax  on 
financial sector assets and higher contributions 
to  bank  guarantee  and  relief  funds.  Risks 
in  foreign  currency  are 
related 
gradually  diminishing.  While  a  wide  range  of 
related  legislative  proposals  were  tabled,  none 
have as yet been adopted. 

loans 

to 

relevant 

  The  role  of  strong,  independent  financial 
supervision is increasingly important. This is 
especially 
recently 
strengthened links between the financial sector 
and  the  public  sector,  in particular  as  the  state 
now  controls  the  two  largest  banks  and  the 
largest insurer. 

given 

the 

  Labour market situation is the best in recent 
history;  yet,  getting  more  people  to  work 
would  ease  labour  shortages.  Employment 
rates  have  continued  to  rise  (above  70 %  for 
those  aged  20-64  in  2017),  to  the  point  that 
labour shortages are affecting business activity. 
Barriers  to  labour  market  participation  include 
disincentives  to  work  originating  from  the 
benefit system and limited access to long-term 
care  and  childcare.  Arrangements  for  a  better 
work-life  balance,  including  part-time  work, 
are  not  widely  provided.  These  barriers  are 
particularly  relevant  for  groups  with  lower 
activity  rates:  women,  low-skilled  people,  and 
older 
people.  Permanent 
employment has been rising fast, but the share 
of  temporary  contracts  remains  high.  High 
incidence  of 
self-employment  and  other 
atypical  work  combined  with  weaker  welfare 

disabled 

and 

2 

 
 
Executive summary 

is  hampered  by 

coverage of these workers creates risks. Labour 
sector-specific 
mobility 
arrangements  (such  as 
the  special  social 
security  system  for  farmers),  shortcomings  in 
the housing market and transport infrastructure. 
After a steady rise in immigration to Poland in 
recent years, non-EU workers (especially from 
Ukraine)  now  play  an  important  role  in  the 
Polish labour market. 

  A continued upskilling of the labour force is 
crucial  to  improve  employability  and  to 
foster  innovation.  The  currently  low  number 
of  adults  in  education  and  training  and  its 
impact on skills and competences is an obstacle 
to employment. However, the Polish education 
two  strong  features:  a  high 
system  has 
percentage of tertiary graduates and good basic 
skills at completion of lower secondary school. 
Developing  independent,  creative  and  critical 
thinking and learning is a key challenge for all 
levels of the education and training system. 

  An  improved  access  to  healthcare  is  key  to 
better  health  outcomes.  This  is  particularly 
challenging  given  the  low  level  of  public 
funding  and  the  low  number  of  doctors  and 
nurses.  In  2017,  some  efforts  were  made  to 
distribute healthcare resources more efficiently. 

led 

the  Commission 

  Poland  adopted  reforms  of  the  justice 
system  which 
to 
conclude  that  there  is  a  clear  risk  of  a 
serious breach of the rule of law. An efficient 
and  independent  judicial  system  is  beneficial 
for  the  business  environment.  Since  late  2015, 
the  Polish  authorities  have  adopted  several 
laws  affecting  the  structure  of  the  justice 
system. The reforms should be carried out in a 
way  which  protects  the  independence  of  the 
judiciary.  In  this  regard,  the  Commission  has 
concluded  that  a  clear  risk  of  a  serious  breach 
of  the  rule  of  law  exists  in  Poland  within  the 
meaning  of  Article  7(1)  of  the  Treaty  on 
European Union. The Commission also set out 
the ways in which this risk could be addressed.  

  Poland’s  efforts  to  increase  the  economy’s 
innovative  capacity  have  not  yet  translated 
into  a  significant  rise  in  innovative  outputs. 
Developing  the  science  base  is  a  critical 
challenge  for  improving  scientific  excellence 
and translating it into innovative market results. 
A  number  of  steps  towards  increasing  private 
sector  innovation  have  been  taken,  including 
tax  incentives  for  R&D  expenditures.  Their 
effects, however, risk being delayed by limited 
collaboration  between  business  and  research 
institutions, among other factors. 

  The  business 

environment  overall 
investment 

is 
favourable,  while 
remains 
restrained by barriers related to the quality 
of  regulation  and 
investor-uncertainty. 
Private  investment  has  been  low  for  many 
years,  while  public  investment  has  benefitted 
from  the  wide-spread  use  of  EU  funds.  The 
regulatory framework and other barriers to the 
expansion  of  firms  are  affecting  investment 
activity  and  productivity.  Work  continues  on 
some  legislative  proposals  to  improve  the 
activity.  High 
business 
for 
conditions 
from  abrupt 
resulting,  e.g., 
uncertainty, 
regulatory 
hinder 
changes, 
investment. Inadequate financing may also be a 
constraint  for  some  companies.  Effective  and 
efficient  public 
including 
procedures  for  public  procurement,  spatial 
planning,  and  building  permits  is  key  for  the 
investment  climate  and  regional 
country’s 
development.  State-owned  and state-controlled 
companies continue to gain importance. 

administration, 

appears 

to 

  Poland 

to 

develop 

continues 

its 
infrastructure. The road network continues to 
the  support  of  EU  funds. 
improve,  with 
Modernisation  of  the  railway  network  is  also 
progressing, although slowed by a lack of long-
term  planning  and  shortcomings  in  investment 
project  management. 
broadband 
coverage  is  low  and  only  partially  offset  by 
mobile broadband take-up. 

Fixed 

to  cleaner  sources 

  Poland  faces  challenges  in  moving  towards 
cleaner  energy  sources.  The  electricity  sector 
relies  heavily  on  coal-fired  generation.  The 
transition 
risks  being 
delayed  by  legislative  changes  that  in  some 
areas impose de facto prohibitive conditions for 
installations.  Limiting 
renewable 
greenhouse  gas  emissions 
from  energy, 
transport  and  industry  remains  a  key  concern 
from  a  climate  perspective.  High  air  pollution 
remains a major health-related concern. 

energy 

3 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

Poland is experiencing strong economic growth. 
Domestic  demand  has  been  the  dominant  growth 
driver  for  the  last  3-4  years.  In  2016  and  2017, 
private  consumption  contributed 
to 
growth, given the weak performance of investment 
that  period.  Private  consumption  was 
during 
supported by favourable labour market conditions, 
increased 
record-high 
transfers 
consumer confidence. Estimated at 4.6 % in 2017, 
real GDP growth was among the highest in the EU. 

the  most 

fiscal 

and 

Graph 1.1:  Contributions to real GDP growth, 2008-2019 

favourable  developments 
foreign  markets 
should  support  a  continued  expansion  of  exports. 
As a result, real GDP growth is projected to reach 
4.2 % in 2018 and 3.6 % in 2019. 

in 

Potential growth 

the  most 

Potential growth has moderated in recent years, 
mainly due to a slower increase in productivity 
and  lower  investments.  Capital  accumulation 
contributed 
to  potential  growth, 
especially  in  2007-2011,  but  since  then  this 
contribution  declined  (Graph  1.2).  The  slowdown 
in total factor productivity (TFP) growth was more 
pronounced.  Its  contribution  to  potential  growth 
dropped. It fell from above 3 percentage points up 
to  around  2003  to  around  2  percentage  points 
during  2005-2010  and  to  around  1  percentage 
point  in  more  recent  years.  However,  some 
the  coming  years. 
in 
rebound 
Significantly 
rates  were 
rising  employment 
supporting potential growth during the last decade. 

is  expected 

Graph 1.2: 

Estimated potential growth and its 
components, 2007-2019 

Source: Eurostat, European Commission 

to  an 

in  Q2 2017 

thanks 
structural 
trends  differed  between 

Weak  investment  continued  in  the  first  three 
quarters  of  2017.  Public  investment  started  to 
increasing 
recover 
utilisation  of  EU 
funds.  Private 
sectors, 
investment 
reflecting  a  range  of  economy-wide  and  sector-
specific factors. Sectors with a significant share of 
state-owned or state-controlled enterprises such as 
energy, mining and other public utilities recorded a 
particularly weak investment performance. 

Source: European Commission 

Growth  is  projected  to  remain  strong  in  2018 
and 2019. An increasing utilisation of EU funds is 
expected  to  provide  a  strong  stimulus  to  public 
and, to a lesser extent, private investment. Private 
consumption growth is projected to moderate from 
exceptionally  high  readings  in  2017,  while  still 
remaining  robust.  It  will  be  supported  by  strong 
wage 
is 
forecast  to  translate  into  higher  imports,  but 

increases.  Strong  domestic  demand 

In  the  future,  the  labour  market  is  expected  to 
be  a  drag  on  potential  growth.  Poland’s 
population  has  been  falling  since  2013,  while  the 
working  age  (15-74)  population  has  been  slowly 
shrinking  already  since  2008  and  is  projected  to 
continue  declining  in  the  decades  to  come.  The 
most recent Eurostat's projection sees working age 
population  (aged  15-74)  falling  by  around  18 % 
between  2015  and  2050  (see  also  European 

4 

-4-2024681007080910111213141516171819%, ppsInventories investmentInvestment (GFCF)ConsumptionNet exportsReal GDP growthforecast00.511.522.533.544.5507080910111213141516171819TFPCapitalLabourPPS 
 
 
 
Commission, 2017a). Migration flows are likely to 
be  an  increasingly  important  factor  for  future 
working  age  population  trends.  Fertility  rates, 
currently very low despite a small improvement in 
2017,  are  expected  to  play  only  a  limited  role. 
Given  the  current  record  low  unemployment  rate, 
further  gains  in  labour  force  participation  and 
investment  in  skills  become  key  for  the  potential 
growth outlook (Section 3.3). 

Capital  accumulation  is  expected  to  remain 
muted in the near future, while the longer term 
outlook  will  depend  on  a  combination  of 
factors.  In  the  long  run,  investment  can  play  a 
stronger  role  of  supporting  potential  growth  in 
Poland.  The  capital-output  ratio  in  Poland  has 
hovered around two for the last few years, whereas 
it  was  closer  to  three  (although  declining)  in  the 
Czech  Republic  and  Germany.  Future  investment 
developments  will  be  determined  in  particular  by 
perceptions  of  macroeconomic  prospects  and 
stability  and  the  quality  of  institutions,  including 
the  rule  of 
law  and  policy  and  regulatory 
environment. 

Labour market 

The  strong  growth  has  resulted  in  a  buoyant 
labour  market  performance.  Employment 
continued  to  grow  in  the  first  three  quarters  of 
2017  (Graph  1.3).  The  employment  rate  of  those 
aged  20-64  went  above  71 %  in  Q2-Q3  2017. 
Wage  growth  increased  visibly.  This  translated 
into  a  further,  though  limited,  increase  in  activity 
rates. The unemployment rate has continued to hit 
new  record  lows  (4.7 %  in  Q3 2017).  These 
numbers  may  underestimate  the  actual  growth  in 
employment as they cover migrant workers only to 
a  limited  degree.  Available  data  suggest  that 
inward  migration  of  labour,  predominantly  from 
Ukraine, continued to rise in 2017. 

Labour shortages became a challenge and wage 
growth  is  expected  to  accelerate.  In  2017,  a 
shortage  of  adequately  skilled  labour  has  become 
one  of  the  top  barriers  to  growth,  as  reported  by 
various  business  surveys  (Graph  1.4).  Labour 
shortages  are  the  result  of  a  strong  demand  for 
labour  at  the  current  stage  of  the  economic  cycle 
combined  with  a  limited  supply  of  labour.  Given 
that activity rates among highly skilled people are 
already  high,  migrants  have  become 
an 
increasingly  important  source  of  new  hiring  for 

1. Economic situation and outlook 

firms (NBP, 2017c). Another related development 
is the pressure on wages that is projected to further 
intensify in the coming quarters. 

Graph 1.3: 

Employment, wages and unemployment rate, 
2013-2017 

Source: Eurostat 

Structural  labour  market  challenges  include 
low  participation  of  certain  groups  and  lack  of 
labour  market  flexibility  in  some  areas.  Older, 
less skilled people and women in particular are less 
economically active than their peers in most other 
EU  Member  States  (see  Section  3.3).  The 
employment  rate  of  the  disabled  is  particularly 
low (3).  This  has  multiple  reasons,  including  low 
skills,  the  lack  of  a  culture  of  adult  learning, 
certain 
barriers 
disincentives  built  into  the  social  benefit  system, 
and  the  low  statutory  retirement  age  for  women. 
The  overall  flexibility  of  the  labour  market  is 
hampered by factors such as: 

geographic  mobility, 

to 

 

limited take-up of part-time employment, 

  weaknesses in the public employment services, 

  rules  on  transferring  from  the  farmers’  special 
pension  system  to  the  general  social  security 
system, and 

 

the  large  differences  between  atypical  and 
temporary  and  permanent  work  contracts  as 

(3)  Eurostat statistics on income and living conditions indicate 
that in 2015 the employment rate of disabled in Poland was 
9.6 percentage points below the EU average. 

5 

-3-1135791113Employment growth y-o-yNominal wage growth y-o-yUnemployment rate% 
 
                                                           
1. Economic situation and outlook 

regards  the  costs  associated  with  employment 
protection. 

Graph 1.4: 

Share of companies indicating shortage of 
labour among factors limiting activity in 
selected sectors, 2000-2017 

inequality  and 

(European  Commission  2017b).  Within  the  tax-
benefit  system,  it  is  mainly  the  pension  system 
which has the most significant impact on reducing 
the  risk  of  poverty. 
income 
However, recent changes in social benefits appear 
to  have  increased  the  impact  of  these  benefits  on 
the redistribution of income. Difficulties pertain to 
accessing healthcare as well as early childcare and 
pre-school  education.  This  can 
the 
inequality of opportunities (see Section 3.3). While 
the  education  system  as  a  whole  appears  to  have 
reduced  inequalities,  recent  changes  to  the  school 
structure  may  limit  this  role  in  the  future.  This  is 
because the separation into vocational and general 
education  tracks  will  now  happen  after  less  years 
of school (5). 

increase 

Graph 1.5:  Gini coefficient of disposable income, 2005-

2016 

Source: Central Statistical Office 

Inequality 

lowered 

inequality. 

Strong  growth  of  incomes  of  less  affluent 
Income 
households 
inequality  in  Poland  has  been  falling  for  several 
years  (Graph  1.5).  Based  on  the  most  commonly-
used  indicators,  it  fell  below  the  EU  average  by 
around 2012 and has stayed slightly below it since 
then (4).  This  improvement  can  be  explained  by  a 
combination of rising employment and wages, and 
certain changes in the tax and benefit system. The 
most recent benefit changes (not yet fully reflected 
in  available  data)  are  expected  to  have  further 
lowered income inequality. 

The  role  of  social  benefits 
in  reducing 
inequalities is expected to increase while various 
factors affect the equality of opportunities. The 
tax  and  benefit  system  as  a  whole  used  to  play  a 
inequality 
relatively 

limited  role 

in  reducing 

(4)  The  ratio  of  the  total  income  received  by  the  20 %  of  the 
population with the highest income to that received by the 
20  %  of  the  population  with  the  lowest  income  (S80/S20 
income  quintile  share  ratio)  declined  to  4.8  in  2015.  This 
placed  Poland  in  the  middle  of  the  EU  countries  for  this 
indicator. For the EU as a whole, S80/S20  equalled 5.2 in 
that  year.  These  data  are  based  on  2016  EU-SILC  survey 
that refer to the previous year for all Member States except 
Ireland and the United Kingdom. 

(1) SILC stands for the Survey of Income and Living 
Conditions. HBS stands for the Household Budget Survey. 
Data labelled year T refer to the income situation in year T. 
The Gini coefficient takes values between 0 and 100 and is a 
measure of equality of distribution. Higher values indicate a 
higher level of inequality. 
Source: Central Statistical Office and Eurostat 

External position 

remains 

competitiveness 

External 
strong. 
Poland has been consistently increasing its share in 
total  world  exports,  by  around  one  third  over  the 
decade  up  to  2016.  The  strong  performance  of 
services  trade  has  been  reflected  in  a  gradually 
increasing 
services. 
in 
Telecommunications,  computer,  and  information 
services, transport and other business services saw 

surplus 

trade 

in 

(5)  For analysis see e.g. IBE (2014), Woessmann (2016).  

6 

010203040506020002000200120022003200420052006200720082009201020112011201220132014201520162017Manufacturing(skilled labour)Construction(skilled labour)Retail Trade-(all labour)%29303132333435200520062007200820092010201120122013201420152016EU27 (SILC)PL (SILC)PL (HBS) 
 
                                                           
 
                                                           
their  global  export  shares  rising  quite  strongly 
during the last decade. The cost competitiveness of 
exports  has  been  supported  by  contained  unit 
labour  costs  growth  and  a  stable  EUR/PLN 
exchange rate. 

The composition of export of goods is changing 
gradually,  with  average  quality  remaining 
below  the  EU  average.  The  composition  of 
exports  reflects  competitive  advantages  of  the 
Polish  economy.  Production  costs  below  the  EU 
average are associated with the average quality of 
to  other  EU 
Polish  manufacturing  exports 
countries remaining below the EU average (Graph 
1.6) (6).  For  some  sectors,  such  as  computer, 
electronic  and  optical  products  or  furniture,  the 
average  quality  has  been  improving  in  recent 
years.  In  other  sectors,  the  quality  has  been 
stagnating  or  declining  compared  to  the  EU 
average.  In  the  future,  the  export  performance  of 
the  economy  will  be  determined  by  the  extent  to 
which  the  expected  faster  growth  of  labour  and 
other  production  costs  lead  to  a  gradual  shift  in 
export  composition 
towards  high-tech,  high-
quality products. 

The  current account  remained  close  to balance 
in  2017.  The  current  account  position  has  been 
broadly  stable  since  mid-2015,  gradually  moving 
towards  a  balanced  position.  This  results  from 
consistent  deficits  in  the  primary  income  balance 
(around 4 % of GDP), a high and growing surplus 
in the trade of services (around 3.5 % of GDP as of 
late  2017)  and  a  minimal  surplus  in  the  trade  of 
goods (below 0.5 % of GDP). 

Poland's  negative  net  international  investment 
position  (NIIP)  widened  slightly.  The  NIIP 
was  -63 %  of  GDP  at  the  end  of  Q3 2017.  This 
slight widening followed rapid improvement in the 
position  in  late  2016,  and  these  swings  mainly 
reserves.  The 
in  official 
reflect 
accumulated 
foreign  direct 
stock  of  net 
investments  (nearly  37 %  of  GDP  in  Q3 2017) 
accounts for the major part of the NIIP. Given the 
relative  stability  of  direct  investments,  this  limits 
the risks associated with a negative NIIP. 

changes 

(6)  The averages are calculated for 23 broad categories of the 
statistical classification of economic activities. The quality 
is proxied by an index estimated using the methodology of 
Vandenbussche (2014). 

1. Economic situation and outlook 

Graph 1.6:  Average quality rank of manufacturing exports 

to the EU, 2016 and 2011 

(1) The 7 sectors shown accounted for 63 % of 
manufacturing exports to the EU in 2016. The EU average 
import quality from all EU other Member States, US, China 
and Japan is around 0.5. 
Source: European Commission calculations based on 
Comext and Orbis databases. 

Price developments 

Consumer price inflation gradually increased in 
the  second  half  of  2017,  and  this  trend  is 
expected to continue. Swings in energy and food 
prices  had  the  strongest  impact  on  inflation 
(measured  by  the  harmonised  index  of  consumer 
prices – HICP) during 2017. After an initial surge 
at  the  end  of  2016  and  in  early  2017,  HICP 
inflation first decreased and then went above 1.5 % 
later in the year. The index targeted by the central 
bank  followed  a  very  similar  path,  increasing  to 
2.5 %  in  November,  before  falling  in  December. 
Core  inflation  (excluding  energy  and  unprocessed 
food)  stayed  in  a  narrow  band  between  1 %  and 
1.5 % since March 2017. Stronger wage growth is 
projected  to  translate  into  higher  price  increases 
especially  in  the  services  sector.  Overall  HICP 
inflation  is  expected  to  reach  2.5 %  in  the  middle 
of 2018 and stay just below 3 % in late 2019. Price 
pressures from higher wage growth are expected to 
be  counterbalanced  by  low  foreign  inflation  and 
broadly stable energy prices. 

2017 was a good year for asset prices. The main 
index  of  the  Warsaw  Stock  Exchange  was  rising 
throughout  2017,  increasing  by  23 %  since  end-
2016.  Shares  performed  well  across  the  sectors, 
including in the energy and financial sectors. This 

7 

0.00.51.0FurnitureChemicals And Chemical ProductsMachinery And Equipment N.E.C.Electrical EquipmentComputer, Electronic And OpticalProductsFood ProductsMotor Vehicles, Trailers And Semi-Trailers20112016Average quality rank (1 = the highest) 
                                                           
 
followed  the  general  trend  in  European  markets, 
and was broadly in line with developments in other 
Central  European  markets.  House  prices  were  on 
the  rise,  although  the  pace  remained  modest  – 
around  5 %  annually  in  the  secondary  market  in 
the largest cities. 

Monetary policy 

The  National  Bank  of  Poland  has  kept  interest 
rates  unchanged  since  March  2015  despite  a 
gradual rebound in inflation and stronger wage 
growth. The central bank sees the strong impact of 
external factors (especially global energy and food 
prices)  driving  inflationary  trends.  The  statements 
issued  by  Poland’s  Monetary  Policy  Council 
stressed  the  relatively  low  core  inflation,  despite 
stronger  wage  growth.  The  Council  expected 
inflation  to  remain  close  to  the  target  over  the 
projection  horizon.  As  a  result,  in  early  2017  real 
interest  rates  turned  negative.  This  has  likely 
contributed  to  some  changes  in  the  structure  of 
bank  deposits  (see  Section  3.2)  and  might  have 
been a factor supporting housing demand. 

