COMMISSION STAFF WORKING DOCUMENT Country Report Poland 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 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: 2019-02-27
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, 27.2.2019  SWD(2019) 1020 final  COMMISSION STAFF WORKING DOCUMENT Country Report Poland 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 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(2019) 150 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.   Competitiveness and investment 

Annex A: Overview Table 

Annex B: Commission Debt Sustainability Analysis and fiscal risks 

Annex C: Standard Tables 

Annex D: Investment Guidance on Cohesion Policy Funding 2021-2027 for Poland 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial indicators — Poland 

Table 2.1: 

Assessment of implementation of 2018 country-specific recommendations 

Table 3.2.1: 

Financial stability indicators of the Polish banking system 

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 

LIST OF GRAPHS 

Graph 1.1: 
Graph 1.2: 
Graph 1.3: 

Projected cumulative GDP growth in 2017-2018 

Employment, wages and unemployment rate, 2013-2018 

Non-Polish citizens paying social contributions in Poland, 2012-2018 

1 

3 

7 

15 

20 

20 
24 
26 
33 

45 

49 

50 

56 

61 

14 

17 

24 

50 

51 

52 

53 

54 

55 

7 
8 
9 

 
 
 
 
Graph 1.4:  Gini coefficient of equivalised disposable income, 2005-2017 
Graph 1.5: 

Change in regional GDP per capita in PPS relative to the EU average (2006-2016), 

depending on the 2006 starting point 

Unit value of capital goods exports 

Graph 1.6: 
Graph 2.1:  Overall multiannual implementation of 2011-2018 CSRs to date 
Graph 3.1.1:  Yearly change of tax-to-GDP ratios, 2016-2018 
Graph 3.1.2:  Pro-cyclicality of VAT revenue to private consumption ratio, 1995-2017 
Graph 3.1.3:  Medium-term public debt scenarios 
Graph 3.2.1:  Lending developments 
Graph 3.3.1:  Effects of retirement age changes on employment rate, 11Q1–18Q3 
Graph 3.4.1:  Private investment to GDP ratio 
Graph 3.4.2:  Air pollution in regions according to number of days with exceeded PM10 limits, 2017 
Graph 3.4.3:  Urbanisation rate and regional GDP in PPS per capita, 2016 

LIST OF BOXES 

Box 2.1: EU funds and programmes contribute to addressing structural challenges and to fostering 

growth and competitiveness in Poland 

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 

10 

10 
11 
15 
20 
21 
23 
24 
28 
33 
38 
40 

18 
27 
44 

2 

 
 
 
 
 
Skills,  migrant  workers  and  investment  play  a 
major role for potential growth. For many years, 
the  labour  contribution  to  potential  growth  has 
remained  small.  With  a  projected  decline  in  the 
working-age population, labour will present a drag 
on potential growth in the future. Given its already 
large share in the total work force, future migration 
trends are expected to have a substantial impact on 
growth.  Another  key  to  boosting  productivity  and 
growth is  capital accumulation. Investment trends 
will  increasingly  depend  on  various  non-tangible 
factors like perceptions of macroeconomic stability 
and  the  quality  of  Poland's  institutions,  policies, 
regulatory environment, and the rule of law. 

Poland is increasingly integrated into the global 
economy.  Poland’s  current  account  is  close  to 
balance  and  its  net  external  debt  narrowed  during 
2018.  Exports  remain  highly  diversified  and 
gradually  shifting 
towards  higher-value-added 
products, partially driven by increasing integration 
into global production chains. 

In 

this  context,  support 

Increasing  investments  to  support  innovation, 
skills  development,  better 
education  and 
infrastructure  and  cleaner  energy  are  crucial 
for Poland’s future growth. Investment remained 
low  in  recent  years,  leaving  many  opportunities 
to  vital 
untapped. 
innovations  and  greater  take  up  of  innovations, 
together  with  investment  in  education  and  skills, 
has  a  crucial  role  in  increasing  the  growth 
potential.  Expanded  and  modernised  transport, 
communication and energy networks can also play 
a  crucial  productivity-enhancing  role.  Investment 
in  childcare,  long-term  care  and  healthcare  would 
help  mitigate  labour  shortages.  Finally,  greater 
energy  efficiency  and  more  extensive  use  of 
renewables  would  allow  Poland  move  towards 
cleaner energy and help limit air pollution. Annex 
D  identifies  key  priorities  for  support  by  the 
the 
European  Regional  Development  Fund, 
European Social Fund Plus and the Cohesion Fund 
over  2021-2027,  building  on  the  analysis  of 
investment  needs  and  challenges  outlined  in  this 
report. 