Financial sector 

The banking sector remains strong and resilient 
with  adequate  profitability.  Strong  capital 
buffers,  comfortable  liquidity  and  sound  asset 
quality  limit  the  risks  to  financial  stability.  After 
falling  between  2014 
and  2015,  banks’ 
profitability  appears  to  have  stabilised,  although 
the  situation  differs  among  banks.  The  inter-
linkages between the financial sector and the state 
have grown for two reasons. First, state ownership 
in the sector increased in 2017 with the two largest 
banks  now  directly  or  indirectly  controlled  by  the 
state. Moreover, the design of the tax on financial 
sector assets gives an incentive to banks to hold a 
substantial  amount  of  government  bonds  (around 
the  outstanding  amount  of  Polish 
40 %  of 
sovereign  bonds).  The  problems  of  the  small 
segment of credit unions are being dealt with. The 
risks  related  to  uncertain  outcome  of  policy 
discussions  on  reducing  the  remaining  stock  of 
foreign  currency-denominated  mortgage 
loans 
appear to have receded somewhat in 2017.  

Public finances 

The  headline  deficit  contracted 
primarily  due 

in  2017, 
stronger  revenues.  A 

to 

1. Economic situation and outlook 

combination  of  strong  growth  in  wages,  private 
consumption and imports, better collection of VAT 
and  lower-than-projected  investment  expenditure 
facilitated  a  continued  decline  in  the  general 
government deficit. In 2017, it is estimated to have 
significantly  decreased  from  2.5 %  of  GDP  in 
2016.  Based  on  the  Commission’s  autumn  2017 
forecast, the deficit should remain broadly stable in 
2018 and 2019. 

in 

increase 

Projections  suggest  an  expansionary  fiscal 
stance  in  2018.  While  the  headline  deficit  should 
remain  broadly  stable,  the  fiscal  situation  looks 
differently  when  considering  the  structural  fiscal 
balance, i.e. the balance adjusted for the economic 
cycle  and  excluding  one-off  and 
temporary 
measures. Following  a  period  of fast  decline  until 
2015,  the  estimated  structural  deficit  remained 
broadly  stable.  The  Commission  autumn  2017 
forecast  predicts  a  gradual 
the 
structural  deficit  in  2018  and  2019  (Graph  1.7). 
Hence,  despite  a  favourable  economic  situation, 
the structural deficit remains far from the medium-
term  objective  of  1 %  of  GDP (7).  In  2016  and 
2017  public  spending  increased  also  due  to  the 
lowering  of  the  statutory  retirement  age  and  the 
introduction  of  a  child  benefit.  This  puts  more 
the  structural  deficit,  as  other 
pressure  on 
items  were  not  adjusted.  By 
expenditure 
consequence,  the  room  for  countercyclical  fiscal 
policy  will  be  more  limited  when  economic 
conditions  worsen.  Public  expenditure  for  these 
two  items  is  rather  inelastic  and  cannot  be  easily 
adjusted over the economic cycle.  

The  general  government  debt  decreased  from 
its  2016  peak  and  is  projected  to  broadly 
faster  nominal 
stabilise.  A  combination  of 
economic  growth,  a  lower  headline  deficit  and 
appreciation of the zloty contributed to the decline 
in  the  general  government  debt-to-GDP  ratio  in 
2017 (from 54.1 % at the end of 2016). The public 
debt  is  expected  to  broadly  stabilise  until  the  end 
of 2019. 

(7)  A medium-term budgetary objective is a budget deficit (or 
surplus) target defined in structural terms. This means that 
business cycle swings are taken into consideration and the 
effects of one-off and other temporary measures are filtered 
out. 

8 

 
                                                           
1. Economic situation and outlook 

Graph 1.7:  Headline and structural fiscal balances, 2011-

2019 

Source: European Commission 

9 

-7-6-5-4-3-2-101232010201120122013201420152016201720182019Structural fiscal balanceOutput gapHeadline fiscal balanceforecast% of GDP 
 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic, financial and social indicators - Poland 

(1) NIIP excluding direct investment and portfolio equity shares .         
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches.  
Source: Eurostat and ECB as of 30 Jan 2018, where available; European Commission for forecast figures (Winter forecast 2018 
for real GDP and HICP, Autumn forecast 2017 otherwise)   

10 

2004-072008-122013-1420152016201720182019Real GDP (y-o-y)5.53.52.33.82.94.64.23.6Potential growth (y-o-y)3.64.03.03.12.93.13.33.4Private consumption (y-o-y)4.13.41.43.03.9...Public consumption (y-o-y)3.91.73.32.41.7...Gross fixed capital formation (y-o-y)12.32.54.36.1-7.9...Exports of goods and services (y-o-y)10.05.16.47.78.8...Imports of goods and services (y-o-y) 12.03.05.86.67.9...Contribution to GDP growth:Domestic demand (y-o-y)5.72.92.33.41.0...Inventories (y-o-y)0.7-0.3-0.2-0.21.2...Net exports (y-o-y)-1.00.80.30.60.7...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.10.50.60.50.50.50.40.4Capital accumulation (y-o-y)1.31.91.51.71.31.31.41.4Total factor productivity (y-o-y)2.21.60.90.91.11.31.51.6Output gap-0.71.5-1.3-0.5-0.50.61.11.1Unemployment rate15.18.99.77.56.25.04.24.0GDP deflator (y-o-y)3.23.00.40.80.42.12.02.5Harmonised index of consumer prices (HICP, y-o-y)2.43.70.4-0.7-0.21.62.12.6Nominal compensation per employee (y-o-y)3.15.91.91.74.44.85.77.1Labour productivity (real, person employed, y-o-y)2.63.01.52.32.3...Unit labour costs (ULC, whole economy, y-o-y)0.42.80.4-0.62.12.12.63.8Real unit labour costs (y-o-y)-2.7-0.20.0-1.31.70.00.61.3Real effective exchange rate (ULC, y-o-y)3.1-1.60.3-3.2-2.84.44.21.9Real effective exchange rate (HICP, y-o-y)3.6-1.20.6-2.1-3.52.24.0.Savings rate of households (net saving as percentage of net disposable income)2.20.7-0.2-0.41.7...Private credit flow, consolidated (% of GDP)6.56.94.03.54.6...Private sector debt, consolidated (% of GDP)46.370.376.878.981.6...of which household debt, consolidated (% of GDP)17.333.035.336.036.7...of which non-financial corporate debt, consolidated (% of GDP)29.037.341.442.944.9...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)3.95.75.75.04.7...Corporations, net lending (+) or net borrowing (-) (% of GDP)1.15.17.68.05.76.66.46.6Corporations, gross operating surplus (% of GDP)22.423.825.125.924.825.625.625.8Households, net lending (+) or net borrowing (-) (% of GDP)-1.9-2.8-2.7-2.8-1.5-2.2-2.4-2.6Deflated house price index (y-o-y)..-1.82.62.5...Residential investment (% of GDP)3.43.33.02.53.0...Current account balance (% of GDP), balance of payments-4.6-5.0-1.7-0.6-0.30.0-0.7-0.9Trade balance (% of GDP), balance of payments-2.3-2.11.63.14.0...Terms of trade of goods and services (y-o-y)1.5-0.51.52.40.81.3-0.1-0.1Capital account balance (% of GDP)0.61.72.42.41.1...Net international investment position (% of GDP)-44.2-61.2-69.0-62.1-60.7...Net marketable external debt (% of GDP) (1)-10.4-24.0-26.7-26.0-22.9...Gross marketable external debt (% of GDP) (1)36.851.957.158.461.0...Export performance vs. advanced countries (% change over 5 years)69.237.79.811.214.8...Export market share, goods and services (y-o-y)8.90.45.42.46.2...Net FDI flows (% of GDP)-3.5-1.9-1.6-2.1-1.2...General government balance (% of GDP)-3.6-5.3-3.9-2.6-2.5-1.7-1.7-1.9Structural budget balance (% of GDP).-5.9-3.1-2.3-2.2-2.1-2.3-2.5General government gross debt (% of GDP)45.651.353.051.154.153.253.053.0Tax-to-GDP ratio (%)34.233.132.933.334.435.135.335.3Tax rate for a single person earning the average wage (%)28.224.724.324.925.0...Tax rate for a single person earning 50% of the average wage (%)25.622.521.923.223.3...forecast 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

the 

with 

expenditure 

implementing 

Progress 
the 
recommendations  addressed  to  Poland  in  2017 
has to be seen as part of a process which started 
with the introduction of the European Semester 
in 2011. Looking at the multi-annual assessment of 
the  implementation  of  the  CSRs  since  these  were 
first adopted, Poland implemented 44 % of all the 
CSRs with at least 'some progress', while in 56 % 
of CSRs Poland recorded 'limited' or 'no progress' 
(see Graph 2.1). Some CSRs in the fields of public 
finance  and  product  markets  have  been  fully 
implemented  or  saw  'substantial  progress'  with 
introduction  of 
and 
liberalisation of access to the professional services. 
Some  measures 
labour  market 
segmentation  and  participation  helped  to  achieve 
'some  progress'  for  labour  market  related  CSRs. 
The  introduction  of  tax  incentives  and  improving 
access  to  finance  for  R&D  activities  was  also 
assessed  as  achieving  'some  progress'  in  relevant 
CSRs. Only limited progress was observed in life-
long  learning,  enforcing  contracts,  and  removing 
obstacles  to  infrastructure  investment.  There  was 
no  progress  in  reforming  special  pension  regimes 
for  farmers  and  miners, 
in  establishing  an 
independent  fiscal  council  and  limiting  the  use  of 
reduced  VAT  rates.  As  the  statutory  pension  age 
increase  was  reversed  in  2017,  there  is  also  no 
progress in this area.  

tackling 

rule 

the 

Poland  corrected 
its  excessive  deficit  and 
increased tax compliance, but only limited or no 
progress  was  observed  in  other  public  finance 
areas.  Poland  had  corrected  its  excessive  fiscal 
deficit  and  the  corresponding  excessive  deficit 
procedure  was  closed  in  2015.  No  progress  was 
made  to  limit  the  extensive  use  of  reduced  VAT 
rates,  but  a  number  of  effective  measures  to 
increase  tax  compliance,  in  particular  regarding 
VAT, were  implemented.  At the  same  time,  work 
to  reform  budgetary  planning  and  processes  was 
initiated. Efforts were made to tackle the long-term 
sustainability  of  public  finances,  with  a  2012 
reform 
statutory 
retirement  age  to  67  years.  However,  the  reversal 
of 
increase 
implemented in October 2017 (back to 65 years for 
men  and 60 for  women)  was  not accompanied  by 
substantial  measures  to  increase  the  effective 
retirement  age.  Only  limited  action  was  taken  to 
reform  special  pension  arrangements,  and  the 
measures did not cover miners and farmers. 

increasing 

retirement 

gradually 

statutory 

age 

the 

the 

Graph 2.1:  Overall multiannual implementation of 2011-

2017 CSRs to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact 
** 2011 annual assessment: Different CSR assessment 
categories 
** The multiannual CSR assessment looks at the 
implementation until 2018 Country Report since the CSRs 
were first adopted. 
Source: European Commission 

tackling 

labour  market 
Poland  has  been 
segmentation but at the same time took actions 
with  a  mixed 
labour  market 
impact  on 
participation. Poland has been continuing actions 
to  tackle  labour  market  segmentation  by  limiting 
the  possibility  to  abuse  temporary  employment, 
increasing  social  security  contributions  on  some 
non-standard  labour  contracts  and  introducing 
minimum hourly wage for some of these contracts. 
In  addition,  new  labour  codes  are  being  prepared. 
Poland  has  also  increased  the  availability  of 
childcare so that more women can work. However, 
increasing  the  school  starting  age  and  removing 
the  obligation  for  five-year-olds  to  attend  pre-
school  have  the  opposite  effect.  Some  steps  were 
taken 
recommendations  on 
vocational  education  and  training.  The  lifelong 
learning strategy was adopted in September 2013, 
but  coordination  of  adult  learning  policy  is  not 
efficient  and  there  has  been  no  increase  in 
participation.  The  decrease  of 
the  statutory 
retirement  age  is  likely  to  reduce  the  number  of 
people working or actively looking for a job. 

to  address 

the 

11 

18%38%36%5%3%No ProgressLimited ProgressSome ProgressSubstantialProgressFullImplementation 
 
 
 
2. Progress with country-specific recommendations 

Table 2.1: 

Assessment of 2017 country-specific recommendations 

preparation 

Poland  has  been  continuously  improving  its 
transport  and  energy  infrastructure.  While  the 
pace  of  road  transport  investment  is  satisfactory, 
the  rail  sector  is  still  lagging  behind  due  to 
problems  with 
and 
timely 
implementation  of  rail  projects.  Infrastructure 
investment hinges to a large extent on EU funding 
and is thus prone to cyclical peaks and downturns. 
This  adversely  affects 
the 
construction  sector.  Progress  was  observed  in 
transmission  and 
developing  domestic  energy 
distribution networks. This included opening of the 
liquefied natural gas terminal and some new power 

the  stability  of 

Investment 

generation  capacity. 
in  gas  and 
electricity interconnectors has been delayed, while 
recent 
the 
legislative 
development of renewables. 

hindered 

changes 

Overall, Poland has made limited progress (8) in 
addressing the 2017 CSRs. Limited progress was 
made  in  addressing  recommendations  on  public 

(8)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the Overview Table in the Annex. This 
overall  assessment  does  not  include  an  assessment  of 
compliance with the Stability and Growth Pact. 

12 

 Overall assessment of progress with 2017 CSRs:  Limited CSR 1: Pursue a substantial fiscal effort in 2018, in line with the requirements of the preventive arm of the Stability and Growth Pact, taking into account the need to strengthen the ongoing recovery and to ensure the sustainability of Poland’s public finances. Take steps to improve the efficiency of public spending and limit the use of reduced VAT rates. Limited progress  Limited progress has been made in improving the efficiency of public spending.  No progress was made on limiting the extensive use of reduced VAT rates.     CSR 2: Take steps to increase labour market participation, in particular for women, the low-qualified and older people, including by fostering adequate skills and removing obstacles to more permanent types of employment. Ensure the sustainability and adequacy of the pension system by taking measures to increase the effective retirement age and by starting to reform the preferential pension arrangements. Limited progress  Limited progress in measures to increase participation in the labour market. Some policy measures can be expected to increase activity. No government decision has been made on the reform of the higher education. Lowered statutory retirement age acts towards limiting labour market participation.  No progress in ensuring the sustainability and adequacy of the pension system. No progress in measures to increase the effective retirement age. No progress in reforming the preferential pension arrangements. CSR 3: Take measures to remove barriers to investment, particularly in the transport sector. Limited progress  No progress in ensuring legal certainty and trust in the quality and predictability of policies and institutions. Limited progress in simplifying construction-related procedures. Some progress in removing obstacles to investment in the transport sector. * This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact.   
                                                           
 
 
finance. First steps were undertaken to reform the 
budgetary  framework,  while  the  extensive  use  of 
reduced  VAT  rates  was  not  addressed.  There  has 
been limited progress with the recommendation to 
increase labour force participation. In addition, no 
measures  were  taken  to  increase  the  effective 
retirement  age  and  to  reform  special  pension 
arrangements.  There  was  also  limited  progress  on 
removing  obstacles  to  investment,  including  the 
transport sector. 

The European Structural and Investment (ESI) 
Funds  are  pivotal  in  addressing  key  challenges 
to inclusive growth and convergence in Poland. 
Notably,  these  include  improving  investment  and 
business conditions, promoting R&D in the private 
sector  and  strengthening  links  between  research 
and  industry,  and  reducing  obstacles  to  railway 
investments 
and 
fostering 
administrative  capacities.  The  ESI  Funds  also 
labour 
support  women's  participation 
market,  particularly  through  developing  childcare 
facilities,  strengthening  links  between  vocational 
training and adult learning and the labour market. 

planning 

the 

by 

in 

2. Progress with country-specific recommendations 

can 

from 

request 

Member  States 
the 
Commission  technical  support  to  prepare, 
design,  and 
implement  growth-enhancing 
structural  reforms.  The  Structural  Reform 
Support  Service  (SRSS)  provides,  in  cooperation 
with  the  relevant  Commission  services,  tailor-
made technical support, which does not require co-
financing  and  is  provided  at  a  Member  State's 
request. The support addresses priorities identified 
in  the  context  of  the  EU  economic  governance 
process  (i.e.,  implementation  of  country-specific 
recommendations),  but  the  scope  of  the  SRSS 
support is wider as it can also cover reforms linked 
to  other  Commission  priorities,  or 
reforms 
undertaken at the initiative of Member States.  

environment,  public 

Poland  has  requested  technical  support  from 
the  SRSS  to  help  implement  reforms  in  various 
areas  such  as:  public  administration,  growth  and 
the  business 
financial 
management, taxation, and the financial sector. In 
particular, the SRSS provides support to strengthen 
the  administrative  capacity  of 
the  National 
Revenue  Administration,  improve  public financial 
management,  and  enhance  research,  development 
and innovation.  

13 

 
2. Progress with country-specific recommendations 

Box 2.1: Tangible results delivered through EU support to structural change in Poland 

Poland  is  the  largest  beneficiary  of  the  European  Structural  and  Investment  Funds  (ESI  Funds) 
support and can receive up to EUR 86 billion until 2020. This represents around 3 % of GDP annually over 
the period 2014-2018 and 56% of public investment (1). By 31 December 2017, an estimated EUR 48 billion 
(55 % of the total) was allocated to projects on the ground. This has paved the way for over 750 enterprises 
to cooperate with research institutions; over 1 700 firms are being supported to introduce new products to 
their  markets;  the  capacity  of  childcare  infrastructure  is  raised  to  accommodate  an  additional  146 000 
children. Out of the EU financing, EUR 3.4 billion is to be delivered via financial instruments, which is a 
three-fold increase compared to the 2007-2013 period.  

ESI  Funds  help  address 
implement  country-specific 
structural  policy  challenges  and 
recommendations.  Actions  financed  cover,  among  others,  promoting  R&D  in  the  private  sector; 
strengthening links between R&D, innovation and industry; improving investment conditions and the easing 
of registering business; reducing obstacles to railway investments by fostering project planning and building 
administrative  capacities;  supporting  women's  participation  in  the  labour  market,  particularly  through 
developing  childcare  facilities;  strengthening  links  between  vocational  training  and  the  labour  market  and 
adult  learning  development.  The  Catching-up  Regions  Initiative  aims  at  enhancing  technology  transfers 
between academia and business, helping speeding up and easing administrative processes related to business 
registration, spatial planning and business inspections; and aims at improving the employability of graduates 
of secondary schools. 

Various  reforms  were  undertaken  already  as  precondition  for  ESI  Funds  support (2).  Smart 
Specialisation  Strategies  for  research  and  innovation  were  developed  to  focus  efforts  on  product 
specialisation  with  strong  market  potential.  This has  also helped  improve  cooperation  between  enterprises 
and  public  research  institutions.  The  national  and  regional  transport  plans  have  allowed  the  timely 
preparation of projects, implemented not only with support from ESI Funds, but also from the Connecting 
Europe  Facility,  European  Investment  Bank  (EIB)  loans  and  national  funding.  Reform  of  public 
procurement,  including  e-procurement  is  increasing  the  efficiency  of  public  spending.  The  mapping  of 
health  infrastructure  intends  to  enhance  coordination  and  targeting  of  investments  improving  access  to 
healthcare  by  shifting  the  system  away  from  hospital  based  care  towards  ambulatory  care.  However,  in 
certain instances this has entailed additional amount of time and resources. 

Poland  is  advancing  the  take  up  of  the  European  Fund  for  Strategic  Investments  (EFSI).  As  of 
December  2017,  overall  financing  volume  of  operations  approved  under  the  EFSI  amounted  to  EUR  2.5 
billion,  which  is  expected  to  trigger  total  private  and  public  investment  of  EUR  8.9  billion.  More 
specifically,  35  projects  under  the  Infrastructure  and  Innovation  Window  have  been  approved  so  far, 
amounting to EUR 2.4 billion in EIB financing under the EFSI. This is expected to trigger nearly EUR 6.5 
billion  in investments  (3).  Under  the  SME  Window,  9  agreements  with  financial  intermediaries have  been 
approved  so  far.  European  Investment  Fund  financing  enabled  by  the  EFSI  amounts  to  EUR  56  million, 
which  is  expected  to  mobilise  more  than  EUR  1.1  billion  in  total  investment.  Some  26 000  smaller 
companies or start-ups will benefit from this support. 

Funding  under  Horizon  2020,  the  Connecting  Europe  Facility  and  other  directly  managed  EU  funds  is 
additional  to  the  ESI  Funds.  By  the  end  of  2017,  Poland  has  signed  agreements  for  EUR  4.1  billion  for 
projects under the Connecting Europe Facility. 

https://cohesiondata.ec.europa.eu/countries/PL 

(1)  Public investment is defined as gross fixed capital formation + investment grants + national expenditure on agriculture 

and fisheries. 

(2)  Before  programmes  are  adopted,  Member  States  are  required  to  comply  with  a  number  of  so-called  ex-ante 

conditionalities, which aim at improving conditions for the majority of public investments areas. 

(3)  Figures relating to the Infrastructure and Innovation Window exclude multicountry projects. 

14 

 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

Tax system 

Graph 3.1.1:  Tax revenue as % of GDP, 4 quarter moving 

average 

In  Poland,  the  share  of  direct  taxes, 
in 
particular  on  labour,  in  total  tax  revenue  is 
lower than in the EU. In 2016, the overall tax-to- 
GDP  ratio  at  34.4  %  was  lower  than  the  EU 
average of 40.0 %. This compares to, respectively, 
33.3 % and 39.7 % in 2015. The difference in the 
tax-to-GDP  ratio  was  mainly  driven  by  lower 
revenue from taxes on labour in Poland, one of the 
lowest in the EU. At the same time, revenue from 
taxes  on  consumption  remained  close  to  the  EU 
average (9). 

Tax  compliance  is  improving.  Stronger  tax 
collection  is  driven  to  a  large  extent  by  VAT 
revenue.  According  to  an  EU  wide  study,  the  gap 
between the VAT amount expected to be collected 
and  actually  collected  in  Poland  was  24.5 %  in 
2015,  significantly  above  the  EU  average  of 
12.8 % 
these 
(CASE/IAS,  2017).  However, 
estimates  do  not  yet  reflect  the  effects  of  recent 
reforms.  The  VAT  gap  is  the  only  tax  gap  for 
which  there  are  comparative  estimates  for  all  EU 
countries. The increase in tax revenues in 2016 and 
notably  in  2017  seems  to  indicate  that  the  gap  is 
being  significantly  reduced  (see  Graph  3.1.1). 
National  estimates  also  confirm  this  trend.  For 
example, one source estimated that in 2017 around 
one fourth of the 2016 VAT gap was closed (PwC, 
2017). A strong increase in revenue from corporate 
and personal income taxes is also visible.  

Robust  macroeconomic  conditions  and  a 
number  of  reforms  helped  to  increase  tax 
revenue.  The  current  buoyant  macroeconomic 
environment,  including  strong  consumption  and 
rising  inflation  and  wages  (see  Section  1),  boosts 
tax  revenues.  However,  part  of  the  recently 
observed increase in tax revenue can be attributed 
to efforts strengthening the legal framework with a 
view  to  curbing  tax  evasion  and  avoidance  (for 
the 
details  see  Box  3.1.1).  They 
substantial  reforms  implemented  in  2016  which 
covered  mainly  VAT,  excise  duties  and  corporate 
income tax (CIT) (European Commission, 2017a). 

followed 

(9)  The  composition  is  based  on  European  Commission 

(2017c). 

(1) other taxes exclude social security contributions 
Source: European Commission 

Poland  continues  its  drive  to  tackle  tax  fraud. 
Following  the  2017  implementation  of  a  large 
number of changes to VAT and excise legislations, 
further reforms are planned for 2018. They include 
the  implementation  of:  a  voluntary  split  payment 
for  VAT  (10),  a  law  to  prevent  the  use  of  the 
financial  sector  for  tax  fraud  (11),  a  register  of 
public  receivables,  on-line  cash  register,  and  the 
tobacco  package  focusing  on  the  tobacco  product 
trade.  

(10)  This  consists  of  paying  the  invoiced  amount  to  two 

separate accounts:   
–  net  value  of  a  good  /  service  to  an  account  where  the 
supplier has full access; 
–  the  amount  of  VAT  to  a  VAT  account  from  which  the 
supplier can pay its VAT obligations (to the tax authorities 
or to its suppliers’ VAT accounts). 

(11)  The  objective  of  the  law  is  to  be  achieved  via  a  risk 
assessment  using  information  from  bank  and  credit  union 
accounts.  The  clearing  house,  based  on  information  on 
opened  accounts  and  on 
transactions  performed  by 
businesses, is to calculate on a daily basis a risk score to be 
communicated to tax authorities. It will be then used by the 
authorities to perform a risk analysis. In case of a suspicion 
of  tax  fraud,  tax  authorities  may  block  the  account  for  72 
hours,  with  a  possible  extension  to  three  months.  A  daily 
analysis  of  information  from  taxpayers'  accounts  and  the 
possibility to block accounts based on a risk analysis are a 
novelty  in  the  Polish  tax  system,  potentially  raising 
concerns regarding their proportionality.  

15 

05101520252015-Q32016-Q32017-Q3other taxesVAT revenue% of GDP% of GDP 
 
                                                           
 
                                                           
 
 
3.1. Public finances and taxation 

Box 3.1.1: Policy highlights: measures to improve tax compliance 

In  2013-2016,  Poland  received  country-specific  recommendations  to  increase  tax  compliance.  It  has  been 
addressing  this  challenge  through  a  number  of  legislative  changes,  in  particular  related  to  VAT.  Their 
implementation  started  in  2014  and  significantly  intensified  in  2016-2017.  Initially,  anti-fraud  measures 
included  reverse  charge  and  joint  responsibility  of  vendor  and  client  for  the  payment  of  VAT  in  some 
sectors.  In  2016,  the  country  modified  a  number  of  laws  under  the  ‘fuel  package’  with  a  view  to  curbing 
organised  VAT  fraud  activity  in  the  fuel  sector.  Also  in  2016,  a  general  anti-avoidance  rule  for  taxation 
entered into force. In 2017, an amendment to the VAT law further extended the application of the reverse 
charge mechanism and joint liability as well as limited the use of quarterly VAT returns. Additionally, some 
100 000 companies were obliged to regularly submit to the tax authorities a standard audit file containing 
transaction  details.  Also,  the  law  on  tracking  the  transport  of  certain  goods  became  applicable.  On  top  of 
that,  the  tax  and  customs  administrations  merged  and  underwent  a  restructuring  process.  They  were  also 
equipped with new IT tools facilitating detection of fraud.  

Also,  the  scope  of  application  of  the  Standard 
to  micro-
Audit  File  was  extended  further 
companies  (some  1.5  million  taxpayers)  and  an 
amendment  of  the  framework  tax  law  is  being 
prepared. 

the  customs  and 

The  National  Revenue  Administration  became 
operational  in  2017.  To  improve  effectiveness 
and  create  synergies, 
tax 
administrations  were  merged  into  one  body.  The 
new  institution  has  more  powers.  The  way  tax 
audits  are  performed  has  changed  considerably. 
For instance, in many cases the appeal against the 
findings  of  an  audit  needs  to  be  lodged  with  the 
authority that issued it. This may limit the chances 
of  a  positive  outcome  for  businesses.  There  is 
broad consensus that tax authorities need adequate 
organisation,  tools  and  powers  to  combat  fraud 
(European  Commission,  2016a;  IMF,  2015).  It  is 
important, however, to ensure a proper balance so 
that  effective  enforcement  does  not  adversely 
affect honest businesses, in particular small ones. 

An  efficient  tax administration  remains crucial 
for  systemic  improvement  in  tax  compliance. 
The  amount  of  resources  invested  in  information 
technology  (IT)  can  be  taken  as  a  proxy  for  how 
modernised  a  tax  administration  is  and  tends  also 
to  go  hand  in  hand  with  good  performance.  The 
recurrent  budget  allocated  to  IT  expenditures  in 
Poland was among the lowest in OECD countries, 
at 1 % of the administration’s total budget in 2015 
(OECD,  2017a).  Although,  the  National  Revenue 
Administration  became  operational  in  early  2017, 
some  processes  are  still  being  developed  and 
remain  fragmented,  for  example  databases.  To 
date,  IT  applications  have  been  developed  to 

process information collected from Standard Audit 
Files and there are plans to set up an IT centre in 
2018. Some effects are already visible, with more 
focus  on  desk  audits,  automated  analysis  of 
available  tax-related  data  and  prompt  feedback  to 
taxpayers on issues identified. This is in line with 
the OECD findings on how tax administrations can 
use technology to become more effective (OECD, 
2016a). In addition, the Supreme Audit Office has 
legal  and 
positively  assessed 
organisational  reforms  in  its  recent  audit  of  tax 
administration  performance  in  terms  of  respecting 
taxpayer’s  rights  and  protecting  state  revenue 
(NIK, 2017a).  

the  previous 

Changes  to  the  tax  system  yielded  higher 
revenues  but  increased  uncertainty.  In  2016,  a 
record number of almost 32 000 pages of legal acts 
entered  into  force  in  Poland  (Grant  Thornton, 
2017a).  Over  40 %  of  them  had  an  impact  on 
business  activity,  including  nearly  1 800  pages  of 
tax-related  laws.  The  practical  application  and 
legal interpretation of several recent measures have 
posed many challenges. For instance, the Standard 
Audit File became compulsory for large companies 
only  a  few  months  after  the  relevant  law  was 
adopted.  It  required  some  quick  modifications  of 
companies’ 
systems.  Another 
example  is  the  construction  sector  which  raised 
concerns that the interpretation of new regulations 
could  potentially  expose  honest  taxpayers  to  the 
risk of wrong interpretation and non-compliance. 

bookkeeping 

Tax compliance remains burdensome in Poland 
but  simplification  efforts  are  ongoing.  The  260 
hours spent in 2016 by a model company in Poland 
to meet its tax obligations (11 hours fewer than in 

16 

 
3.1. Public finances and taxation 

linked  to  CO2  emissions.  In  2017,  the  work  on 
amending  legislation  on  car  taxation  (excise  duty 
on  cars)  –  which  included  linking  it  to  CO2 
emissions – was suspended; however, excise duties 
on electric vehicles were abolished in 2018. 

Fiscal framework 

in 

an 

fiscal 

framework 

expenditure 

the  whole 

and 
almost 

(including  a  ceiling  enshrined 

The  fiscal  framework  remained  unchanged  in 
2017 with numerical fiscal rules as its strongest 
element.  The 
comprises 
numerical  fiscal  rules,  a  medium-term  budgetary 
framework,  independent  fiscal  institutions  and 
budgetary procedures. Numerical fiscal rules cover 
the 
debt 
Constitution) 
rule 
general 
encompassing 
government  sector  as  well  as  individual  spending 
limits  for 
local  governments.  The  stabilising 
expenditure  rule  –  used  for  the  first  time  for  the 
2015  budget  –  determines  a  maximum  amount  of 
public expenditure in a given year. Unlike a simple 
debt rule, it is countercyclical in nature because of 
its  design  and  permanent  character  –  it  prevents 
policymakers  from  over-spending  also  in  good 
times. However, the amendments to the rule in late 
2015 that allowed for higher expenditure limits in 
the  2016  budget  raised  concerns  about 
its 
credibility.  Since  then,  the  rule  has  not  been 
modified and in the 2017 convergence programme 
the authorities underlined their commitment to it. 

fiscal  policy.  Their 

Poland is the only EU Member State without a 
fiscal  council (14).  Such  councils  are  watchdogs 
for  monitoring 
remit 
significantly  differs  across  countries,  but  usually 
includes  assessing  macroeconomic  and  budgetary 
forecasts,  assessing  compliance  with  fiscal  rules 
and  analysis  of  long-term  sustainability  of  public 
finances.  Fiscal  councils  are  important  because 
they  help 
the  key 
challenges  of  fiscal  policy  and  public  finances. 
Poland has no plans to set up a fully-fledged fiscal 
council.  Some  of  the  functions  mentioned  above 
are  currently  performed  by  several  bodies  in 
Poland,  but  this  fragmented  set-up  weakens  their 
impact. 

the  public  about 

inform 

(14)  The Czech Republic does not yet have a functioning fiscal 
council  either  but  is  in  the  process  of  nominating  its 
members. 

2015) was the third longest time in the EU (World 
Bank,  2017).  The  efficiency  of  post-filing 
processes  such  as  obtaining  tax  refunds  or  being 
audited remained moderate (World Bank and PwC, 
2017)  but  simplification  efforts  are  underway. 
Rates of e-filings have substantially increased. The 
authorities  consulted  the  private  sector  on  some 
issues. In 2017, the Ministry of Finance initiated a 
set of tax consultations with businesses to increase 
certainty  and  simplify  procedures.  For  example,  a 
consultation  was  run  on  improving  the  Standard 
Audit File and creating a list of practices for VAT 
which, when followed, would provide certainty for 
honest taxpayers. 

the 

increases 

significantly 

Poland continues to apply reduced VAT rates to 
an extensive number of goods and services. This 
leads to high foregone revenue and complicates the 
VAT  system.  The  VAT  policy  gap,  capturing  the 
effects  of  applying  reduced  rates  and  exemptions, 
was  the  highest  in  the  EU  (CASE/IAS,  2017). 
More  than  half  of  the  gap  comes  from  applying 
reduced rates (12). The wide application of reduced 
rates 
of 
compliance. For instance, Grant Thornton (2017b) 
reported  that  in  2015  and  2016,  taxpayers  made 
respectively 1 825 and 1 193 requests to tax offices 
for  individual  interpretations  of  the  applicable 
VAT  rates  for  food  products  alone  (5 %  vs  8 %). 
Poland is currently analysing its system of reduced 
VAT rates and acknowledges the need to improve 
it,  particularly  to  ensure  clearer  definitions  of 
goods  and  services  for  the  application  of  reduced 
rates (13). It is not yet known whether and to what 
extent  this  analysis  will  result  in  actual  changes 
and structural improvements.  

cost 

Poland  does  not  use  environmental  taxes  to 
stimulate  a  more  efficient  use  of  energy  and 
reduce  greenhouse  emissions.  The  implicit  tax 
rate  on  energy,  at  below  60%  of  the  EU  average, 
remains  relatively  low  (European  Commission, 
2017c). Rates on transport fuels are below the EU 
average  and  a  number  of  tax  exemptions  are 
available  e.g.  for  agriculture  and  energy-intensive 
industries. Also, vehicles taxation in Poland is not 

(12)  The so-called actionable VAT policy gap stood at 27.9 %. 
The  reduced  rate  gap  was  15.5 %  and  the  actionable 
exemption gap was 12.4 %. 

(13)  Reply  from  the  Ministry  of  Finance  to  a  parliamentary 
question by a member of the parliament on 4 August 2017, 
http://www.sejm.gov.pl/sejm8.nsf/interpelacja.xsp?docume
ntId=15DF0FD0A937504FC1258155004AFB86  

17 

 
                                                           
                                                           
3.1. Public finances and taxation 

Long-term sustainability 

No major risks to fiscal sustainability have been 
identified.  The  Commission's  2017  analysis  of 
debt sustainability (European Commission, 2018a) 
indicates  low  short-term  fiscal  sustainability  risks 
for  Poland.  In  the  medium  term,  the  S1  fiscal 
sustainability  indicator  points  to  a  medium  risk 
given that the debt-to-GDP ratio is expected to rise 
somewhat  in  the  different  scenarios  (see  Graph 
3.1.2). The long-term fiscal sustainability indicator 
S2 points to a similar conclusion. It indicates that 
an  upfront  adjustment  effort  of  3.1  pps  of  GDP 
would  be  needed  to  ensure  that  the  debt-to-GDP 
ratio  is  not  on  an  ever-increasing  path.  The 
medium  risk  over  the  long  term  is  driven  by  the 
initial  budgetary  position  (i.e.  still  sizeable  fiscal 
deficit  projected  at  1.9 %  of  GDP  for  2019)  and 
the outlook for age-related expenditure (1.2 pps of 
GDP). 

Graph 3.1.2:  Medium-term public debt scenarios 

Source: European Commission 

The lowering of the statutory retirement age in 
2017  will  be  a  drag  on  public  finances.  In  late 
2017, Poland lowered the statutory retirement age 
to  60  years  for  women  and  65  years  for  men, 
reversing an ongoing gradual increase to 67 years 
for  all.  Mainly  as  a  result  of  this  factor,  public 
pension  expenditure  is  expected  to  increase  by 
around 1.0 pp. of GDP in the years 2030-2040 and 
to  a  lower  extend  in  the  following  decades.  The 
lowering  of  the  statutory  retirement  age,  without 
any  accompanying  measures 
the 
effective  retirement  age,  will  also  affect  the 
pension  replacement  rate  which  is  expected  to 
decrease  strongly  in  the  decades  to  come  (see 
Section 3.3). With a significant share of pensioners 
projected 
sufficient 
contributions, the budget will need to top up their 
pensions  to  a  certain  minimum  level.  As  a 
consequence,  public  expenditure  on  minimum 

accumulate 

increase 

not 

to 

to 

that 

factors 

various 

hamper 

the  Commission 

Budget planning and procedures do not support 
efficient  use  of  available  funds.  As  highlighted 
by 
(European  Commission, 
2017a),  the  current  setup  creates  a  situation  ‘in 
which  an  effective  and  efficient  management  and 
reallocation  of  funds  pose  challenge’.  This  was 
also underlined by the IMF (2017a) which pointed 
efficient 
to 
management  of  public  funds.  They  include  the 
complexity  of  the  current  budget  structure;  a  lack 
of  robust  and  binding  medium-term  planning; 
substantial  spending  decided  outside  the  budget; 
and  a  lack  of  a  structured  assessment  of  the 
effectiveness  of  expenditure.  Although 
the 
government  adopts  a  medium-term  budgetary 
framework  every  year 
form  of  a 
Multiannual  State  Financial  Plan),  the  public 
finance targets set in it do not constitute targets for 
the  budgets  laws  for  the  years  it  covers.  In  the 
current  situation, 
identify 
inefficient  spending  and  reallocate  funds  to  areas 
where  expenditure  would  add  most  value;  also  as 
spending  reviews  are  not  part  of  the  budget 
process. The need for tools to do this is even more 
acute  as  the  share  of  inelastic  expenditure  has 
recently  increased  (Section  1).  As  also  underlined 
by  the  Ministry  of  Finance  (MF,  2015),  such  a 
situation  may  lead  to  a  suboptimal  allocation  of 
funds. 

is  difficult 

the 

(in 

to 

it 

is  committed  to 

improving  budget 
Poland 
planning  and  procedures. 
the 
In  2016, 
government  announced  a  reform  of  the  budget 
process and work continued in 2017. The reform is 
intended  to  address  the  major  issues  in  public 
finance  management.  It  includes  the  introduction 
of  more  binding  medium-term  planning,  a  formal 
inclusion  of  spending  reviews  in  the  budget 
process  and  a  simplification  of 
the  budget 
structure.  It  also  includes  several  operational 
changes, for instance a new calendar for preparing 
the  budget  and  a  change  of  forecasting  models.   
Work  is  ongoing  to  strengthen  macroeconomic 
forecasting, modernise the Chart of Accounts, and 
strengthen the medium term budgetary framework. 
The reform has the potential to make the spending 
significantly  more  effective  and  efficient,  but  the 
change  from  the  current  budget  decision-making 
process to the new process will require time and a 
strong  commitment.  No  implementation  date  for 
the entire comprehensive reform has yet been set. 

18 

4547495153555759616365201720182019202020212022202320242025202620272028% of GDP Baseline no-policy change scenarioStandardized (permanent) negative shock (-1p.p.) to the short- and long-term interest rates on newly issued androlled over debtStandardized (permanent) positive shock (+1p.p.) to the short- and long-term interest rates on newly issued androlled over debtBaseline no-policy change scenarioPermanent decrease of the interest rates on debt by 1 percentage point Permanent increase of the interest rates on debt by 1 percentage point 
 
3.1. Public finances and taxation 

average pension paid by the general system (ZUS, 
2017),  while  the  average  age  of  newly  retired 
miners was less than 49 in 2016. 

pensions is expected to increase. As an example, in 
the scenario simulated by EC-EPC (2018), it raises 
from  0.1 %  of  GDP  in  2016  to  2.4 %  of  GDP  in 
2070. 

The  change  of  rules  on  social  security 
contributions,  that  could  increase  the  short-
term revenue and increase pension expenditure 
in  the 
long-term,  was  put  on  hold.  The 
Parliament, in a relatively short procedure, decided 
that  from  2019, 
the  cap  on  social  security 
contributions would be abolished. The pension and 
disability  allowance  contributions  would  be  paid 
based on the actual salary, instead of being capped 
at 30 average monthly wages. In the short term, the 
reform  was  expected  to  generate  additional  social 
contributions  revenue  of  some  0.3 %  of  GDP 
annually.  This  assumed  that  there  would  be  no 
significant  shift  to  other  forms  of  employment 
among  the  highest-paid  individuals  (e.g.  self-
the  defined-contribution 
employment).  Given 
pension  system,  in  the  long  term,  this  change 
would  create  obligations  to  pay  higher  pensions. 
The  reform  was  put  on  hold  as  the  President 
decided  not  to  sign  the  law  and  sent  it  to  the 
Constitutional Tribunal for review (15).  

pension 

arrangements 

Special 
remained 
broadly  unchanged  in  2017.  The  lowering  of 
pension-related emoluments for officials of certain 
former special services was the only major change 
to  the  special  pension  schemes  that  entered  into 
force in 2017. However, its impact on the budget, 
estimated  at  some  0.02 %  of  GDP  per  year,  is 
negligible.  At  the  same  time,  the  costly  special 
pension schemes, particularly for farmers (KRUS) 
and  miners,  enjoyed  privileges  compared  to  the 
general system (ZUS). Actual contributions to the 
farmers’  pension  scheme  cover  less  than  10 %  of 
its  total  bill.  In  turn,  the  public  subsidy  to  the 
farmers’  pension  scheme,  although  in  nominal 
terms lower than in 2016, was nearly 1 % of GDP 
in  2017.  The  preferential  contribution  rates  of  the 
farmers’  pension  scheme  and  the  low  financial 
incentives  for  switching  to  the  general  system 
combined  with  a  special  tax  system  for  farmers 
hamper labour mobility (see Section 3.3). In 2017, 
the average miner’s pension was almost twice the 

(15)  The  President  expressed  concerns  regarding  the  law-
its  public 
making  process, 
consultation  phase.  See  Section  3.4  for  a  broader 
discussion of, often, fast legislative procedures in Poland. 

in  particular  as  regards 

19 

 
                                                           
3.2.  FINANCIAL SECTOR 

than 

The  banking  sector  remains  liquid  and  well 
capitalised.  Banks  are  well  capitalised  with  an 
average  capital  adequacy  ratio  of  17.5 %  and 
Tier 1  capital  ratio  of  16.1 %  in  Q2  2017,  about 
two  percentage  points  higher 
in  2015. 
Liquidity  indicators,  such  as  the  loan  to  deposit 
ratio  (94.7 %  in  Q2 2017),  point  to  a  comfortable 
buffer  as  a  result  of  private  sector  deposit  growth 
averaging  9 %  over  2015-2016.  Polish  banks  are 
predominantly  funded  through  domestic  deposits, 
which  represented  close  to  60 %  of  the  balance 
sheet total, and liabilities towards foreign financial 
entities,  mostly  parent  banks,  were  equivalent  to 
around 12 % of total funding. The quality of assets 
in  the  sector  has  remained  sound  on  the  back  of 
strong  macroeconomic  data,  with 
the  non-
performing loans ratio at 4.9 % in Q2 2017 (Table 
3.2.1).  But  the  performance  of  individual  banks 
varies and some may need to increase their capital.  