EXECUTIVE SUMMARY 

addressing 

Poland  is  enjoying  good  economic  times,  ideal 
for 
socio-economic 
its  main 
challenges (1).  Current  economic  conditions  are 
favourable  with  continuing  strong  growth  and 
improving  public  finances.  Unemployment  is  at  a 
record  low  and  social  inequalities  are  gradually 
diminishing.  However,  in  the  long  run  Poland’s 
economic  prospects  depend  on  the  economy’s 
capacity to move away from a model based on low 
labour costs towards a knowledge-based economy 
producing  advanced  products  and  services.  In  the 
meantime,  the  economic  environment  offers  a 
unique  opportunity  to  address  structural  issues,  in 
particular related to ageing, a decreasing working-
age population and low innovation levels. 

increasing 

investment, 

investment  supported  by  EU 

The  Polish  economy  continued  to  enjoy  strong 
economic  growth.  Household  consumption  and 
in  particular 
gradually 
public 
funds, 
the  main  drivers  of  GDP  growth 
remained 
estimated  at  5.1 %  in  2018.  Private  consumption 
was  driven  by  the  best-in-history  labour  market 
situation, high consumer confidence and increasing 
household borrowing. 

Growth  is  expected  to  slow  down  but  remain 
solid.  While  a  buoyant  labour  market  and  high 
consumer  confidence  are  projected  to  further 
support  private  consumption,  its  growth  is  set  to 
slow from the rates observed in 2017-2018. This is 
due  to  higher  inflation  lowering  real  disposable 
incomes.  Mainly  thanks  to  EU  funds,  public 
investment  is  projected  to  further  increase,  while 
the increase in private investment is set to become 
more  gradual.  Both  imports  and  exports  are 
projected  to  rise,  although  the  increase  in  exports 
may be affected by a weaker outlook for the global 
economy and international trade. Overall, Poland’s 
GDP  is  expected  to  rise  by  3.5 %  in  2019  and 
3.2 % in 2020. 

(1)  This  report  assesses  Poland’s  economy  in  light  of  the 
European Commission’s Annual Growth Survey published 
on 21 November 2018. In the survey, the Commission calls 
on  EU  Member  States  to  implement  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  —  delivering  high-quality  investment, 
efforts  on  productivity  growth, 
reforms 
focusing 
inclusiveness  and 
institutional  quality  and  ensuring 
macroeconomic stability and sound public finance. 

3 

 
 
                                                           
Executive summary 

Poland  has  made 
addressing 
the 
recommendations. 

limited  progress (2) 
2018 

in 
country-specific 

Key structural issues analysed in this report, which 
point 
for  Poland’s 
economy, are the following: 

to  particular  challenges 

There has been limited progress in: 

 

increasing the efficiency of public spending; 

 

increasing labour market participation; 

  strengthening  the  innovative  capacity  of  the 

economy. 

There has been no progress in: 

 

removing 
permanent types of employment; 

remaining  obstacles 

to  more 

 

increasing the effective retirement age; 

 

reforming special pension arrangements; 

  ensuring 

and 
consultations in the legislative process. 

effective 

public 

social 

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

leaving  and 

Poland  performs  relatively  well  on  the  Social 
Scoreboard indicators supporting the European 
Pillar  of  Social  Rights.  In  recent  years,  Poland 
made  major  progress  in  reducing  the  share  of 
people  at  risk  of  poverty.  However,  a  significant 
gender employment gap persists, related to factors 
like  limited  access  to  childcare  for  the  youngest 
long-term  care 
children  and  shortcomings 
provision.  The 
low  effectiveness  of  Poland's 
efforts  to  help  people  find  work  limits  the  labour 
supply. 

in 

(2)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
country-specific  recommendation 
the 
overview table in the Annex. 