Table 3.2.1:  Banking sector financial stability indicators, 

2015-2017 

Source: ECB 

Low  interest  rates,  the  bank  levy  as  well  as 
contributions  to  the  Bank  Guarantee  Fund 
weigh  on  banks’  profitability.  Profitability 
indicators  declined  in  2015  and  have  remained 
broadly  stable  since  then.  On  top  of  record  low 
interest  rates,  profits  have  been  reduced  by  two 
factors. First, the bank levy introduced in February 
2016  was  equivalent,  in  nominal  terms,  to  some 
19%  of  total  2015  profits.  Second,  in  2016  banks 
needed to contribute approximately EUR 1 billion 
into  the  Bank  Guarantee  Fund  (BGF),  which  had 
to  be 
the 
bankruptcies  of  SK  Bank  and  credit  unions.  In 
2017  the  BGF  and  resolution  fund  contributions 
were  governed  by  the  newly  implemented  bank 
recovery and resolution directive and amounted to 
some EUR 0.5 billion. The profitability outlook for 
the sector is uncertain given the policy discussions 
on  various  measures  to  address  foreign-currency 
loans  and  additional  provisions  for  disputes  on 
loans in a foreign currency. 

replenished 

following 

regularly 

The  stock  of  mortgage  loans  denominated  in  a 
foreign  currency  has  declined  and  is  not  a 
systemic  risk  per  se,  though  it  does  pose 
challenges  for  some  banks.  Neither  the  central 
bank  nor 
the  financial  supervisory  authority 
consider  the  stock  of  foreign  currency  mortgages 
to  be  generating  systemic  risks.  In  the  banking 
system,  the  stock  of  foreign-currency  mortgage 
loans has been decreasing on average by some 6 % 
a year for the last five years to the level equivalent 
to  7.2  %  of  GDP  and  35 %  of  the  total  mortgage 
loan stock in October 2017. However, some banks 
still  have  a  sizeable  foreign-currency  mortgage 
loan  book.  This  has  two  implications.  First,  these 
banks  are  exposed  to  valuation  and  compensation 
losses, if their loan book were to be converted into 
domestic  currency  based  on  historical  exchange 
rates 
court 
judgements).  Second,  a  sizeable  foreign-currency 
position forces lenders to rely for risk management 
either on funding from a foreign parent bank, from 
foreign currency bonds or the derivatives market.  

legislation  or 

through 

(either 

No major legislation on loans denominated in a 
foreign  currency  was  adopted,  despite  multiple 
draft  proposals.  The  authorities’  approach  has 
both  legislative  and  regulatory  elements.  The 
legislative proposals tabled so far aimed on the one 
hand  to  offer  some  compensation  for  excessive, 
unfairly  charged,  foreign-currency  spreads  and  on 
the other hand tried to strongly incentivise banks to 
convert  foreign-currency  mortgages  into  PLN. 
This  operation  would  use  a  fund  financed  by 
mandatory  bank  contributions,  proportionate  to 
their  foreign-currency  mortgage  exposure  (in  the 
version  proposed  by  the  President’s  Office  in 
August  2017).  The  main  regulatory  element  takes 
the form of the nine recommendations released by 
the Financial Stability Committee in January 2017. 
The key incentive is in the form of risk weights of 
150 % 
loans 
(compared with the normal weight of 100 %).  

foreign-currency  mortgage 

for 

interconnections 

Sovereign-bank 
became 
stronger.  The  financial  crisis  drew  attention  to 
sovereign-bank  linkages,  which  in  some  instances 
have  increased  exposure  to  market  and  liquidity 
risks,  ultimately  becoming  a  major  liability  for 
some  countries.  In  Poland,  the  sovereign-bank 
nexus became more relevant in the last two years. 
The introduction of the bank levy, which exempts 
Polish  sovereign  bonds  from  the  tax,  increased 
banks’ holdings  of  these bonds  in  the  first half of 

20 

201520162017Q2Non-performing debt [% of total]5.04.74.9Coverage ratio  [%]54.555.855.2Loans to Deposits Ratio [%]94.491.294.7Tier 1 Ratio [%]14.515.416.1Solvency Ratio [%]15.816.917.5Return on Equity [%]7.77.56.9Return on Assets [%]0.90.80.8 
 
 
 
 
3.2. Financial sector 

relatively  little  traction  in  the  covered  bond 
market.  And 
the  dominance  of  flexible-rate 
contracts may become a challenge in future, given 
the current record low interest rates. 

Graph 3.2.1:  Credit growth, 2012-2017 (annual % change) 

2016. In 2017, Polish banks held about 40 % of the 
outstanding  amount  of  Polish  sovereign  bonds, 
equivalent  to  some  14 %  of  banks’  balance  sheet. 
In addition, with the acquisition of the controlling 
stake  in  Pekao  SA  now  the  first  and  the  second 
largest banks in Poland are controlled by the state, 
bringing  the  share  of  directly  and  indirectly  state-
controlled banks up to around 36 % of the sector’s 
total  assets  in  mid-2017.  This  acquisition  also 
presents 
the 
challenge  given  the  ownership  links  between  the 
leading insurance company and the second largest 
bank. 

financial  supervision  with 

the 

Financial and macro-prudential supervision are 
playing an increasingly important role. Over the 
crisis years, Poland’s financial supervision proved 
to  be  prudent  and  forward-looking.  Currently, 
discussions  are  ongoing  on  some  form  of  merger 
between financial supervision and the central bank. 
The  reasons  given  for  this  are  potential  synergies 
between the micro-prudential supervision of banks 
and  macro-supervision  of  the  banking  sector.  The 
increasing  role  of  the  state  in  the  financial  sector 
together with a higher share of government bonds 
held by banks underline the paramount importance 
of strong and independent supervision and a robust 
macro-prudential framework. 

Credit  growth  was  supported  by  low  interest 
rates  and  strong  economic  growth,  though  the 
dominance  of  variable-interest-rate  mortgage 
loans  might  become  a  challenge  in  the  future. 
The growth in loans to the private sector has been 
broadly  in  line  with  nominal  GDP  growth.  Loans 
to  the  corporate  sector  grew  by  around  7-8 %  in 
the  second  half  of  2017,  driven  by  investment 
loans  (Graph  3.2.1).  The  stock  of  loans  to 
households  increased  by  some  5-6 %  annually, 
driven by a strong increase in consumer lending on 
the back of improved households’ creditworthiness 
and  record-high  consumer  confidence.  The  stock 
of housing loans grew only by around 3 %, a result 
of  robust  growth  of  Polish  zloty  denominated 
mortgages  and  falling  foreign-currency 
loans. 
Banks  have  tightened  rules  on  housing  loans, 
primarily due to regulatory factors, including new 
rules on acquiring agricultural real estate and more 
stringent  risk  parameters  following  supervisory 
recommendations.  Mortgage  lending  products  are 
predominantly  based  on  variable  interest  rates 
(adjusted on  a  quarterly  or  half-yearly  basis).  The 
limited  use  of  fixed-interest-rate  contracts  reflects 

(1) The graph shows annual growth rates in indices of 
notional debt stocks. This data does not include revaluations 
and only reflects transactions. 
Source: ECB 

Poland’s capital market is one of the largest and 
most  developed  in  central  Europe,  though 
growth has slowed in recent years. Following an 
exceptionally  good  2017, 
the  Warsaw  Stock 
Exchange  (WSE)  market  capitalisation  increased 
to  some  EUR 170  billion  or  36 %  of  GDP  in 
December 2017. The Polish capital market has all 
the  features  of  a  developed  market,  including 
secure trading and post-trade services as well as an 
advanced  infrastructure.  From  September  2018, 
the  market  will  be  upgraded  to  the  status  of 
‘developed market’ from the ‘advanced emerging’ 
category  by  the  FTSE  Russel  indices.  Over  the 
past  20  years,  the  WSE  has  become  a  hub  for 
foreign  institutional  investors  targeting  equity 
investments  in  the  region  as  well  as  the  preferred 
capital market for initial public offerings of foreign 
companies  from  neighbouring  countries.  But  the 
Polish  market  still  faces  challenges  including  the 
relatively  small  size  of  both  the  market  itself  and 
the listed companies, the low free float resulting in 
low  turnover,  the  uncertainty  about  the  future  of 
the sizeable stock held by open pension funds, and 
the underdeveloped individual savings and pension 
plans. 

21 

0246810121416Total credit to private sectorLoans to non-financial corporationsLoans to households & NPISHMortgage loans to householdsy-o-y %change  
 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

Labour market 

employment 

Employment  grew  stronger 
in  2017  while 
unemployment  hit  record  lows.  Employment 
growth  was  particularly  strong  in  manufacturing 
and  certain  service  sectors.  This  benefitted  all 
population  groups,  with 
rates 
increasing  for  both  men  and  women  in  almost  all 
age  groups  (except  women  aged  30-34),  people 
with  different  educational  backgrounds  and 
persons  with disabilities.  In  the  first half of  2017, 
the employment rate of those aged 20-64 exceeded 
70 %  for  the  first  time  since  data  has  been 
available.  In  parallel,  the  unemployment  rate 
continued 
in 
to  decline,  hitting  record 
subsequent  quarters.  Falls  in  unemployment  were 
observed  for  both  female  and  male  populations, 
and 
in  both  rural  and  urban  areas.  Youth 
unemployment  (i.e.  people  aged  15-24)  also 
declined steadily: at 14.7 % it was well below the 
EU  average  of  16.6 %  in  Q3 2017.  Finally,  the 
share  of 
job  seekers  among  all 
long-term 
unemployed people also decreased. 

lows 

The  supply  of  skilled  labour  has  become  a 
significant  challenge.  Companies  are  reporting 
shortages of skilled workers in various sectors (see 
Section 1). The unemployment rate is at the record 
lows and the demographic outlook is negative (see 
European  Commission,  2017a).  This  emphasises 
the 
force 
participation and investment in skills.  

challenge  of 

increasing 

labour 

but 

grow, 

continued 

The  number  of  people  in  work  or  actively 
looking 
low 
to 
participation  by  specific  groups  remains  a 
challenge. The activity rate was improving, but at 
69.7 %  in  Q2 2017  (for  ages  15-64)  it  was  still 
below the EU average of 73.3 %. The activity rate 
is close to the EU average in the 25-49 age group, 
while remaining visibly lower among people aged 
55-64  and  the  youngest  generation  (15-24).  Also, 
women  with 
are 
below-tertiary 
participating  to  a  significantly  lesser  extent  than 
the  EU  average  (Table  3.3.1).  Economic  activity 
by  the  disabled  increased  in  2017,  yet  still 
remaining low at 29.9 % in Q3 2017 (16). 

education 

(16)  Data  on  economic  activity  of  disabled  are  based  on  the 
Polish Labour Force Survey but cannot be easily compared 
with other countries due to methodological differences.  

Table 3.3.1:  Differences between activity rates in Poland 

and EU – by age class and educational 
attainment, Q3 2017, percentage points 

Source: Eurostat 

Limited access to childcare, an underdeveloped 
long-term  care  system  and  disincentives  built 
into  the  social  benefits  system  can  discourage 
especially  women  from  participating  in  the 
labour  market.  Insufficient  access 
to  early 
childcare  and  pre-school  facilities  is  particularly 
detrimental to women’s participation in the labour 
market.  Formal  enrolment 
in  child  care  for 
children under 3 stood at 7.9 % in 2016, compared 
to  the  EU  average  of  32.9 %.  Since  2011  Poland 
has  been  taking  action  to  develop  early  child 
education  and  care  facilities  and  the  requirements 
for  service  provision  were  liberalised  in  January 
2018.  The  effects  of  this  measure  are  yet  to  be 
seen.  Another  important  factor  is  the  design  of 
financial support for people who provide long-term 
care to family members, which prohibits the take-
up  of  paid  employment.  For 
low-income 
households  with  young  children,  the  incentives  to 
take up low-paid work appear weak because of the 
eligibility  conditions  of  some  social  benefits 
(Bargu  and  Morgandi,  2018).  The  child  benefit 
to  have  played  a  discouraging  role 
appears 
(Magda, 2017). The design features  of the special 
pension regime for farmers continue to discourage 
workers  from  moving  from  agriculture  into  other 
sectors,  while  deficiencies  in  the  housing  market 
and  transport  infrastructure  limit  geographical 
mobility (European Commission, 2017a). 

Economic  activity  by  older  people  is  hindered 
by  low  skills,  the  recently  lowered  retirement 
age,  health-related  issues  and  low  take-up  of 
part-time work. The over 50s have a significantly 
worse self-declared health status than in other EU 
countries  (Myck  and  Oczkowska,  2017).  Mental 
health appears to be particularly problematic, with 
a  more  mixed  picture 
for  physical  health, 
depending  on  the  indicator  used.  Participation  in

22 

sexeducational levelnon-tertiarytertiarynon-tertiarytertiary20 to 24 years2.1-2.8-8.9-9.025 to 34 years2.83.9-10.7-0.235 to 49 years-1.00.4-2.11.950 to 59 years-7.2-2.6-5.41.560 to 64 years-4.410.9-13.8-11.965 to 69 years0.911.3-3.41.3malesfemales 
 
                                                           
 
 
 
3.3. Labour market, education and social policies 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights   

The  European  Pillar  of  Social  Rights,  proclaimed  on  17  November  2017  by the European  Parliament,  the 
Council  and  the  European  Commission,  sets  out  20  principles  and  rights  to  benefit  citizens  in  the  EU.  In 
light of the legacy of the crisis and changes in our societies driven by population ageing, digitalisation and 
new ways of working, the Pillar serves as a compass for a renewed process of convergence towards better 
working and living conditions. 

Poland  performs  relatively  well  on  the  indicators  of  the  Social  Scoreboard  (1)  supporting  the 
European  Pillar  of  Social  Rights.  The  situation  is  favourable  in  terms  of  access  to  the  labour  market. 
Indicators related to poverty and income inequality have been improving over the past years. At the same 
time, the country faces challenges on issues such as providing formal childcare for young children and the 
development of digital skills. This also reflects a rapidly evolving labour market situation. Access to quality 
healthcare  and  long-term  care  are  issues  of 
concern. 

The  gender  employment  gap  remains 
relatively high. Although female employment 
and  activity  rates  have  been  increasing,  they 
are still well behind those of men. A number 
of  institutional  factors  leading  to  inadequate 
work-life balance provisions, including a very 
low childcare coverage for children aged less 
than  three,  play  a  key  role  in  this  respect. 
Poland  took  steps  to  address  this  challenge, 
but it is too early to assess its effects. 

the 

low 

fast, 

very 

increasing 

Gross  disposable  household  income  has 
been 
and 
unemployment is at record lows. The strong 
household  income  gains  in  recent  years  have 
been related to rising employment and wages 
in 
inflation  environment.   The 
education  system  overall  performs  well,  as 
witnessed  by  the  low  number  of  early  school 
leavers (5.2 % in 2016, below half of the EU 
average)  and  high  tertiary  attainment.  Early 
school leaving has stayed low for a long time, 
inter  alia  owing  to  effective  enforcement  of 
educational  obligation  up  till  the  age  of  18 
and 
the  well-established  reintegration 
programme organised by the Voluntary Youth 
Corps  for  young  people  who  dropped  out  of 
school.  

to 

(1)   The  Social  Scoreboard  includes  14  headline  indicators,  of  which  12  are  currently  used  to  compare  Member  States 
performance.  The  indicators  "participants  in  active  labour  market  policies  per  100  persons  wanting  to  work"  and 
"compensation  of  employees  per  hour  worked  (in  EUR)"  are  not  used  due  to  technical  concerns  by  Member  States. 
Possible alternatives will be discussed in the relevant Committees. Abbreviation: GDHI – gross disposable household 
income. 

education  and  training  and  the  incidence  of 
informal  learning  among  people  aged  55-64  is 
among  the  lowest  in  the  EU (17).  The  statutory 
retirement  age  used  to  be  a major factor  affecting 

(17)  Based on the 2016 edition of the Adult Education Survey. 

labour  force  participation.  The  growth  in  activity 
in recent years was related to the removal of early 
retirement  schemes  and  a  gradual  increase  in  the 
statutory  retirement  age.  In  this  context,  the 
retirement  age 
significant 

lowering  of 

the 

23 

Early leavers from education and training (% of population aged 18-24)Better than averageGender employment gapTo watchIncome quintile ratio (S80/S20)On averageAt risk of poverty or social exclusion (in %)On averageYouth NEET (% of total population aged 15-24)On averageEmployment rate (% population aged 20-64)On averageUnemployment rate (% population aged 15-74)Better than averageGDHI per capita growth Best performersImpact of social transfers (other than pensions) on poverty reductionTo watchChildren aged less than 3 years in formal childcareCritical situationSelf-reported unmet need for medical care Critical situationIndividuals' level of digital skillsTo watchSocial protection and inclusionDynamic labour markets and fair working conditionsEqual opportunities and access to the labour marketPOLANDMembersStates'areclassifiedaccordingtoastatisticalmethodologyagreedwiththeEMCOandSPCCommittees.ThemethodologylooksjointlyatlevelsandchangesoftheindicatorsincomparisonwiththerespectiveEUaverages,andclassifiesMemberStatesinsevencategories(from"bestperformers"to"criticalsituations").Forinstance,acountrycanbeflaggedas"betterthanaverage"iftheleveloftheindicatorisclosetoEUaverage,butitisimprovingfast.Formethodologicaldetails,please consult the draft Joint Employment Report 2018, COM (2017) 674 final.NEET:neitherinemploymentnorineducationortraining;GDHI:grossdisposablehousehold income 
 
                                                           
(particularly  for  women)  is  a  source  of  concern. 
Poland  is  one  of  the  only  two  EU  Member  States 
where  legislation  does  not  foresee  equalisation  of 
retirement age for men and women. Part-time work 
is  not  as  popular  among  older  people  in  Poland 
(only  13 %  of  all  employed  people  aged  55-74 
worked part-time in the first half of 2017) as in the 
EU as a whole (over 25 %). 

Migrant  workers  are  helping  to  ease  labour 
shortages  in  Poland.  Immigration  continued  to 
increase  fast  in  2017,  according  to  the  available 
data  (18).  While  more  permanent  forms  of 
employment  among  foreigners  appear 
to  be 
increasing  rapidly  (120 %  annual  increase  in  the 
number of work permits in the first half of 2017), 
most  non-EU  nationals  (especially  from  Ukraine) 
in Poland still work through a simplified procedure 
that enables work for 6 months within a given 12-
month  period.  Such  temporary  labour  migration 
may  not  fully  utilise  migrants’  skills  and  may  be 
sensitive  to  developments  affecting  the  relative 
attractiveness  of  work  in  their  home  countries, 
Poland  and  other  EU  Member  States  (NBP, 
2017c). Developing a migration strategy to enable 
the  recognition  of  qualifications  and  a  better 
matching of job offers with migrants’ skills could 
help maximise gains from migration. 

and 

services 

employment 

(10.4  months 

Public 
other 
institutions  face  increasing  challenges  getting 
people  with  low  skills  and  competencies  into 
work.  While  the  number  of  unemployed  was 
falling  fast,  the  average  time  of  job  search 
decreased  more  modestly 
in 
Q3 2017,  down  from  11.1  a  year  earlier).  In  their 
efforts to find a job, the unemployed in Poland rely 
on public employment services more often than the 
EU average, while direct applications to employers 
are less common. Private employment services are 
barely  used.  People  who  currently 
remain 
unemployed  or  are  not  economically  active  are 
likely  to  have  low  skills  and  competencies.  To 
improve 
is 
considering  changes  to  its  active  labour  market 
policies.  In  addition,  coverage  of  unemployment 
benefits  for  the  short-term  unemployed  remain 

the  government 

situation, 

the 

(18)  There is no source enabling a precise assessment of labour 
migration  level  and  trends.  In  the  first  half  of  2017  the 
number of employers’ declarations on the intention to hire 
foreigners  increased  by  49 %  from  a  year  earlier.  In  the 
first  3  quarters  of  2017  the  number  of  requests  for 
residence permits increased by 37 % from a year earlier. 

3.3. Labour market, education and social policies 

among  the  lowest  in  the  EU (19).  This  may  be 
linked to the persistent segmentation of the labour 
market,  as  the  self-employed  face  administrative 
difficulties  in  accessing  unemployment  benefits 
and  not  all  civil  law  contracts  are  covered  by  the 
social 
for 
contributions 
security 
unemployment  benefits. 

allowing 

Permanent  contracts  dominate  among  newly 
created  jobs,  but  the  share  of  temporary 
contracts  remains  high.  Temporary  employment 
accounted  for  26.1 %  of  employees  in  Q3 2017, 
down by 1.3 percentage points from a year earlier, 
but  still  among  the  highest  in  the  EU.  This  is 
accompanied  by  one  of  the  lowest  transition  rates 
from temporary to permanent contracts in the EU. 
implications  of 
The  underlying  reasons  and 
ensuing  labour  market  segmentation  into different 
categories  of  workers  and  types  of  contracts  were 
discussed  e.g.  in  European  Commission  (2016a, 
2017a).  Some  legislative  changes  relevant  for 
labour  market  duality  might  be  included  in  new 
draft labour codes that are to be presented in early 
2018 by the Codification Commission. 

Social dialogue and collective bargaining 

important 

legislative  proposals 

The  Social  Dialogue  Council  has  worked 
intensively on several policy areas, although not 
all 
are 
submitted  to  it.  Since  its  creation  in  2015,  the 
Council  has  played  a  key  role  in  the  dialogue 
the  Polish 
between  employers,  workers  and 
government. However, it has not discussed several 
major  legislative  proposals,  such  as  removing  the 
cap  on  social  security  contributions  (see  Sections 
3.1 and 3.4).  

in  wage 

Collective bargaining between social partners is 
decentralised.  Poland  has  one  of  the  lowest 
collective  bargaining  coverages  across  Member 
States  (Visser,  2016a,  2016b).  There  is  almost  no 
coordination 
it 
predominantly  takes  place  at  the  company  level. 
Collective  bargaining  coverage  is  particularly  low 
among young workers, based on self-reported data 
(European Commission, 2017d). A new collective 
labour code, now under preparation, might change 
the situation. 

bargaining, 

as 

(19)  According  to  the  results  of  the  benchmarking  exercise 
carried  out  by  the  Employment,  Social  Policy,  Health  and 
Consumer Affairs Council. 

24 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

substantial  costs 

challenges  and 
(European 
Commission,  2017e).  This  risks  significantly 
reducing  the  resources  that  could  be  devoted  to 
addressing  challenges  in  the  Polish  educational 
system, like the ones mentioned above. 

Graph 3.3.1:  Pre-school participation by 3-5 year olds, 

2013-2017 

(1) 2017 data are provisional. 
(2) Size of respective cohorts approximated based on 
Central Statistical Office population data in June 2017. 
Source: Central Statistical Office; PL Ministry of Education. 

Tertiary  education  attainment  is  high,  but 
challenges  remain  with  learning  outcomes.  The 
share  of  tertiary  graduates  struggling  with  basic 
quantitative  reasoning  and  understanding  simple 
written communication was well above the OECD 
average  in  the  Survey  of  Adult  Skills  (PIAAC) 
(OECD,  2016b).  To  address 
the  quality  of 
teaching, social relevance and scientific outcomes, 
Poland  intends  to  reform  its  higher  education 
system.  In  2017,  the  draft  law  (Constitution  for 
Science)  was  officially  presented,  following  a 
broad  public  consultation.  If  implemented,  the 
changes are expected to cover e.g. governance, the 
organisation of doctoral studies, and the funding of 
higher  education.  Some  steps  have  already  been 
taken to address shortcomings in the system. 

remain 

involvement 

increasing  the 
Improving  basic  skills  and 
employers’ 
the  key 
challenges  facing  initial  vocational  education. 
The  weakness  of  vocational  schools  in  helping 
students  develop  basic  skills  has  repeatedly  been 
identified  in  PISA  and  PIAAC  surveys  (e.g.  IFiS, 
re-organisation  of 
2013).  The 
vocational  schools  creates  an  opportunity 
to 
strengthen cooperation with employers and the role 
of  apprenticeships.  It  is,  however,  as  yet  unclear 
whether effective action will be taken in this area. 

forthcoming 

Formal  and 
especially  non-formal  adult 
learning  in  Poland  remains  underdeveloped. 

Education and skills 

Educational  performance  has  been  strong  in 
recent years. Poland’s rate of early school leaving 
is low: in 2016 it was 5.2 %, less than half the EU 
average of 10.7 %. Poland had improved its PISA 
results  in  recent  years.  Despite  some  decline  in 
overall  performance  between  2012  and  2015, 
Poland  still  scored  better  than  both  the  EU  and 
OECD 
(European 
Commission, 2016b).  

averages 

areas 

all 

in 

faces  various 
The  education  system  still 
challenges  in  light  of  the  changing  demand  for 
skills  and  intensifying  global  competition  for 
talent. Major issues include making schools better 
at  developing  independent,  creative  and  critical 
teaching  problem-solving  skills  and 
thinking, 
teamwork,  helping  pupils 
learn 
independently and developing a positive attitude to 
life-long-learning,  including  through  the  use  of 
information  technology  tools  (see  IBE,  2015).  In 
addition,  there  is  scope  for  improving  the  role  of 
schools in equalising socioeconomic opportunities. 

learn 

to 

Coverage of early childhood education and care 
partly  recovered  in  the  school  year  2017/18 
after  a  decline  in  2016/17.  Participation  in  early 
childhood  education  and  care  was  increasing  fast 
until  the  2015/16  school  year.  The  coverage  then 
reached 93.1 % of children between age 4 and the 
compulsory  education  starting  age,  still  below  the 
EU  average  of  94.8 %  in  2014/15.  In  turn, 
participation  declined  in  2016/17  (for  policies 
triggering  this  decline  see  European  Commission, 
2017a).  Provisional  data  suggest  a  rebound  in 
2017/18, particularly for three-year-olds who have 
a  guaranteed  right  to  a  place  in  preschool  as  of 
September  2017  (Graph  3.3.1).  In  addition, 
funding was recently increased for  the opening of 
new  childcare  places  for  children  under  three,  for 
whom  coverage  is  still  very  low.  Enrolment  in 
early  child  education  and  care  is  geographically 
uneven: it is much lower in rural areas, particularly 
eastern and north-eastern Poland (GUS, 2017a). 

Ongoing change of the school system is utilising 
considerable  resources  and  attracting 
the 
attention  of  stakeholders.  The  phasing  out  of 
lower  secondary  schools  started  in  September 
local 
2017,  affecting  schools, 
governments, which are responsible for the school 
network.  The  operation  has  numerous  logistical 

teachers  and 

25 

50%55%60%65%70%75%80%85%90%95%100%2013/142014/152015/162016/172017/18P3Y4Y5Y% of age cohortschool year 
 
3.3. Labour market, education and social policies 

parallel, the number of at risk people has fallen by 
almost  3.3  million  since  2008,  by  far  the  biggest 
fall 
improvement, 
nevertheless, differs between groups. 

the  EU.  The  pace  of 

in 

family/children 

social  benefits 

Expenditure  on 
increased 
significantly, but there are questions about their 
effectiveness  and  efficiency.  Recent  policy 
developments show a clear focus on selected areas, 
namely 
income  support.  The 
introduction  of  a  child  benefit  in  early  2016  was 
not accompanied by any significant adjustments to 
the  whole  social  benefit  system.  As  a  result,  the 
relative generosity of the system has changed, with 
families  with  more  children  now  benefitting  the 
most. However, an overall assessment of the social 
benefit  system  is  lacking  and  there  appears  to  be 
little public debate about the distribution of public 
to  different  policy  areas,  such  as 
resources 
healthcare, 
the 
disabled, family support, etc.  

long-term  care,  support 

for 

Welfare  coverage 
self-employed  and 
for 
atypical  workers  is  emerging  as  a  potential 
issue.  Most  welfare  benefits  in  Poland  are  based 
on  the  insurance  principle.  Self-employed  and 
those  employed  on  certain  non-standard  contracts 
are  not  obliged  by  law  to  be  covered  by  health 
insurance,  even  if  they  can  voluntarily  opt  in. 
Because of the high incidence of self-employment 
and other forms of atypical work, Poland is one of 
the countries with the highest share of employed at 
risk  of  not  being  entitled  to  sickness  benefits. 
Pension  contributions  are  also 
lower  or  not 
obligatory for certain atypical work arrangements. 
This  will  lead  to  very  low  future  pensions  for 
many people. 

Pensions currently provide adequate protection 
against  poverty  but  the  recent  change  in  the 
pension  system  is  expected  to  reduce  benefit 
levels.  In  2015,  the  at-risk-of-poverty  rate  among 
Polish  pensioners  was  below  the  EU  average  and 
only slightly higher than among employed people. 
The  pension  replacement  rate, 
the  ratio 
between pensions in retirement relative to earnings 
when  working,  was  supposed  to  decline  fast  even 
with  the  statutory  retirement  age  at  67.  Its  recent 
lowering  is  expected  to  worsen  the  situation 
are 
unless  working 
significantly, 
lengthened  well  beyond  the  new  statutory  age. 
Women  are  expected  to  be  particularly  affected 
given  that,  for  those  retiring  from  2040  onwards, 

careers 

i.e. 

average 

across  participating 

The  PIAAC  results  show  that  key  information-
processing  skills  of  adult  population  were  below 
the 
countries, 
particularly  among  people  aged  35-54  and  those 
with  low  educational  attainment  (OECD,  2016b). 
The share of adult population (16-74 years) with at 
least basic digital skills is relatively low in Poland 
(46 %  in  2017)  as  compared  to  the  EU  average 
(57 %  in  2017),  even  if  there  has  been  marked 
improvement  in  the  recent  years  (from  40 %  in 
2015).  These  underscore 
the  challenge  of 
upgrading  skills  for  adults  in  the  context  of 
population ageing and changing demand for skills. 
This is the particular focus of the EU’s Upskilling 
Pathways  Recommendation  (Council,  2016).  In 
2016,  only  3.7 %  of  those  aged  25-64  reported 
participation in education or training in the month 
before  the  survey,  one  third  of  the  EU  average of 
10.8 % (20). The gap is wider still among the least 
qualified. Both demand and supply-side issues are 
likely at play. Adults are frequently not interested 
in developing their competencies or acquiring new 
skills  or  qualifications.  At 
time, 
companies  may  be  relatively  less  willing  to 
provide  training  to  certain  categories  of  workers. 
The 
Integrated 
Qualifications System has had a limited impact so 
far.  The  Polish  authorities  plan  to  develop  a  new 
skills strategy. 

implementation 

the  same 

the 

of 

Poverty and social inclusion 

level 

is  below 

Poverty  continued  to  decline fast. While  Poland 
performs  around  EU  average  for  the  indicators 
related  to  adequacy  of  minimum  income  benefits, 
its 
the  national  poverty 
threshold (21).  The  share  of  people  at  risk  of 
poverty or social exclusion fell to 21.9 % in 2016 
down from 27.8 % in 2009, and most recent labour 
market  trends  and  changes  in  the  social  benefits 
system suggest further improvement in 2016-2017 
(see Section 1) (22). This is also confirmed by 2016 
household  budget  survey  data  (GUS,  2017b).  In 

(20)  This  compares  to  the  EU2020  target  of  15 %.  The 
Eurostat’s Adult Education Survey confirms low and stable 
or  declining  participation  in  adult  learning.  Between  2011 
and  2016  participation  declined  minimally  for  all  groups 
aged 25-64 defined by educational attainment level. 

(21)  According  to  the  benchmarking  exercise  in  the  area  of 
minimum  income  schemes  conducted  within  the  Social 
Protection  Committee,  see  the  draft  Joint  Employment 
Report 2018.  

(22)  The  survey  was  carried  out  in  2016,  but  the  income  data 
that form the core of the poverty assessment refer to 2015.  

26 

 
                                                           
3.3. Labour market, education and social policies 

Inefficiencies  remain  in  the  distribution  of 
healthcare  resources.  The  number  of  hospital 
beds 
is  high  but  not  optimally  distributed 
geographically. In contrast outpatient and primary 
healthcare  are  generally  underdeveloped.  While 
preliminary  diagnoses  are  meant  to  be  conducted 
at  primary  care  level,  the  system  of  financial 
incentives  means  that  doctors  often  push  the  cost 
of  investigation  onto  specialist  providers.  Few 
resources  are  devoted  to  preventive  medicine, 
initiatives  and  health 
through  public  health 
promotion.  All 
together  with  a 
the  above, 
relatively  high  share  of  out-of-pocket  health 
spending  by  patients  also  leads  to  unequal  access 
to  health  services  depending  on  patients’  income 
and place of residence. 

Certain  measures  are  being  taken  that  could 
improve  efficiency.  Preparing  maps of  healthcare 
needs  can 
improve  efficiency  of  healthcare 
investments  as  these  enable  assessment  on  the 
basis  of  criteria 
identified  needs, 
including 
demographics,  available  infrastructure,  medical 
staff, etc. The introduction of new pharmaceuticals 
and  medical  technologies,  an  area  potentially 
resulting in sharp cost increases, is being managed 
by  a  specialised  agency.  Potential  savings  by 
aggregating the procurement of medicinal products 
largely remain untapped. 

Recently-adopted  laws  are  changing  how  the 
hospitals  and  primary  healthcare  operate.  The 
introduction of the hospital network could improve 
services for patients, through better coordination of 
services (including after hospital discharge), easier 
access to specialists and reduced waiting times for 
medical  treatment.  In  addition,  the  new  solutions 
improve 
for 
coordination  of  healthcare,  including  preventive 
medicine.  The  new  primary  healthcare  set-up  will 
be  piloted  until  2019,  with  a  view  to  fully 
implementing it after that. The combined effects of 
these two new laws are yet to be assessed. 

healthcare 

primary 

should 

Long-term care faces multiple challenges. Most 
long-term  care  is  provided  by  informal  carers, 
often  family  members  who  have  almost  no 
institutional  support.  Such  a  system  has  negative 
implications for social inclusion and labour market 
is 
participation. 
it 
unsustainable, 
ageing. 
Furthermore, better coordination of long-term care 
and healthcare could help curb costs. 

the 
given 

population 

longer 

term, 

In 

their  statutory  retirement  age  will  be  reduced  by 
seven  years (23).  Depending  on  the  indexation  of 
minimum  pensions,  a  significant  proportion  of 
future  female  pensioners  could  be  at  risk  of 
poverty.  So  far,  the  only  government  initiative 
attempting to increase the effective retirement age 
consisted  of  informing  potential  pensioners  about 
the link between the level of benefit and the length 
of professional career. 

Healthcare 

Life  expectancy  in  Poland  has  continued  to 
increase,  with  the  gap  with  the  EU  average 
narrowing  in  the  last  decade.  In  2015,  life 
expectancy  in  Poland  stood  at  77.5  years,  above 
the  levels  in  most  neighbouring  countries,  but 
about 3 years below the EU average. An eight-year 
gap  in  life  expectancy  between  Polish  men  and 
women (73.5 and 81.6 years, respectively) is above 
the  EU  average  of  5.5  years.  Differences  by  the 
socioeconomic  status  also  remain  higher  than  in 
most other EU Member States. 

Access to and the effectiveness of the healthcare 
system is affected by low health spending and a 
low  number  of  health  workers 
in  some 
specialisations.  In  2015,  total  health  expenditure 
was 6.3 % of GDP, well below the EU average of 
9.9 %  of  GDP (24).  The  government  intends  to 
increase  public  health  expenditure  from  around 
4.5 % of GDP at present to 6 % of GDP by 2025. 
lowest  number  of 
the 
Poland  has  amongst 
practising doctors and nurses relative to population 
size.  The  shortages  in  particular  affect  certain 
specialisations. This has implications for access to 
healthcare.  Self-reported  unmet  needs  for  medical 
care rank among the highest in the EU, and waiting 
times  for  certain  health  care  interventions  are 
particularly 
the 
healthcare  system  varies.  For  example,  hospital 
acute  care  for  cardiac  patients  appears  to  be  very 
effective,  while  outcomes  for  cancer  care  are  less 
favourable.  Mortality  rates  for  conditions  that  are 
amenable  to  medical  treatment  remain  above  the 
EU average. 

long.  The  effectiveness  of 

(23)  This comes on top of delaying the start of working careers, 
due to an increase in the school starting age introduced in 
September 2016. 

(24)  More  information  and  data  cited  in  this  section  can  be 

found in OECD/European Observatory (2017).  

27 

 
                                                           
3.4.   INVESTMENT 

in 

particularly 

investments, 

Corporate 
in 
intangible assets, have been low for many years. 
In  2009-2016,  the  average  investment  of  the 
corporate  sector  amounted  to  10.3 %  of  GDP, 
compared  to  the  EU-28  average  of  11.9 %  and  to 
significantly  higher  values 
regional  peer 
countries  (e.g.  16.7 %  in  the  Czech  Republic). 
There is a particularly large gap in investments in 
intellectual  property  products 
(this  category 
includes for example software or patent rights) that 
averaged 1.3 % of GDP in Poland, compared to the 
EU-28  average  of  3.7 %  of  GDP.  Private 
investment declined in 2016 and remained weak in 
early  2017  but  is  expected  to  gradually  recover 
(see Box 3.4.1 and Section 1). 

to  public 

investment 

level,  a  particularly 

is  higher  than  the  EU 
Public 
average, largely because of the utilisation of the 
European  Structural  and  Investment  Funds 
investment  at 
(ESIF).  In  addition 
large  share  of 
national 
investment  (2.3 %  of  GDP  during  2009-2016, 
compared to the EU-28 average of 1.3 % of GDP) 
is  by  local  governments.  A  significant  share  of 
public and also private investment is supported by 
the  ESIF.  This  has  several  implications.  First, 
Poland  is  exposed  to  swings  in  the  utilisation  of 
EU  funds.  Second,  a  long-term  challenge  of 
ensuring adequate public resources to maintain an 
appropriate investment level could emerge, should 
the ESIF allocation decrease after 2020. Third, the 
large amount of ESIF funding also underscores the 
importance  of  effective  administration,  strategic 
planning  of  infrastructure  investment  and  public 
procurement (See Box 2.1) (25). 

The  relatively  small  size  of  companies  limits 
overall investment, especially in R&D. There is a 
strong  link  between  firm  size  and  investment 
intensity:  larger  firms  invest  more  per  person 
employed  (Graph  3.4.1).  Given  the  particularly 
high share of small companies in Poland, this may 
be  one  of  the  factors  lowering  total  investment  in 
the  country.  In  2014-2015,  34 %  of  all  those 
employed  in  Poland  worked in  firms  with  at  least 
10 employees, well below the EU average of 44 %. 
In  turn,  microenterprises  account  for  a  high  share 
of  Poland’s 
small 
employment share of the largest companies has an 
impact  on  aggregate  R&D 
even 

sector.  The 

corporate 

stronger 

(25)  For  an  overview  of  the  challenges  with  ESIF  supporting 

innovation see Breznitz and Ornston (2017). 

investment  given 
concentrated on the biggest companies. 

that 

this 

is  even  more 

Graph 3.4.1:  Investment outlays per person employed by 

firm size, 2015 

Source: European Commission calculations based on 
Central Statistical Office 

and 

human 

quality 

The  quality  of  the  regulatory  framework 
the  overall 
remains  a  weak  element  of 
favourable  business  environment.  A 
large 
domestic  market,  strong  and  stable  economic 
of 
capital, 
growth, 
infrastructure  have  remained  the  strong  elements 
of  the  business  environment,  compared  to  other 
confirmed  by  various 
countries.  This 
international 
the  Global 
Competitiveness  Index  (WEF,  2017).  However, 
the quality of institutions weighs on Poland’s rank. 
For  instance,  the  most  problematic  factors  for 
doing  business  as  identified  by  WEF  (2017) 
regulations,  policy 
labour 
include 
instability and inefficient government bureaucracy. 

such  as 

tax  and 

rankings, 

is 

High  uncertainty  appears 
to  still  hinder 
investment.  The  perception  of  relatively  high 
uncertainty,  especially  surrounding  the  legal  and 
tax  environment,  remained  an  important  factor 
limiting  investment  in  2017  (NBP,  2017a).  This 
may  be  related  to  measures  taken  to  improve  tax 
compliance  (see  Section  3.1)  but  can  also  reflect 
other  abrupt  regulatory  changes.  In  2017,  several 
measures  impacting  the  conditions  for  businesses 
were  adopted  in  a  fast  legislative  procedure. 
Examples  include  a  significant  increase  in  social 
security  contributions  on  high-wage  earners, 
changes in the conditions for the renewable energy 

28 

05101520253035400-9employees10-49employees50-249employees250 and moreemployeesthousand PLN per employee 
 
                                                           
 
3.4. Investment 

favourable conditions for starting and carrying out 
economic  activity.  It  will  also  clarify  rules  for 
foreign  companies  setting  up  or  providing  cross-
border  services  in  Poland.  The  package  was 
extensively consulted and business representatives 
were generally supportive. New laws, if effectively 
implemented,  may  improve  the  relations  between 
business  and  public  administration.  Another  law 
discussed by the government proposes to introduce 
a  new  mechanism  of  support  for  companies 
investing  throughout  Poland  by  offering  income 
tax breaks. This new system is meant to replace the 
tax exemptions in special economic zones. 

Poland  has  reformed  its  R&D  tax  incentives 
with new regulations in 2016-2018. The changes 
aim  to  make  R&D  tax  breaks  more  attractive  and 
encourage  their  wider  use.  Based  on  international 
experience  with  similar  solutions,  these  reforms 
can be expected to lead to more private investment 
in R&D (CPB et al., 2014) (26). 