is  presented 

in 

likely 

  The  public  finances  have  improved.  The 
fiscal  deficit  is  estimated  to  have  further 
narrowed  in  2018,  supported  by  the  robust 
economy  and  new  measures  to  improve  tax 
collection.  Public  debt  as  a  share  of  GDP 
further  declined  and  is  significantly  below  the 
threshold  of  60 %  GDP.  While  no  visible 
improvement  in  the  structural  balance  was 
observed in 2016 and 2017, some improvement 
is 
in  2018. 
to  have  materialised 
Maintaining the observed improvements in tax 
collection  is  important  if  Poland  is  to  finance 
its  increased  expenditure  without  negatively 
impacting  public  finances,  also  in  the  light  of 
the  expected  slowdown  in  economic  growth. 
Limiting  the  administrative  burden  linked  to 
tax  compliance  is  also  of  key  importance. 
Further reforms of taxes are planned, including 
clearer assignment of Value added tax rates to 
goods and services. 

  Work  to  reform  the  budgetary  process 
continues. Its fiscal rules are stable but Poland 
remains  the  only  Member  State  without  an 
independent  fiscal  council.  At  the  same  time, 
the  government  continues  work  to  address 
shortcomings 
the  budgetary  process, 
including  better  medium-term  planning.  The 
ultimate  goal  of  the  planned  reform  is  to 
increase  the  efficiency  and  effectiveness  of 
spending,  a  crucial  challenge  considering  the 
increase  in  fixed  public  expenditure  in  recent 
years. 

in 

strong  GDP  growth, 

  The  banking  sector  is  overall  sound.  Banks’ 
own equity levels are high and asset quality is 
gradually improving. Liquidity indicators point 
to  a  comfortable  funding  position,  with  ample 
space  for  future  lending  growth.  Lending  is 
supported  by 
low 
unemployment  and  low  private-sector  debt. 
Banks’ profitability is gradually improving but 
lags  behind  peer  countries,  being  one  of  the 
reasons  for  an  ongoing  consolidation  in  the 
sector.  Foreign  currency  mortgage  loans  are 
some 
being  gradually  paid  off,  while 
uncertainty  remains  due  to  various  draft  laws 
potentially  changing  the  situation.  Steps  are 

4 

 
 
                                                           
Executive summary 

years,  Poland  has  managed  to  significantly 
reduce the share of people at risk of poverty or 
social  exclusion.  However,  future  pension 
benefits  are  expected  to  be  significantly  lower 
in relation to wages than today, particularly for 
women.  So  unless  the  authorities  decide  to 
support  the  pension  system  with  additional 
public  funds  which  would  impact  the  fiscal 
sustainability, the share of old people at risk of 
poverty  may 
substantially.  The 
problem  is  amplified  by  shortcomings  in  the 
long-term care system. 

increase 

  The  health  system  is  struggling  given  low 
and  mis-allocated  resources.  The  number  of 
practising  doctors  and  nurses  relative 
to 
population  size  is  among  the  lowest  in  EU. 
Although  the  authorities  announced  plans  to 
increase spending on healthcare, addressing the 
inefficiencies in spending is also crucial. 

only 

partially 

  Poland lags on innovation, with recent  legal 
changes 
addressing 
challenges. Despite past efforts to improve the 
R&D  framework  and  significant  support  from 
EU  funds,  Poland’s  innovation  performance 
remains  modest. 
  Innovative  activities  by 
companies  are  hindered  by  a  number  of 
obstacles.  Overall,  the  country’s  innovation 
is  hampered  by  underdeveloped 
potential 
science-business 
these 
deficiencies,  however,  are  addressed  by  the 
higher education reform, designed to boost the 
quality of Poland's science base. 

links.  Some 

of 

  Progress  in  infrastructure 

investment 

is 
uneven. Investment in infrastructure in Poland 
is  largely  driven  by  EU  funds.  While  road 
infrastructure  development  continues, 
the 
progress in modernising the railway network is 
slower,  partly  due  to  a  lack  of  long-term 
project 
planning 
management. Fast internet access infrastructure 
has  developed  quickly  but  ensuring  broad 
access 
remains  a 
challenge.  Poland  is  also  facing  the  challenge 
of  progressing 
towards  circular  economy, 
which limits benefits from the use of secondary 
raw materials. 

to  ultra-fast 

shortcomings 

internet 

and 

in 

to 

taken 

being 
support  capital  market 
development.  This  could  also  help  increase 
domestic savings. 