Barriers to expansion of firms affect investment 
activity and productivity. Given the link between 
firm size and investment intensity, barriers to firm 
growth  constitute  also  investment  barriers.  For 
example,  burdensome  administrative  procedures 
for  social  security  can  prevent  certain  one-person 
companies  from  hiring  as  this  is  associated  with 
the need to report monthly with multiple forms and 
annexes.  Other  factors  hindering  the  growth  of 
firms  include  issues  surrounding  inheritance  in 
lack  of 
trust,  credit  market 
firms, 
family 
imperfections, 
for 
burdens 
administrative 
workplace security, business inspections or sector-
specific  regulations  (see  also EBRD,  2017).  Also, 
shortages of skilled labour (see Section 3.3) can be 
expected to limit the room for firm growth, while 
additionally 
investment, 
especially  in  sectors  where  capital  and  labour  are 
complementary.  Barriers  to  firm  growth  have 
productivity, 
further 
competitiveness  and  innovativeness  of  the  whole 
economy, as discussed by EBRD (2017). 

implications 

impeding 

directly 

for 

Access  to  credit  is  not  a  crucial  investment 
barrier overall, but adequate financing may be 

(26)  At  the  same  time,  part  of  the  expected  rise  of  business 
R&D  spending  (between  2015  and  2016  it  increased  by 
around half) may be of a purely statistical nature. Identical 
transactions  previously  not  reported  as  R&D  investment 
due to tax disincentives may now be reported as R&D (see 
Białek-Jaworska et al., 2016). 

sector or new limitations on setting up pharmacies. 
The practice of avoiding and limiting the scope of 
public  and  social  consultations  on  key  draft  laws 
continued in 2017 (Obywatelskie Forum Legislacji 
– Fundacja Batorego, 2017). 

Poland  adopted  reforms  of  the  justice  system 
which  led  the  Commission  to  conclude  that 
there  is  a  clear  risk  of  a  serious  breach  of  the 
rule of law. An efficient and independent judicial 
system  is  crucial  for  the  business  environment. 
Since  late  2015,  the  Polish  authorities  have 
adopted several laws affecting the structure of the 
justice  system.  The  reforms  should  be  carried  out 
in  a  way  which  protects  the  independence  of  the 
judiciary.  In  this  regard,  the  Commission  has 
concluded  that  a  clear  risk  of  a  serious  breach  of 
the rule of law exists in Poland within the meaning 
of  Article  7(1)  of  the  Treaty  on  European  Union. 
The  Commission  also  set  out  the  ways  in  which 
this risk could be addressed. Respect for the rule of 
law is not only a prerequisite for the protection of 
all the fundamental values listed in Article 2 TEU. 
It is also a prerequisite for upholding all rights and 
obligations  deriving  from  the  Treaties  and  for 
establishing  mutual  trust  of  citizens,  businesses 
and national authorities in the legal systems of all 
other Member States. The Commission underlines 
that  the  proper  functioning  of  the  rule  of  law  is 
also  essential 
the  seamless 
in  particular  for 
operation of the Internal Market and an investment 
friendly environment, because economic operators 
must know that they will be treated equally under 
the law. Respect for the rule of law is also essential 
for  mutual  trust  in  the  area  of  justice  and  home 
affairs, 
judicial 
cooperation in civil and criminal matters which is 
based  on  mutual  recognition.  This  cannot  be 
assured  without  an  independent  judiciary  in  each 
Member State. 

for  effective 

in  particular 

Several policy measures to improve the business 
climate  are  at  the  advanced  stage  of  the 
legislative process. Poland slipped three places in 
the  2018  Doing  Business  ranking  (World  Bank, 
2017)  because  other  countries  progressed  with 
implementation  of  reforms.  This  points  to  the 
importance  of  a  sustained  effort  to  improve  the 
business  environment.  A  legislative  package  of 
five laws known as the ‘Constitution for business’ 
was approved by the lower house of the parliament 
in January 2018. Its general objective is to simplify 
the  legal  business  environment  and  to  set  more 

29 

 
                                                           
3.4. Investment 

aiming at policies encouraging a more sustainable 
use  of  land.  However,  its  final  shape  and  the 
effects of its eventual implementation remain to be 
seen. 

State-owned  and  state-controlled  companies 
(SOEs)  continue  to  gain  importance.  SOEs  are 
key  players  in  crucial  sectors  of  the  Polish 
economy  (European  Commission,  2017a).  The 
government sees SOEs as drivers and leaders of its 
innovation  policy  agenda  and 
significantly 
increased  in  2017  the  state  ownership  in  the 
banking  and  energy  sectors (30).  So  far  the  SOEs’ 
performance  remained  overall  strong  and  broadly 
similar 
companies.  However, 
international  evidence  suggests  that  a  dominant 
role of SOEs can pose fiscal, financial and macro-
stability risks (Böwer, 2017). Given their size, the 
current  patterns  of  investment  by  SOEs  translate 
(European 
into 
top 
Commission,  2017f).  High 
management  at  several  major  SOEs  may  have 
played a role affecting investment decisions. 

investment 

turnover 

private 

overall 

trends 

to 

in 

transferring 

the  Chancellery  of 

The  new  SOE  governance  framework  is  being 
gradually implemented. The new governance law 
of  2017  formally  kept  the  oversight  of  the  SOE 
supervision  centralised,  while 
the 
responsibilities  from  the  Ministry  of  the  Treasury 
to 
the  Prime  Minister. 
However,  the  supervision  was  delegated  to  line 
ministries,  some  of  which  (e.g.  the  Ministry  of 
Energy)  set  their  own  supervisory  guidelines.  In 
October  2017,  the  Chancellery  issued  supervisory 
guidelines  as  a  reference  governance  framework 
for line ministries. The Chancellery is preparing a 
revision  of  the  January  2017  governance  law, 
which  increases  the  Chancellery's  supervisory 
rights. The objective of the SOEs’ management is 
defined  as  ‘sustainable  growth  in  shares  values, 
considering 
the 
economic 
state’ (Republic of Poland, 2016). It remains to be 
seen  how  this will  be  operationalised  and  to  what 
extent  considering  it  will  help  make  economic 
investment decisions. 

policy 

an 

of 

At 

the 

2017b). 

a constraint for some companies. Own resources 
remain 
the  dominant  source  of  funding  for 
corporate  investments  (NBP,  2017a).  The  same 
applies  to  investment  in  housing  by  households 
(NBP, 
time, 
underdevelopment  of  certain  capital  market 
instruments may be limiting investment, especially 
in some market segments (27). In 2017, the Warsaw 
Stock  Exchange  noted  the  lowest  number  of  new 
listings since 2009 and the highest ever number of 
withdrawals.  Meanwhile,  the  Polish  Development 
Fund is expected to gain importance increasing the 
role of public entities on the capital market. 

same 

to 

Effective  and  efficient  public  procurement  is 
important for public investment. In 2017, public 
the 
procurement  processes  were  adapting 
changes introduced in July 2016 and preparing for 
a  wider  roll-out  of  electronic  public  procurement. 
A  broader  use  of  non-price-related  tender  criteria 
is  already visible  in data.  It remains  to  be seen  to 
what  extent  the  various  players  will  cooperate  in 
aggregating  their  tenders  (e.g.  in  the  health  sector 
or local governments through integrated territorial 
investment).  Managing  complex  infrastructure  or 
information 
remains 
challenging even at the central government level. 

technology 

projects 

Deficiencies  in  the  spatial  planning  framework 
and in the issuing of building permits affect the 
investment  climate  and  regional  development. 
The non-binding  role of documents  setting  spatial 
development  guidelines  at  the  local  level (28),  the 
limited  coverage  of  spatial  development  plans (29) 
and  the  dominant  role  of  ad  hoc  administrative 
decisions  for  building  permits  create  distorted 
spatial  development  patterns  (NIK,  2017b).  This 
makes investing in certain localities less attractive, 
leads  to  building  in  risk  areas  (e.g.  flooding),  and 
creates urban sprawl that puts pressure on existing 
infrastructure.  The  draft  Building  Code  has  the 
potential  to  address  some  of  these  deficiencies  by 

(27)  For example, in 2016, private equity investments accounted 
for 0.17 % of GDP, compared to the EU average of 0.32 % 
(Invest Europe, 2017). 

(28)  In 

Polish: 

studium 

uwarunkowań 

i 

kierunków 

zagospodarowania przestrzennego.  
plan 
Polish:  miejscowy 

(29)  In 

przestrzennego. 

zagospodarowania 

(30)  For  example,  several  energy  SOEs  set  up  a  company  to 

develop electro mobility. 

30 

 
                                                           
                                                           
3.4. Investment 

Box 3.4.1: Investment challenges and reforms in Poland 

Macroeconomic perspective 

Investment activity was volatile in recent years. After falling in 2012-2013, investment activity rebounded 
strongly  in  2014-2015.  However,  2016  saw  a  strong  decline  in  investment  and  investment  weakness 
continued  into  2017,  with  some revival  only in  the  second  half of  the year.  By Q3 2017  the  ratio  of  total 
investment  to  GDP  fell  to  17.3 %,  the  lowest  since  1995.  Factors  explaining  these  swings  include 
fluctuations  in  the  utilisation  of  the  EU  structural  funds,  changing  perceptions  of  uncertainty  and  risks, 
including  on  economic  policy  directions,  and  on  overall  macroeconomic  conditions.  A  recovery  in 
investment  is  expected  to  strengthen  in  2018.  Public  investment  is  estimated  to  have  rebounded  strongly 
already in 2017, whereas private investment is projected to increase more gradually.  

Assessment of barriers to investment and ongoing reforms 

A number of investment barriers persist affecting Poland's investment climate. These include in particular: 

1.  An  unstable  regulatory  environment.  Several  implemented  and  still  discussed  changes  in  taxation  (see 
Sections 3.1 and 3.3) increase uncertainty, especially if implemented through a fast-track legislative process 
with  no  public  consultation.  Lack  of  a  long-term  strategy  for  the  energy  sector  and  2016-2017  regulatory 
changes  are  examples  of  sector-specific  regulatory  barriers  (see  Section  3.4).  Such  specific  barriers  exist 
also in other areas, as evidenced by recent legislation constraining the opening of new pharmacies and by 
discussions on taxes targeting the retail sector. 

2. The increased role of the state. In some key sectors the government's control on investment decision by 
some  key  companies  may  discourage  private  investments  if  public  involvement  is  perceived  as  distorting 
competition (see Section 3.5,Wise-Europa, 2016). 

3.  Limited  co-operation  between  academic  and  business  sectors.  This  along  with  the  subpar  quality  of 
scientific research in some areas hampers the development of corporate R&D investment (Sections 3.3, 3.4). 

4.  Lack  of  capacity  of  public  administration.  This  in  particular  applies  to  the  capacity  to  carry  out  public 
procurement in a way that ensures good value for money for the public sector but also gives the contractors 
sufficient stability and predictability to adequately adjust capacity (see Section 3.3). This also applies to the 
knowledge of the applicable laws and willingness to share the knowledge with potential investors (see e.g. 
by Fundacja Republikańska, 2017). It also refers to spatial planning and the issuing of building permits.  

31 

Regulatory/ administrative burdenTaxationPublic administrationCSRAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&IInsolvency frameworkBusiness services / Regulated professionsCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation, skills, lifelong learningCSREnergyLegend:TransportNo barrier to investment identifiedCSRInvestment barriers that are also subject to a CSRSome progressNo progressSubstantial progressLimited progressFully addressedPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
3.5.  SECTORAL POLICIES 

R&D and Innovation 

Despite  efforts  to  enhance  the  economy's 
capacity  to  innovate,  scientific  and  innovation 
inputs  and  outputs  have  been  weak  in  recent 
years. Between 2007 and 2016, the expenditure on 
R&D  increased  by  0.41 %  of  GDP  to  0.97 %  of 
GDP.  However,  this  still  matched  only  about  half 
of the EU average (2.03 % of GDP). The increase 
has  been  supported  by  public  R&D  spending,  of 
which 60 % is ensured by the European Structural 
and  Investment  Funds  (European  Commission, 
2017g).  Business  R&D  expenditure,  although 
almost  tripling  in  recent  years  (from  0.22 %  of 
GDP  in  2011  to  0.63 %  in  2016),  was  still  far 
below  the  EU  average  of  1.3 %  of  GDP.  Poland 
scores  low  for  most  indicators  of  the  European 
Innovation  Scoreboard,  including  SME  in-house 
innovations  (lowest  in  the  EU),  science-business 
linkages  and number  of  PhD  graduates  (European 
Commission,  2017h).  Employment  in  high-tech 
manufacturing  and  knowledge  intensive  sectors  is 
also  low  (Applica  et  al,  2016).  Recently,  major 
to  encourage  more 
steps  have  been 
innovation 
including 
tax 
programmes  for 
incentives  for  R&D  (Section  3.3).  The  effects  of 
these  measures  cannot  yet  be  fully  evaluated,  but 
they are likely to support business expenditure on 
R&D in the coming years. 

innovative  start-ups  and 

the  private  sector, 

taken 

in 

Developing  the  science  base  is  critical  for 
enhancing  scientific  excellence  and  translating 
it  into  innovations  and  technological  progress. 
Despite past efforts to reform the research system 
(European  Commission  2016a  &  2017a),  it  still 
ranks third to last in the 2017 European Innovation 
(European  Commission,  2017h), 
Scoreboard 
poorly  performing  for  scientific  outputs(31)  and 
international  scientific  co-publications 
(Graph 
3.5.1).  In  particular,  the  Polish  research  system 
lacks  openness  and  does  not  create  favourable 
conditions  for  knowledge  flows  (32).  A  major 
reform 
the 
‘Constitution  for  Science’  (see  also  Section  3.2), 
consultation  with 
has 

these  shortcomings, 

to  address 

prepared 

been 

in 

(31)  Only 5 % of all Polish scientific publications were  among 
the top 10% most cited publications worldwide, compared 
to  the  EU  average  of  10.6 %.  On  a  more  positive  note, 
Poland  recorded  one  of  the  fastest  improvements  for  this 
indicator between 2010 and 2016. 

(32)  On  the  importance  of  science  openness  and  knowledge 
flows  for  innovations  see:  European  Commission  (2016c, 
2018b), Jonkers and Wagner (2017). 

(consolidation)  and 

stakeholders.  The  reform  takes  into  account  key 
recommendations of the international Peer Review, 
conducted  by  the  Horizon  2020  Policy  Support 
Facility  at  the  request  of  the  Polish  authorities 
(Winckler  et  al,  2017).  The  reform  provides  for 
measures to overcome the fragmentation of higher 
education 
to  encourage 
broadening  the  teaching  offer  (e.g.  ‘Excellence 
Initiative’  project).  It  also  focuses  on  reinforcing 
the  management  and  autonomy  of  universities 
combined  with  their  greater  societal  involvement, 
simplification of the university funding system and 
reform 
reporting  obligations.  Moreover, 
envisages 
schools  and 
reorienting  university  evaluation  processes from  a 
bureaucratic  exercise  to  a  system  of  promoting 
teaching quality, scientific excellence and impact. 

setting  up  doctoral 

the 

Graph 3.5.1:  Total international scientific co-publications as 

% of total scientific publications, 2007 and 
2016 

Source: European Commission 

and 

and  Development, 

The  private  sector’s  long-term  engagement  in 
R&D  is  subdued  by  weak  collaborative  links 
institutions.  Despite  several 
with  research 
support  schemes  offered  by  the  Ministry  of 
Science and Higher Education, the National Centre 
for  Research 
the 
Foundation  for  Polish  Science,  the  quantifiable 
outcomes of collaborative R&D are modest, with a 
low  number  of  co-patents  and  public-private 
scientific co-publications. Many Polish companies 
only embark on formal R&D projects if public co-
funding  and  grants  are  available  (Winckler  et  al, 
2017). 
innovative 
companies in Poland cooperated with universities. 
few  higher  education 
In  addition,  only  a 
institutions and research institutes were funded by 
the  private  sector  (Klincewicz  et  al,  2018).  A 
competitive call for industrial doctorates launched 

In  2015,  only  10 %  of 

32 

0102030405060708090LUMTCYATBEEESEDKIENLUKLVFIBGFRPTSKHUELSIDECZESHRITLTROPL20162007 
 
                                                           
 
in  May  2017  is  expected  to  increase  researchers’ 
mobility.  The  draft  ‘Constitution  for  Science’  law 
could better enable universities to deliver demand-
side  services  to  enterprises.  In  addition,  the 
planned  ‘Łukasiewicz  Research  Network’  aims  at 
integrating selected research institutes and creating 
synergies  to  ensure  an  efficient  management  of 
major  projects  under  the  Strategy  for  Responsible 
Development.  

Infrastructure and network industries 

road 

The  road  network  in  Poland  continues  to 
improve.  In  2017,  more  than  370  km  of  new 
national  roads  were  added  to  the  network.  The 
newly  amended  national 
construction 
programme  provides  a  financial  framework  to 
continue the development of high-speed roads until 
2023,  with  EU  funds  covering  around  40 %  of 
their  total  costs.  However,  the  programme  and  its 
financial  allocation  were  often  subject  to  sudden 
to 
changes, 
prepare  certain  projects. 
the 
programme  priorities  were  selected  to  match  the 
growing  traffic  demand  and  the  requirements  for 
European  connectivity,  but  the  mobility  needs  of 
northern  regions  remain  only  partly  addressed.  In 
particular, insufficient connectivity  may affect the 
growth  potential  of  the  Pomerania  region  (Graph 
3.5.2). 

In  principle, 

jeopardising 

the  means 

invested 

Road  safety  remains  poor,  particularly  for 
pedestrians and cyclists. With fatalities dropping 
by  a  cumulative  23 %,  Poland  made  substantial 
progress  in  2010-2016.  However,  in  2016  the 
number of road fatalities increased to 79 deaths per 
1  million  inhabitants,  and  Poland  was  still  among 
the  EU  Member  States  with  the  highest  rate  of 
road fatalities. The 2016 EU average was 50 per 1 
million.  In  cities,  pedestrians  and  cyclists  are 
disproportionately  affected,  as  they  account  for 
more  than  50 %  of  the  fatal  victims  of  road 
accidents. The main factors behind the poor safety 
record  include  lack  of  appropriate  regulatory 
solutions,  such  as  an  absolute  priority  of 
pedestrians  over  vehicles  at  pedestrian  crossings, 
ineffective  law  enforcement  against  dangerous 
driving habits and inadequate safety infrastructure. 

3.5. Sectoral policies 

Graph 3.5.2:  Network of high-speed roads until 2023 

Source: European Commission 

the 

the  railway  network 

Modernisation  of 
is 
accelerating, although most of the challenges in 
the  sector  persist.  In  2017,  EU  funds  financed 
over 50 % of the overall investments implemented 
under 
the  national  railway  programme.  The 
implementation of Rail Baltica progressed with the 
first  section  to  the  north  of  Białystok.  Despite  a 
faster contracting of railway projects, there is still 
risk that all railway investments planned until 2023 
will not be completed on time. This is mainly due 
to a limited capacity in the construction sector and 
institutional  weaknesses  of 
infrastructure 
managing  authority.  In  comparison  to  the  road 
sector,  complex  administrative  and 
financial 
procedures  are  still  affecting  the  effectiveness  of 
the  railway  managing  body.  The  railway  network 
high  vulnerability  to  traffic  disruptions  and  a 
limited  coordination  of  works  are  affecting  the 
already  low  speed  of  average  commercial  freight 
rail. The risk of missing the programme objectives 
is  further  aggravated  by  a  lack  of  appropriate 
measures  to  address  the  challenges  of  increased 
investments,  as  well  as  too  few  reserve  projects 
with  secured  funding  under  the  national  railway 
programme.  The  High  Level  Group  on  Railway 
Investments  is  working  to  resolve  the  main 
bottlenecks to investments in the railway with EU 
funds. 

Strategic 
transport 
long-term  planning  of 
investments  is  missing. There  is still  no  strategic 
regulatory  framework  for  the  long-term  (beyond 
2023)  development  of  the  transport  networks  for 
all  modes, 
identification  and 
attribution  of  their  roles  and  safeguarding  of 

including  clear 

33 

 
 
3.5. Sectoral policies 

is  making 

nuclear  power  programme  has  been  delayed. 
Poland 
little  use  of  electricity 
interconnectors  and  only  scarce  progress  on  their 
development  has  been  observed  (see  European 
Commission,  2017a).  Constrained  by  insufficient 
capacity  and  facing  difficulties  to  finance  the 
necessary investment, Poland is planning to use the 
capacity mechanism, which is to be operational as 
of 2018. 

Graph 3.5.3:  Gross electricity generation by fuel - TWh, 2015 

appropriate  financing  solutions.  Poland's  transport 
development  strategy,  which  is  currently  under 
review, may eventually accommodate these needs.  

Poland  is  still  challenged  by  a  low  fixed 
broadband  coverage  and  take-up.  The  number 
of  households  with  a  broadband  connection 
remains  low;  with  only  78 %  of  households 
connected in 2017, Poland was significantly below 
the  EU  average  of  85  %.  The  negative  effects  of 
low  fixed  broadband  coverage  are  only  partially 
offset  by  high  mobile  broadband  take-up.  Local 
authorities  charge  telecom  operators  high  fees  for 
using  installation  space  on  roads,  hampering  the 
effective  roll-out  of  broadband  infrastructure  and 
raising its maintenance cost. 