  Independent financial supervision is crucial. 
The  state  controls  about  one  third  of  the 
banking sector, as well as the biggest insurance 
company.  This  increases  the  importance  of  a 
strong,  independent  financial  supervisor,  with 
appropriate  powers.  The  full  effects  of  several 
recent  changes 
the  functioning  of  the 
to 
financial supervision remain to be seen. 

increasing 

  Labour  shortages  highlight  the  need  for 
more people to enter the labour market. The 
unemployment  rate  stabilised  below  4 %. 
Shortages  of  skilled  labour  hamper  firms’ 
growth  in  many  sectors.  In  addition  to  the 
crucially important  net  migration of  foreigners 
and  Polish  citizens, 
labour 
supply depends on getting more people into the 
labour market. Participation in the labour force 
is  hampered  by  various  factors,  such  as 
insufficient  availability  of  childcare  and  long-
term  care  facilities,  and  the  low  statutory 
retirement age. The effective functioning of the 
labour  market 
is  negatively  affected  by 
unreformed  special  pension  regimes  and  other 
the  share  of 
factors.  Although  declining, 
temporary employment contracts remains high. 

the 

skills, 

market 

participation 

  Skills  development  through  investment  in 
education  and  training  is  key  to  increasing 
labour 
and 
productivity.  While  Poland  has  performed 
well in terms of early school leaving and basic 
skills  at  lower  secondary  level,  there  are 
concerns about the quality of tertiary education, 
teachers’ 
skills 
and 
development.  Moreover,  adults  rarely  engage 
in 
in 
in 
enterprises 
smaller  firms.  In  addition,  the  current  policies 
to  help  people  into  jobs,  in  particular  those 
focusing  on  skills  upgrades,  are  not  fully 
effective.  A  quality  education  and  training 
system  that  takes  the  life-long  perspective 
could  be  one  crucial  factor  supporting  future 
growth prospects. 

training 
is  underutilised,  particularly 

learning,  and  vocational 

transversal 

  The  risk  of  poverty  has  decreased,  but 
challenges  appear  in  the  long  run.  In  recent 

  The  energy  sector  faces  the  challenge  of 
reducing  greenhouse  gas  emissions  and 

5 

 
 
pollution.  Electricity  generation  is  dominated 
by  coal,  and  strongly  rising  demand  for 
electricity  has  recently  been  met  by  new, 
mainly coal power plants. The development of 
renewable  energy  sources  has  been  negatively 
affected by regulatory changes. Poland faces a 
risk  of  missing  its  2020  target  of  15 %  of 
energy  from  renewables.  Rising  wholesale 
electricity 
stock-piling 
and 
legislation  may  reduce  the  competitiveness  of 
Poland’s  energy  sector  and  energy-intensive 
industries.  Meanwhile,  the  greenhouse  gas 
intensity of the Polish economy remains among 
the  highest  in  the  EU  and  high  air  pollution 
remains a major health-related concern. 

prices 

gas 

  Regional  disparities  persist.  All  Polish 
regions  have  been  developing  fast  for  the  last 
decade.  There  are  still,  however,  strong 
disparities  between  them,  partly  explained  by 
in 
rural  and  urban  divisions. 
connectivity  could  play  an  important  role  in 
helping reduce regional disparities. 

Investing 

  Investment remains affected by uncertainty. 
Private 
investment  has  remained  subdued 
compared  to  peer  countries,  partially  due  to 
the  general 
increased  uncertainty.  While 
is  favourable,  some 
business  environment 
regulatory  deficiencies  weigh  on  confidence 
and certainty. New laws continue  to be passed 
frequently  in  fast-track  legislative  procedures 
and  without  proper  public  consultation.  The 
risk  of  a  serious  breach  of  the  rule  of  law  in 
Poland persist and the situation is deteriorating 
as  many  of  the  contested  measures  are  being 
implemented 
is 
affecting  business  trust  as  economic  operators 
need to be sure that they are equally treated by 
an  independent  judiciary.  Compliance  with 
certain 
and 
procedures  is  burdensome  and  may  prolong 
investment  processes,  in  particular  related  to 
construction. In some sectors, state-owned and 
state-controlled companies continue to grow in 
importance,  making  it  key  to  ensure  a  level 
playing field for private competitors. 

consolidated.  This 

administrative 

requirements 

and 

Executive summary 

6 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

Economic  growth  remained  strong  in  2018. 
Following  years  of  strong  expansion,  real  GDP 
growth reached 5.1 % in 2018, among the highest 
rates  in  the  EU  (Graph  1.1).  The  peak  of  the 
economic  cycle  was  most  likely  reached  in  mid-
2018.  Domestic  demand  (especially  consumption 
and  investment)  has  remained  the  main  driver  of 
real GDP. 

The period of uninterrupted and fast growth of 
the  Polish  economy  experienced  over  the  last 
decade continued. Poland's economy expanded by 
37 %  in  the  decade  leading  up  to  2018,  almost 
three  times  faster  than  the  euro  area  economy. 
2018  was  the  27th  consecutive  year  of  GDP 
expansion. In 2017, GDP per capita reached 70 % 
of  the  EU  average  (when  accounting  for  different 
price  levels  between  countries),  up  from  55 %  a 
decade earlier. This success stands out not only in 
a  European,  but  also  in  a  global,  comparison. 
Several factors contributed: reforms in the  quarter 
of  a  century  after  1989  which  set  strong 
institutions  and 
the  rule  of  law,  responsible 
macroeconomic  policies,  improvements  in  the 
education system, and preventing the emergence of 
large  inequalities.  EU  integration  and  EU  funds 
(see Box 2.1) played an important role in all these 
areas. 

Private  consumption  was  the  key  driver  of 
growth.  An  increase  in  private  consumption  by 
4.9 % in 2017 and by 4.5 % in 2018 was possible 
thanks  to  favourable  labour  market  conditions, 
strong  consumer  confidence,  easy  access  to  credit 
and  low  inflation.  The  effects  of  increased  fiscal 
transfers  were  visible  in  2017,  but  faded  as  of 
2018. In 2018, the growth  of private consumption 
outpaced gains in real disposable income, resulting 
in a decline in the savings rate of households to an 
estimated low of 0.9 % of disposable income. 

Investment  continued  to  gradually  recover  in 
2018.  Booming  public  investment  was  the  main 
driver of overall investment growth, with the gross 
fixed capital formation expenditures expanding by 
7.3  %.    This  was  supported  by  an  increasing 
utilisation of EU funds, and spending in the build-
up  to  the  local  and  regional  elections  in  the 
autumn.  Private 
investment  growth  remained 
positive, but relatively weak. 

Graph 1.1: 

Projected cumulative GDP growth in 2017-2018 

16

% 

14

12

10

8

6

4

2

0

E

I

T
M

O
R

L
P

I

S

V
L

U
H

E
E

Y
C

T
L

G
B

Z
C

K
S

R
H

I

LF
N

S
E

T
A

T
P

U
L

U
E

E
S

E
D

R
F

L
E

K
D

E
B

K
U

T

I

Source: European Commission 

Growth is projected to rest close to potential in 
2019  and  to  slow  in  2020.  A  favourable  labour 
market  situation,  high  consumer  confidence  and 
to 
increasing  household  credit  are  expected 
continue  supporting  private  consumption.  Its 
growth  is  nevertheless  likely  to  slow  from  the 
exceptionally high rates observed in 2017-2018 as 
higher inflation weighs on real disposable income. 
Public  investment  expenditure  is  projected  to 
continue  rising,  helped  by  EU  funds,  although  its 
growth  rate  is  set  to  slow  relative  to  the  strong 
rates  in  2018.  Private  investment  is  projected  to 
strengthen  gradually.  Strong  domestic  demand  is 
forecast  to  translate  into  higher  imports.  Exports 
are  set  to  rise,  although  at  a  slower  rate  than 
observed in recent years given a somewhat weaker 
outlook  for  the  global  economy  and  international 
trade. 