Energy 

Despite ongoing changes, the electricity sector is 
challenged  by  the  need  to  expand  capacity, 
modernise  and  to  reduce  greenhouse  gas 
emissions.  Without  additional  investment,  the 
projected growth in electricity demand may lead to 
electricity  shortages  after  2020  (PSE,  2016).  The 
large  part  of  ageing  generation  capacity  does  not 
meet  the  pollutant  emissions  standards  and  would 
not  work  flexibly  with  plants  producing  energy 
from  intermittent  renewables.  Currently,  around 
80 %  of  power  generation  relies  on  coal  (Graph 
3.5.3)  and  will  thus  be  exposed  to  the  changing 
price  of  emission  allowances  under 
the  EU 
emissions trading system (EU ETS). An update of 
the  strategic  outlook  for  the  Polish  energy  mix  is 
missing,  but 
recent  government 
declarations  indicate  that  coal  is  to  keep  its 
dominating  share.  To  support  the  transition  of 
the 
towards  clean  energy, 
mining 
Commission 
initiated  a  pilot  programme  for 
Silesia region under the Coal and Carbon-Intensive 
Regions in Transition initiative. 

the  most 

regions 

In  the  short  term,  expansion  of  electricity 
supply  capacity  is  planned  mainly  in  the  form 
of coal-fired generation. Over 3 GW of new coal-
fired  and  over  1 GW  of  new  gas-fired  capacity  is 
being  built.  More  mainly  gas-fired  generation 
projects  are  also  being  analysed.  Some  efficient 
coal combustion and pollution control technologies 
are to be applied and coal gasification feasibility is 
considered.  The  development  of  co-generation  is 
suffering  from  regulatory  uncertainty  over  the 
regulation  of  its  support  system.  The  Polish 

Source: European Commission 

this  support. 

Despite renewables becoming more competitive, 
their  deployment  was  hampered  by  recent 
legislative  changes.  The  2016  regulation  set  de 
facto  prohibitive  requirements  for  new  on-shore 
wind  installations.  The  2017  change  of  certain 
provisions related to the green certificates affected 
existing  renewable  energy  installations  that  were 
the 
receiving 
renewables operators also suffered from unilateral 
termination  of 
long-term  contracts  by  state-
controlled  entities.  It  is  also  not  clear  how  much 
additional  renewable  capacity  Poland  plans  to 
develop. On a positive note, Poland introduced an 
auction-based scheme to support new producers of 
electricity from renewable sources. These elements 
create a mixed investment climate for renewables. 
Hence,  the  achievements  of  the  2020  national 
renewables target will be challenging (33). 

In  conjunction, 

(33)  The preliminary ESTAT data suggest a 2016 decline in the 
share of renewables in final energy consumption to 11.3 %, 
down from 11.7 % in 2015. 

34 

0%10%20%30%40%50%60%70%80%90%100%PLEU28NuclearOtherGasesRenewablesSolid Fuels 
 
                                                           
3.5. Sectoral policies 

Climate and environmental issues 

Poland  is  one  of  the  most  energy-intensive 
economies in the EU, contributing to substantial 
greenhouse  gas  emissions.  Although  the  primary 
energy  intensity  declined  in  Poland  much  faster 
than the EU average from 2005 to 2015 (3.4 % and 
2 %, respectively), the economy is still among the 
most  energy-intensive  in  the  EU.  In  addition, 
against  the  background  of  a  strong  economic 
growth,  final  energy  consumption  has  been 
increasing.  However,  greenhouse  gas  emissions 
per  capita  are  just  above  the  EU  average.  Poland 
faces  the  challenge  of  mitigating  the  energy 
demand  and  exploiting  the  potential  for  energy 
efficiency in all sectors. 

Poland  is  on  track  to  meet  its  greenhouse  gas 
emissions target, but transport emissions are on 
the  rise.  Poland  aims  to  limit  the  increase  of  its 
greenhouse  gas  emissions  in  sectors  outside  the 
EU  ETS  to  14 %  by  2020  from  the  2005  levels. 
Poland’s  non-ETS  emissions  increased  by  7.1 % 
between 2005 and 2016, staying below the interim 
target. The biggest contributor to total greenhouse 
gas  emissions  is  the  energy  sector,  due  to  its 
dependence  on 
emissions, 
however,  remain  a  growing  source  of  concern  as 
emissions and energy consumption from this sector 
have  increased  in  recent  years.  According  to 
national  projections,  Poland  will  reach  its  2020 
greenhouse  gas  emissions  target  with  a  wide 
margin,  limiting  the  increase  to  5.6 %  against  the 
target ceiling of +14 %. 

coal.  Transport 

has 

been 

reported 

situation 

is  reported 

The  measured  concentration  of  air  pollutants 
continues to exceed EU standards and classifies 
Polish cities as top-polluted in Europe. The most 
severe 
for 
benzo[a]pyrene (in some cases more than 10 times 
target  value)  and  particle  pollution.  Air 
the 
to  have  strong  health 
pollution 
implications, causing a large number of premature 
deaths  (EEA,  2017).  In  September  2017,  Poland 
adopted 
setting 
standards for coal and wood biomass boilers below 
500kW,  i.e.  those  used  in  individual  houses.  The 
regulation entered into force in October 2017. The 
key  measure  introducing  standards  for  solid  fuels 
used for individual heating is still in consultations. 

long-awaited 

regulation 

a 

The electricity  market has become increasingly 
competitive, but coal-based generation and lack 
of  interconnections  have  an  impact  on  prices. 
While  domestic  coal  is  still  relatively  cheap,  the 
operation of inefficient old power plants is costly. 
Lack of and limited use of  interconnections likely 
(34).  While  market 
makes 
competition  has  been  improving  in  recent  years, 
state-controlled  enterprises  dominate  the  market. 
In  2017  state  ownership  was  further  expanded. 
Retail  prices  for  electricity  are  regulated  for 
households, and currently there is no roadmap for 
deregulation  in  this  sector.  The  restructuring  of 
coal mines might affect electricity bills.  

higher 

prices 

its 

been 

Gas  supply  security  is  gradually  improving. 
gas 
developing 
has 
Poland 
interconnectivity.  The 
liquefied  natural  gas 
terminal  in  Świnoujście  and  a  significant  reverse-
flow 
are 
interconnection  with  Germany 
operational.  While  connections  with  other  EU 
Member  States  are  not  yet  developed  (35),  the 
situation  is  to  improve,  with  the  construction  of 
additional interconnectors, notably between Poland 
and  Denmark  (BalticPipe),  as  well  as  with 
Lithuania (GIPL). 

If  abroad, 

While  competition  in  the  gas  wholesale  market 
is  becoming  restricted,  the  gas  retail  market  is 
being  liberalised.  In  2016,  the  number  of  firms 
holding  licences  and  actively  participating  in  the 
wholesale  trade  of  gas  was  increasing.  However, 
this positive trend may be reversed. As a result of 
legislative  changes  in  2016  and  2017,  companies 
importing gas on the wholesale market are obliged 
to  ensure  mandatory  gas  stocks  in  Poland  or 
abroad. 
to 
permanently  secure  the  interconnector  capacity  in 
addition  to  capacity  reserved  for  supplying  their 
customers.  Currently,  the  only  existing  storage 
capacities  in  Poland  are  those  of  the  state-owned 
company with the leading role in the market. In the 
first  three  quarters  of  2017,  the  wholesale  gas 
prices  were  similar  to  the  prices  of  neighbouring 
central  European  countries  but  higher  than  in 
Germany.  In  October  2017,  gas  prices  were 
liberalised  for  all  customer  groups  except  for 
households, which is scheduled for 2024. 

they  must  be  able 

(34)  Wholesale electricity prices have been above those in some 
neighbouring countries. See European Commission (2017i) 
and Market Observatory (2017).  

(35)  The  existing  connection  with  the  Czech  Republic  allows 

only for 0.5 bcm/year flow. 

35 

 
                                                           
ANNEX A  

OVERVIEW TABLE 

Commitments 

2017 Country-specific recommendations (CSRs) 

CSR 1: Pursue a substantial fiscal effort in 2018, in 
line with the requirements of the preventive arm of 
the  Stability  and  Growth  Pact,  taking  into  account 
the need to strengthen the ongoing recovery and to 
ensure 
the  sustainability  of  Poland’s  public 
finances.  Take  steps  to  improve  the  efficiency  of 
public spending  and  limit  the  use  of  reduced  VAT 
rates. 

Pursue  a  substantial  fiscal  effort  in  2018,  in  line 
with the requirements of the preventive arm of the 
Stability  and  Growth  Pact,  taking  into  account  the 
need  to  strengthen  the  ongoing  recovery  and  to 
ensure 
the  sustainability  of  Poland’s  public 
finances.  

Take  steps  to  improve  the  efficiency  of  public 
spending 

Summary assessment(36) 

Poland  has  made  limited  progress  in  addressing 
CSR1.  

This overall assessment of CSR 1 does not include an 
assessment  of  compliance  with  the  Stability  and 
Growth Pact. 

The  compliance  assessment  with  the  Stability  and 
Growth  Pact  will  be  carried  out  in  spring  when  final 
data for 2017 is available. 

Limited  progress  has  been  made  in  improving  the 
efficiency  of  public  spending. 
In  2017,  work 
continued on a reform of the budget process that was 
announced  in  2016.  Measures  are  planned  to  support 
macroeconomic forecasting, help modernise the Chart 
of  Accounts  to  facilitate  a  move  towards  accrual 
accounting,  and 
the  medium-term 
to  strengthen 
budgetary  framework.  The  work  also  continued  on 
amendments  to  the  public  finance  law  that  would  in 
particular 
the 
budgetary  process  and  strengthen  the  role  of  internal 
audit in the public sector. No implementation date for 

incorporate  spending 

reviews 

in 

(36)  The following categories are used to assess progress in implementing the 2017 country-specific recommendations (CSRs): 
No progress: The Member State has not credibly announced nor adopted any measures to address the CSR. This category covers a 
number  of  typical  situations,  to  be  interpreted  on  a  case-by-case  basis  taking  into  account  country-specific  conditions.  They 
include the following: 
 

no legal, administrative, or budgetary measures have been announced   in the national reform programme, in any other 
official  communication  to  the  national  Parliament/relevant  parliamentary  committees  or  the  European  Commission, 
publicly (e.g. in a press statement or on the government's website);  
no non-legislative acts have been presented by the governing or legislative body;   
the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or  setting  up  a  study 
group to analyse possible measures to be taken (unless the CSR explicitly asks for orientations or exploratory actions). 
However, it has not proposed any clearly-specified measure(s) to address the CSR. 

 
 

Limited progress: The Member State has: 

 
 

 

announced certain measures but these address the CSR only to a limited extent; and/or 
presented legislative acts in the governing or legislative body but these have not been adopted yet and substantial further, 
non-legislative work is needed before the CSR is implemented;  
presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR. 

 
 

Some progress: The Member State has adopted measures:  
that partly address the CSR; and/or  
that address the CSR, but a fair amount of work is still needed to address the CSR fully as only a few of the measures 
have  been  implemented.  For  instance,  a  measure  or  measures  have  been  adopted  by  the  national  Parliament  or  by 
ministerial decision, but no implementing decisions are in place. 

Substantial progress: The Member State has adopted measures that go a long way towards addressing the CSR and most of them 

have been implemented. 

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

36 

 
 
 
 
 
 
 
 
 
                                                           
 
and limit the use of reduced VAT rates. 

CSR  2:  Take  steps  to  increase  labour  market 
participation,  in  particular  for  women,  the  low-
qualified  and  older  people,  including  by  fostering 
adequate  skills  and  removing  obstacles  to  more 
permanent 
the 
sustainability  and  adequacy  of  the  pension  system 
the  effective 
to 
by 
retirement  age  and  by  starting  to  reform  the 
preferential pension arrangements. 

types  of  employment.  Ensure 

taking  measures 

increase 

Take  steps  to  increase  labour  market  participation, 
in particular for women, the low-qualified and older 
people,  including  by  fostering  adequate  skills  and 
removing  obstacles  to  more  permanent  types  of 
employment.  

A. Overview Table 

the  reform  of  the  budget  planning  and  budgetary 
procedures has been set.  

No progress was  made  on  limiting  the  extensive use 
of reduced VAT rates.  

Poland  has  made  limited  progress  in  addressing 
CSR2. 

Limited progress has been made as regards measures 
to  increase  labour  market  participation.  Some  policy 
measures  can  be  expected  to  increase  activity.  In 
particular  the  creation  of  nurseries  should  become 
easier and the public funding for them was increased. 
The  number  of  places  in  kindergartens  was  also 
increased.  Some  barriers  to  permanent  employment 
may potentially be removed by new labour codes, but 
the drafts have not yet been published. No government 
decision  has  been  made  on  the  higher  education 
reform.  Simultaneously, 
statutory 
retirement  age  acts  towards  limiting  labour  market 
participation.  Labour  market  participation  of  the 
respective  groups  increased  during  the  last  3-4 
quarters  thanks  to  a  strong  cyclical  position  of  the 
economy. 

lowered 

the 

Ensure  the  sustainability  and  adequacy  of  the 
pension  system  by  taking  measures  to  increase  the 
effective  retirement  age  and  by  starting  to  reform 
the preferential pension arrangements. 

No  progress  has  been  achieved  in  ensuring  the 
sustainability  and  adequacy  of  the  pension  system. 
The sustainability and adequacy of the pension system 
was weakened by lowering of the statutory retirement 
age  which  came  into  force  on  1  October  2017.  No 
measures  have  been  implemented  to  increase  the 
effective retirement age. Also no measures have been 
taken  to  start  reforming  the  preferential  pension 
arrangements. 

CSR  3:  Take  measures  to  remove  barriers  to 
investment, particularly in the transport sector. 

Poland  has  made  limited  progress  in  addressing 
CSR3. 

Take  measures  to  remove  barriers  to  investment, 
particularly in the transport sector. 

There was no progress in ensuring legal certainty and 
trust  in  the  quality  and  predictability  of  policies, 
including 
institutions. 
regulatory  changes,  and 
Limited  progress  has  been  made  as  regards  the 
construction-related  procedures:  the  government  is 
working  on  legislative  proposals  that,  if  effectively 

37 

 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

could 

simplify 

implemented, 
environmental 
procedures  and  issuing  construction  permits.  Some 
progress  has  been  made  in  removing  obstacles  to 
investment in the transport sector. The contracting and 
implementation  of  rail  and 
road  projects  was 
accelerated  and  some  new  legislative  and  non-
legislative  measures  were  implemented  or  are  in  the 
legislative process. 

Europe 2020 (national targets and progress) 

Employment rate target: 71 % 

Employment  rate  among  people  aged  20-64  has 
increased  strongly  since  2013  reaching  69.3 %  in 
2016. Data for the first three quarters of 2017 show a 
continuation of a positive trend.  

R&D  target  set  in  the  2013  NRP:  R&D  intensity 
target is 1.7 % for 2020 

0.97% of GDP (2016). 

Greenhouse gas emissions target:  

target: 
-  National  greenhouse  gas  emissions 
+14 %  in  2020  compared  to  2005  (in  non-ETS 
sectors) 

2020 Renewable energy target: 15% 

Share  of  renewable  energy 
transport: 10% 

in  all  modes  of 

Limited  progress  towards  the  target.  Public  R&D 
intensity  has  been  growing  on  average  by  6.2% 
annually over the period 2007-2016, Poland will reach 
its  national  target  for  2020  if  further  substantial 
increase  of  R&D  intensity  is  achieved  with  the 
minimum  average  annual  growth  of  15.2%  over  the 
period 2016-2020. 

According  to  estimates,  greenhouse  gas  emissions  in 
sectors not covered by the EU ETS increased by 7.1 % 
between 2005 and 2016, i.e. below the 2016 ceiling of 
+9.7  %.  According  to  the  latest  national  projections, 
based  on  existing  measures,  non-ETS  emissions  will 
increase by 5.6 % between 2005 and 2020. The target 
is consequently expected to be met with a substantial 
margin of 8.4 percentage points. 

According  to  preliminary  ESTAT  2016  data,  a  share 
of  renewable  energy  in  final  energy  consumption 
decreased to 11.3 % in 2016.  

Poland  is  lagging  behind  in  reaching  the  target  of 
10 % for renewable energy share in transport. In 2016 
the  share  equalled  3.9 %,  displaying  a  sharp  decline 
from 2015.   

Energy 
consumption  

efficiency: 

reduction 

of 

energy 

Poland  has  set  an 

indicative  national  energy 

The preliminary ESTAT 2016 data show the levels of 
primary  (94.3  Mtoe)  and  final  energy  consumption 
(66.7  Mtoe)  below  the  2020  indicative  national 
targets.  Following  a  period  of  decline  both  energy 

38 

 
 
 
A. Overview Table 

efficiency  target  of  reaching  a  2020  level  of  96.4 
Mtoe  primary  consumption  and  71.6  Mtoe  final 
energy consumption. 

consumption  indicators  increased  slightly  in  2015  - 
2016, compared to 2014. Poland will need to continue 
efforts  to  keep  energy  consumption  levels  in  check 
until 2020. 

Early school leaving target: 4.5 % 

Tertiary education target: 45 % 

Poland  is  one  of  the  best  EU  performers  on  early 
school  leavers  with  the  rate  of  5.2  %  in  2016  being 
less than half the EU average of 10.8 %. 

Poland is among the EU countries with a high tertiary 
education  attainment.  The  share  of  the  population 
aged  30-34  who  have  successfully  completed  tertiary 
studies have been increasing for the last several years. 
The  rate  was  44.6 %  in  2016  and  it  is  likely  that  the 
national target of 45 % was already reached in 2017. 

Risk of poverty or social exclusion target: Target 
on the reduction of population at risk of poverty or 
social exclusion in number of persons: 1 500 000 

Poland  has  achieved  the  target  since  2012.  By  2016 
the  number  of  people  at  risk  of  poverty  or  social 
exclusion declined by 3.3 million. 

39 

 
ANNEX B  

MACROECONOMIC IMBALANCE PROCEDURE SCOREBOARD 

Table B.1: 

The Macroeconomic Imbalance Procedure scoreboard for Poland (AMR 2018) 

Flags: b:Break in series. e:Estimated. p:Provisional.  
1) This table provides data as published under the Alert Mechanism Report 2018, which reports data as of 24 Oct 2017. Please 
note that figures reported in this table may therefore differ from more recent data elsewhere in this document. 2) Unit labour 
cost: 2010 break in time series. Since the indicator is a three year % change the break affects the series until the 2012 figure. 3) 
Unemployment rate: i = Eurostat back-calculation to include 2011 Population Census results. 4) Figures highlighted are those 
falling outside the threshold established in the European Commission's Alert Mechanism Report. 
Source: European Commission 2017, Statistical Annex to the Alert Mechanism Report 2018, SWD(2017) 661. 

40 

Thresholds201120122013201420152016Current account balance, % of GDP 3 year average-4%/6%-4.8 -4.8 -3.4 -2.4 -1.3 -1.0 Net international investment position% of GDP-35%-62.4 -65.3 -68.9 -69.1 -62.1 -60.7 Real effective exchange rate - 42 trading partners, HICP deflator3 year % change±5% (EA) ±11% (Non-EA)-11.5 1.4 -4.3 -1.0 -1.3 -5.0 Export market share - % of world exports5 year % change-6%15.3 1.9 0.2 5.2 9.6 18.1 Nominal unit labour cost index (2010=100)3 year % change9% (EA) 12% (Non-EA)4.2 5.3 3.1 2.9 0.3 2.1pHouse price index (2015=100), deflated 1 year % change6%-4.6 -6.6 -4.8 1.2 2.6 2.5 Private sector credit flow, consolidated% of GDP14%6.7 4.8 3.3 4.6 3.5 4.7 Private sector debt, consolidated% of GDP133%73.9 73.4 75.4 78.1 78.9 81.6 General government gross debt% of GDP60%54.1 53.7 55.7 50.2 51.1 54.1 Unemployment rate3 year average10%9.2i9.8 10.0 9.8 8.9 7.6 Total financial sector liabilities, non-consolidated1 year % change16.5%4.8 10.7 7.4 0.7 2.4 8.9 Activity rate - % of total population aged 15-643 year change in pp-0.2 pp1.9 1.8 1.7b2.2 1.6 1.8 Long-term unemployment rate - % of active population aged 15-743 year change in pp0.5 pp1.2 1.6 1.4 0.2 -1.1 -2.2 Youth unemployment rate - % of active population aged 15-243 year change in pp2 pp8.6 5.9 3.6 -1.9 -5.7 -9.6 External imbalances and competitivenessInternal imbalancesEmployment indicators 
 
 
 
 
 
ANNEX C  

STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2017. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2017. 
(3) As per ECB definition of gross non-performing debt instruments. 
(4) Quarterly values are not annualised. 
(5) Latest data April 2017. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

41 

201220132014201520162017Total assets of the banking sector (% of GDP)(1)90.991.592.491.795.391.6Share of assets of the five largest banks (% of total assets)44.445.248.348.647.7-Foreign ownership of banking system (% of total assets)(2)61.961.359.158.956.545.2Financial soundness indicators:2)              - non-performing loans (% of total loans)(3)6.46.05.45.04.74.9              - capital adequacy ratio (%)14.915.614.915.816.917.5              - return on equity (%)(4)10.810.09.47.77.53.5Bank loans to the private sector (year-on-year % change)(1)7.34.05.45.83.86.5Lending for house purchase (year-on-year % change)(1)6.83.03.54.52.92.8Loan to deposit ratio(1)101.799.598.397.293.997.3Central Bank liquidity as % of liabilities(5)0.00.00.00.00.00.0Private debt (% of GDP)73.475.478.178.981.6-Gross external debt (% of GDP)(2) - public29.628.329.329.228.427.0    - private28.728.529.028.830.528.4Long-term interest rate spread versus Bund (basis points)*350.5246.3235.3220.6294.6311.5Credit default swap spreads for sovereign securities (5-year)*154.177.460.861.175.958.7 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Headline Social Scoreboard indicators 

† The Social Scoreboard includes 14 headline indicators, of which 12 are currently used to compare Member States 
performance. The indicators "participants in active labour market policies per 100 persons wanting to work" and 
"compensation of employees per hour worked (in EUR)" are not used due to technical concerns by Member States. Possible 
alternatives will be discussed in the relevant Committees. 
(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI).       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2018.       
(4) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(5) Average of first three quarters of 2017 for the employment rate and gender employment gap. 
Source: Eurostat. 

42 

201220132014201520162017 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)5.75.65.45.35.2:Gender employment gap (pps)14.514.514.213.814.214.3Income inequality, measured as quintile share ratio (S80/S20)4.94.94.94.94.8:At-risk-of-poverty or social exclusion rate1 (AROPE)26.725.824.723.421.9:Young people neither in employment nor in education and training (% of population aged 15-24)11.812.212.011.010.5:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)64.764.966.567.869.370.8Unemployment rate2 (15-74 years)10.110.39.07.56.24.9Gross disposable income of households in real terms per capita3 (Index 2008=100) ::113.2117.0::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction425.324.826.423.124.5:Children aged less than 3 years in formal childcare6.05.05.55.37.9:Self-reported unmet need for medical care9.08.87.87.36.6:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):::40.044.046.0 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Long-term unemployed are people who have been unemployed for at least 12 months.       
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(4) Impact of socio-economic and cultural status on PISA (OECD) scores.  Values for 2012 and 2015 refer respectively to 
mathematics and science.      
(5) Average of first three quarters of 2017, unless for the youth unemployment rate (annual figure). 
Source: Eurostat, OECD. 

43 

Labour market indicators201220132014201520162017 5Activity rate (15-64)66.567.067.968.168.8:Employment in current job by durationFrom 0 to 11 months11.811.011.711.111.5:From 12 to 23 months9.49.29.39.610.0:From 24 to 59 months17.716.415.815.615.9:60 months or over60.862.762.562.361.1:Employment growth* (% change from previous year)0.1-0.11.71.50.61.2Employment rate of women(% of female population aged 20-64)57.557.659.460.962.263.7Employment rate of men (% of male population aged 20-64)72.072.173.674.776.478.0Employment rate of older workers* (% of population aged 55-64)38.740.642.544.346.248.2Part-time employment* (% of total employment, aged 15-64)7.27.17.16.86.46.6Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)26.826.828.328.027.526.3Transition rate from temporary to permanent employment(3-year average)20.818.818.418.8::Long-term unemployment rate1 (% of labour force)4.14.43.83.02.21.5Youth unemployment rate (% active population aged 15-24)26.527.323.920.817.714.6Gender gap in part-time employment6.15.95.95.76.06.4Gender pay gap2 (in undadjusted form)6.47.17.77.7::Education and training indicators201220132014201520162017Adult participation in learning(% of people aged 25-64 participating in education and  training)4.54.34.03.53.7:Underachievement in education314.4::17.2::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)39.140.542.143.444.6:Variation in performance explained by students' socio-economic status416.6::13.4:: 
 
 
 
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

*  Non-scoreboard indicator 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.  
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months. 
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard. 
Source: Eurostat, OECD. 

44 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare4.14.24.0:::Disability1.61.61.5:::Old age and survivors10.911.311.2:::Family/children1.31.41.5:::Unemployment0.30.30.2:::Housing0.10.10.1:::Social exclusion n.e.c.0.10.10.1:::Total18.418.918.7:::of which: means-tested benefits0.70.80.7:::General government expenditure by function (% of GDP, COFOG)Social protection15.916.316.216.016.9:Health4.64.64.64.74.6:Education5.45.35.35.35.0:Out-of-pocket expenditure on healthcare (% of total health expenditure):23.723.123.3::Children at risk of poverty or social exclusion (% of people aged 0-17)*29.329.828.226.624.2:At-risk-of-poverty  rate1 (% of total population)17.117.317.017.617.3:In-work at-risk-of-poverty rate (% of persons employed)10.410.710.611.210.8:Severe material deprivation rate2  (% of total population)13.511.910.48.16.7:Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan3.63.42.53.02.8:Tenant, rent at market price20.818.414.219.819.5:Proportion of people living in low work intensity households4 (% of people aged 0-59)6.97.27.36.96.4:Poverty thresholds, expressed in national currency at constant prices*1054810549108471124711994:Healthy life years (at the age of 65)Females7.87.88.18.4::Males7.47.27.57.6::Aggregate replacement ratio for pensions5 (at the age of 65)0.60.60.60.60.6:Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::41.740.145.952.4GINI coefficient before taxes and transfers*47.747.747.847.946.6:GINI coefficient after taxes and transfers*30.930.730.830.629.8: 
 
 
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

(1) The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.        
(2) Average of the answer to question Q7B_a. "[Bank loan]: If you applied and tried to negotiate for this type of financing 
over the past six months, what was the outcome?". Answers were codified as follows: zero if received everything, one if 
received most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the 
application is still pending or don't know.       
(3) Percentage population aged 15-64 having completed tertiary education.       
(4) Percentage population aged 20-24 having attained at least upper secondary education.       
(5) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
(6) Aggregate OECD indicators of regulation in energy, transport and communications (ETCR).   
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs' applications for bank loans). 

45 

Performance Indicators2010201120122013201420152016Labour productivity (real, per person employed, year-on-year % change)Labour productivity in Industry13.566.803.57-1.501.991.860.14Labour productivity in Construction10.4711.05-0.661.178.935.04-7.50Labour productivity in Market Services3.423.102.184.75-1.483.083.89Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in Industry-3.17-1.422.350.161.11-1.172.67ULC in Construction2.92-1.091.821.47-7.05-2.2211.84ULC in Market Services4.282.333.69-0.133.28-0.052.23Business Environment2010201120122013201420152016Time needed to enforce contracts(1) (days)830.0830.0685.0685.0685.0685.0685.0Time needed to start a business(1) (days)39.039.039.037.037.037.037.0Outcome of applications by SMEs for bank loans(2)na0.52na0.590.750.460.53Research and innovation2010201120122013201420152016R&D intensity0.720.750.880.870.941.000.97General government expenditure on education as % of GDP5.505.405.405.305.305.20naPersons with tertiary education and/or employed in science and technology as % of total employment37373940414243Population having completed tertiary education(3)19202223242425Young people with upper secondary level education(4)91909090909191Trade balance of high technology products as % of GDP-2.30-2.21-1.97-1.68-1.44-1.59naProduct and service markets and competition200320082013OECD product market regulation (PMR)(5), overall2.422.041.65OECD PMR5, retail2.522.432.55OECD PMR5, professional services3.293.333.24OECD PMR5, network industries(6)3.202.702.34 
 
 
 
 
C. Standard Tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR) 
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR) 
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR) 
          Waste intensity: waste (in kg) divided by GDP (in EUR) 
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP   
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change) 
Real unit energy cost: real energy costs as % of total value added for the economy 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 EUR)  
Real unit energy costs for manufacturing industry excluding refining : real costs as % of value added for  manufacturing 
sectors 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP 
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT. 
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP 
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions 
(excl land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2010 EUR) 
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport sector 
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels 
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk. 
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels 
* European Commission and European Environment Agency 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators). 

46 

Green growth performance201120122013201420152016MacroeconomicEnergy intensity kgoe / €0.270.250.250.230.230.23Carbon intensity kg / €1.071.031.010.950.92-Resource intensity (reciprocal of resource productivity)kg / €2.101.801.681.621.531.46Waste intensity kg / €-0.42-0.44--Energy balance of trade % GDP-3.3-3.4-2.7-2.6-1.6-1.4Weighting of energy in HICP%13.9415.4115.6714.9315.6513.47Difference between energy price change and inflation %3.42.9-1.3-0.10.6-1.9Real unit of energy cost% of value added21.020.919.918.9--Ratio of environmental taxes to labour taxesratio0.220.200.190.190.20-Environmental taxes% GDP2.62.62.42.62.72.7Sectoral Industry energy intensity kgoe / € 0.170.170.170.160.160.16Real unit energy cost for manufacturing industry excl. refining% of value added23.922.822.420.3--Share of energy-intensive industries in the economy% GDP14.3814.4114.2314.1514.22-Electricity prices for medium-sized industrial users€ / kWh0.100.090.090.080.090.08Gas prices for medium-sized industrial users€ / kWh0.030.040.040.040.040.03Public R&D for energy % GDP-0.010.010.010.010.01Public R&D for environmental protection% GDP-0.020.020.030.030.02Municipal waste recycling rate%17.519.624.232.342.544.0Share of GHG emissions covered by ETS*%52.551.752.451.952.150.7Transport energy intensitykgoe / €0.920.830.760.770.810.87Transport carbon intensitykg / €2.512.252.062.082.20-Security of energy supplyEnergy import dependency%33.430.625.628.629.230.3Aggregated supplier concentration indexHHI28.929.827.027.427.2-Diversification of energy mixHHI0.380.360.370.360.350.34 
 
 
 
REFERENCES 

Applica  sprl,  Cambridge  Econometrics,  Vienna  Institute  for  International  Economic  Studies  (2016), 
Economic  Challenges  of  Lagging  Regions,  annex  2,  Task  2-  Country 
report  Poland, 
http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/challenges_lagging/econ_challenges_lag
ging_annex7_en.pdf. 

Bargu A. and M. Morgandi (2018), Can Mothers Afford to Work in Poland? Labor Supply Incentives of 
Social Benefits and Childcare Costs, forthcoming in: Policy Research Working Papers, The World Bank.  
Washington D.C. 

Białek-Jaworska  A.,  M.  Ziembiński,  D.  Zięba  (2016),  Innowacyjność  polskich  przedsiębiorstw. 
Działalność badawczo-rozwojowa i współpraca z biznesem, Polska Rada Biznesu and DELab, Warszawa. 

Breznitz D. and D. Ornston (2017), EU financing and innovation in Poland, EBRD Working Paper No. 
198, European Bank for Reconstruction and Development. 

Böwer U. (2017), State-Owned Enterprises in Emerging Europe: The Good, the Bad, and the Ugly, IMF 
Working Paper no 17/221, International Monetary Fund, Washington, DC. 

CASE/IAS (2107), Study and Reports on the VAT Gap in the EU 28 Member States: 2017 Final Report. 
TAXUD 
https://ec.europa.eu/taxation_customs/sites/taxation/files/ 
study_and_reports_on_the_vat_gap_2017.pdf. 

2015/CC/131, 

available 

at: 

CPB et al (2014), A study on R&D tax incentives. Final report, European Commission Taxation Papers n. 
54, Luxembourg. 

Council  (2016),  Council  Recommendation  of  19  December  2016  on  Upskilling  Pathways:  New 
Opportunities for Adults (2016/C 484/01). 

EBRD (2017), Sustaining Growth. Transition Report 2017-2018, European Bank for Reconstruction and 
Development, tr-ebrd.com. 

EEA  (2017),  Air  quality  in  Europe  —  2017  report,  European  Environment  Agency,  EEA  Report  No 
13/2017, available at https://www.eea.europa.eu/publications/air-quality-in-europe-2017. 

EC – EPC (2018), 2018 Ageing Report: Economic and Budgetary Projections for the EU Member States 
(2016-2070),  (forthcoming),  European  Commission  –  Economic  Policy  Committee  (Ageing  Working 
Group). 

European Commission (2016a), Country Report Poland 2016, SWD (2016) 91 final. 

European  Commission  (2016b),  PISA  2015:  EU  Performance  and  initial  conclusions  regarding 
education  policies  in  Europe,  https://ec.europa.eu/education/sites/education/files/pisa-2015-eu-policy-
note_en.pdf. 

European  Commission  (2016c),  Science,  Research  and  Innovation  performance  of  the  EU,  available  at 
https://publications.europa.eu/en/publication-detail/-/publication/744d5735-e1d4-11e5-8a50-
01aa75ed71a1.  

European Commission (2017a), Country Report Poland 2017, SWD (2017) 86 final. 

European  Commission  (2017b)  –  Labour  Market  and  Wage  Developments  in  Europe,  Annual  Review 
2017, Publications Office of the European Union. 

47 

 
 
References 

European Commission (2017c), Taxation Trends in the European Union, Data for the EU Member States, 
Iceland and Norway, 2017 Edition, Luxembourg. 

European Commission (2017d), Employment and Social Developments in Europe, Annual Review 2017, 
Publications Office of the European Union.  

European  Commission 
https://ec.europa.eu/ education /sites/education/files/monitor2017_en.pdf. 

(2017e),  The  Education  and  Training  Monitor  2017,  available  at 

European Commission (2017f), European Economic Forecast Autumn 2017, Institutional Papers 063. 

European Commission (2017g), My Region, My Europe, Our Future, Seventh report on economic, social 
and territorial cohesion, SWD(2017) 330 final, Brussels. 

European Commission (2017h), European Innovation Scoreboard 2017. 

European Commission (2017i), Energy Union Factsheet Poland, 0020SWD(2017) 407 final, Brussels. 

European Commission (2018a), Debt Sustainability Monitor 2017, Institutional Paper no. 071. 

European Commission (2018b), Science, Research and Innovation performance of the EU, forthcoming. 

EIU  et  al.  (2015),  Risk  and  Return.  Foreign  Direct  Investment  and  the  Rule  of  Law,  Economist 
Intelligence Unit, Hogan Lovells, Bingham Centre for the Rule of Law and the Investment Treaty Forum, 
available at https://www.biicl.org/newsitem/6112. 

Fundacja  Republikańska  (2017),  Główne  ryzyka  i  bariery  działalności  gospodarczej  w  Polsce: 
Perspektywa mikroprzedsiębiorców i małych przedsiębiorstw, Warszawa. 

Grant Thornton (2017a), Barometr stabilności otoczenia prawnego w Polsce, Warszawa. 

Grant  Thornton  (2017b),  Niestrawny  VAT  od  żywności.  Szacunek  wpływu  ujednolicenia  stawek 
podatkowych dla produktów spożywczych, Warszawa. 

GUS  (2017a),  Oświata  i  wychowanie  w  roku  szkolnym  2016/2017,  Główny  Urząd  Statystyczny, 
Warszawa. 

GUS (2017b), Budżety gospodarstw domowych w 2016 r., Główny Urząd Statystyczny, Warszawa. 

IBE  (2015),  Dynamika  przemian  w  edukacji  i  diagnoza  problemów,  Instytut  Badań  Edukacyjnych, 
Warszawa. 

IFiS  (2013),  Program  Międzynarodowej  Oceny  Umiejętności  Uczniów  OECD  PISA.  Wyniki  Badania 
2012 w Polsce, Instytut Filozofii i Socjologii PAN. 

IMF  (2015),  Republic  of  Poland:  Technical  Assistance  Report-Tax  Administration-Modernization 
Challenges  and  Strategic  Priorities,  Country  Report  No.  15/112,  International  Monetary  Fund, 
Washington, DC. 

IMF (2017a), Republic of Poland: Developing a Medium-Term Budget Framework, Technical Assistance 
Report, International Monetary Fund, Washington, DC. 

48 

 
 
References 

IMF  (2017b),  Regional  Economic  Outlook:  Europe  Hitting  Its  Stride,  International  Monetary  Fund, 
Washington, DC. 

Invest  Europe  (2017),  Central  and  Eastern  Europe  Private  Equity  Statistics  2016,  available  at 
https://www.investeurope.eu/media/671537/invest-
europe_cee_privateequitystatistics2016_24082017.pdf. 

Jonkers, K. and C.S. Wagner (2017), Open countries have strong science, Nature Vol 550, pp. 32–33. 

Klincewicz, K., Marczewska, M., Szkuta K. (2018), RIO country report 2017; forthcoming. 

Magda, I. (2017), Family 500+ and women’s labour market participation, Presentation at the Institute for 
Structural Research seminar, 24 October. 

Market  Observatory  (2017),  Quarterly  Report  on  Energy  on  European  Electricity  Markets,  Market 
Observatory for Energy DG Energy Volume 10 (issue 1; first quarter of 2017), European Commission, 
Brussels. 

MF (2015), Analiza elastyczności wydatków budżetowych w Polsce, Podsumowanie wyników współpracy 
z OECD, Ministerstwo Finansów, Warszawa. 

Myck M. and M. Oczkowska (eds.) (2017), Pokolenie 50+ w Polsce na tle Europy: aktywność, zdrowie i 
jakość życia. Wyniki na podstawie badania SHARE, Centrum Analiz Ekonomicznych CenEA. 

Moody's  (2018),  Sovereigns  –  Central  &  Eastern  Europe:  2018  outlook  stable  as  solid  growth  offsets 
structural and institutional challenges, Outlook, 17 January. 

NBP  (2017a),  Szybki  Monitoring  NBP.  Analiza  Sytuacji  Sektora  Przedsiębiorstw,  nr  04/17,  Narodowy 
Bank Polski, Warszawa. 

NBP  (2017b),  Informacja  o  cenach  mieszkań  i  sytuacji  na  rynku  nieruchomości  mieszkaniowych  i 
komercyjnych w Polsce - II kwartał 2017, Narodowy Bank Polski, Warszawa. 

NBP  (2017c),  Kwartalny  raport  o  rynku  pracy  w  I  kw.  2017  r.,  nr  02/17,  Narodowy  Bank  Polski, 
Warszawa. 

NIK  (2017a),  Informacja  o  wynikach  kontroli:  Poszanowanie  przez  Urzędy  Skarbowe  interesów 
interesów  Skarbu  Państwa  przy  wykonywaniu  egzekucji 
podatników  oraz 
administracyjnej,  KBF.430.003.2017,  nr  ewid.  14/2017/P/16/011/KBF,  Najwyższa  Izba  Kontroli, 
Warszawa,  available at https://www.nik.gov.pl/plik/id,13888,vp,16325.pdf. 

zabezpieczenie 

NIK  (2017b),  System  gospodarowania  przestrzenią  gminy  jako  dobrem  publicznym,  Nr  ewid. 
193/2016/KIN, Najwyższa Izba Kontroli, Warszawa.  

Obywatelskie  Forum  Legislacji  –  Fundacja  Batorego  (2017),  X  Komunikat  Obywatelskiego  Forum 
Legislacji o jakości procesu legislacyjnego na podstawie obserwacji w okresie od 16 listopada 2016 do 
15 
at 
http://www.batory.org.pl/programy_operacyjne/przeciw_korupcji/przejrzystosc_w_procesie_stanowienia
_prawa_1/obserwacje_rzadowego_procesu_tworzenia_prawa. 

listopada 

available 

roku, 

2017 

OECD  (2016a),  Technologies  for  Better  Tax  Administration:  A  Practical  Guide  for  Revenue  Bodies, 
OECD Publishing, Paris. 

49 

 
 
References 

OECD (2016b), Skills Matter: Further Results from the Survey of Adult Skills, OECD Publishing, Paris. 

OECD (2017a), Tax Administration 2017: Comparative Information on OECD and Other Advanced and 
Emerging Economies, OECD Publishing, Paris. 

OECD/European Observatory (2017),  Poland: Country Health Profile 2017, State of Health in the EU, 
OECD Publishing, Paris/European Observatory on Health Systems and Policies, Brussels. 

PSE  (2016),  Prognoza  pokrycia  zapotrzebowania  szczytowego  na  moc  w  latach  2016  –  2035,  Polskie 
Sieci Elektroenergetyczne, Konstancin-Jeziorna. 

PwC (2017), Wyłudzenia VAT - luka podatkowa w 2016 r. i prognoza na 2017, Warszawa. 

Republic  of  Poland  (2016),  Ustawa  z  dnia  16  grudnia  2016  r.  o  zasadach  zarządzania  mieniem 
państwowym, available at http://dziennikustaw.gov.pl/du/2016/2259/1. 

Vandenbussche  H.,  (2014),  Quality  in  Exports,  Economic  Papers  528,  European  Commission, 
Directorate-General for Economic and Financial Affairs, Brussels. 

Visser (2016a), ICTWSS Data base. version 5.1, Amsterdam: Amsterdam Institute for Advanced Labour 
Studies (AIAS), University of Amsterdam. 

Visser J. (2016b),  What happened to collective bargaining during the great recession?, IZA Journal of 
Labour Policy 2016 5:9. 

WEF (2017), Global Competitiveness Index 2017-2018, World Economic Forum. 

Winckler,  G.  et  al.  (2017),  Horizon  2020  Policy  Support  Facility  Peer  Review  of  Poland's  Higher 
Education and Science system, European Commission, Brussels. 

Wise-Europa (2016), Wiatr w żagle. Obywatelska strategia dla polskiego rynku kapitałowego, Warszawa. 

Woessmann,  L.  (2016),  The  Importance  of School  Systems:  Evidence  from  International  Differences  in 
Student Achievement, Journal of Economic Perspectives, 30(3): 3-32. 

World Bank (2017), Doing Business 2018: Reforming to Create Jobs, World Bank, Washington, DC. 

World Bank and PwC (2017), Paying Taxes 2018, available at: https://www.pwc.com/gx/en/services/tax/ 
publications/paying-taxes-2018.html. 

ZUS  (2017),  Informacja  o  świadczeniach  pieniężnych  z  funduszu  ubezpieczeń  społecznych  oraz  o 
niektórych świadczeniach z zabezpieczenia społecznego, III kwartał/okres I-IX 2017, Zakład Ubezpieczeń 
Społecznych Warszawa. 

50