Potential growth 

Potential  growth  is  expected  to  increase  in  the 
short term, before slowing from 2020 onwards. 
The  contribution  to  potential  growth  from  capital 
decreased  in  2016  and  has  been  recovering  only 
gradually  since then (Table  1.1). The contribution 
to potential growth from labour has remained low 
and  the  demographic  outlook  –  with  a  projected 
decline  in  the  working  age  population  –  implies 
that  labour  is  expected  to  be  a  drag  to  potential 
growth  over  the  decades  to  come.  This  could  be 
partly  countered  by  migrant  workers,  whose 

7 

 
 
 
in 

increased  strongly 

number 
recent  years. 
Available employment data appear to substantially 
underestimate  the  role  of  migrant  workers  in  the 
economy.  Hence,  part  of  the  apparent  increase  in 
the  contribution  of  total  factor  productivity  to 
potential growth, that is especially visible in 2017-
18  (Table  1.1),  may  be  explained  by  part  of  the 
labour  force  not  being  included  in  the  statistics. 
Potential  growth  is  expected  to  slow  after  2020, 
mainly due to an even weaker labour contribution, 
which  is  projected  to  become  negative  around 
2022. 

implications 

Migration trends and the evolution of skills will 
have  significant 
for  potential 
growth  in  the  future.  The  working  age  (15-74) 
population  has  been  slowly  declining  since  2008 
and  this  trend  is  expected  to  continue  in  the 
decades  to  come.  The  working  age  population  is 
projected to fall by around 18 % between 2015 and 
2050  (European  Commission,  2017a,  2018c). 
Migration  flows  are  likely  to  be  an  increasingly 
important  factor  driving  future  working  age 
population trends. At the same time, the realisation 
of the existing potential for increased labour force 
participation  will  depend  on  factors  such  as  the 
appropriate investment in skills (Section 3.3). 

to 

stands 

reactive 

on 
are 

productivity. 
particularly 

support 
Capital  accumulation 
potential  growth  more  strongly,  also  thanks  to 
Investment 
its 
impact 
developments 
to 
perceptions  of  macroeconomic  stability  and  the 
quality  of  institutions,  including  the  policy  and 
regulatory  environment  (see  Section  3.4).  For 
many  years,  Poland  has  been  characterised  by  a 
low  ratio  of  investment  to  GDP,  particularly  for 
corporate investment. This can be partly explained 
by  the  relatively  small  size  of  the  large-corporate 
sector,  together  with  other  factors  (see  Section 
3.4).  Some  data  issues  may  also  lead  to  an 
investment.  Foreign 
underreporting  of  certain 
direct investment has been a source of productivity 
gains  in  several  sectors.  Both  capital  deepening 
and skills upgrades have the potential to strengthen 
productivity growth. 

Labour market 

employment 

low 
Slowing 
unemployment  and  strong  wage  growth  were 
visible  in  2018.  The  cyclical  position  of  the 
labour  market 
economy  was 

reflected 

record 

gains, 

in 

1. Economic situation and outlook 

developments.  The  employment  rate  in  the  20-64 
age group rose above 72 % in the middle of 2018, 
while the activity rate reached 75 %. Employment 
gains,  as  captured  by  the  labour  force  survey, 
slowed  from 1.4 % in 2017 to an estimated 0.7 % 
in 2018 (Graph 1.2). This development was mainly 
the  result  of  constrained  labour  supply,  given  the 
record  low  unemployment  rate:  3.8 %  in  the  third 
quarter  of  2018.  The  average  number  of  hours 
worked stabilised at low levels, suggesting an on-
going  shift  to  forms  of  employment  that  better 
match employees’ preferences, e.g.  with regard to 
overtime.  At  above  7 %,  wage  growth  broadly 
stabilised at the high level achieved in late 2017. 

Graph 1.2: 

Employment, wages and unemployment rate, 
2013-2018 

Source: Eurostat 

Employers  find  it  increasingly  difficult  to  hire 
people  with  the  relevant  skills.  A  shortage  of 
labour force has continued to top the list of growth 
barriers  (see  Sections  3.3  and  3.4).  Given  the 
already  high  activity  rates  among  skilled  people, 
the  employers’  competition  for  talent  is  likely  to 
the  coming  years, 
in 
remain  strong,  also 
reinforcing wage pressures. 

Labour  market  participation  rates  remain  low 
for  certain  groups.  In  contrast  to  the  elevated 
labour  force  participation  of  highly  educated 
people,  older,  less-skilled  people  and  women  are 
less  economically  active  than  their  peers  in  most 
other EU member states (Section 3.3). The activity 
of people with disabilities also remains low. There 
are multiple causes of this, including  weak labour 
market-relevant  skills,  a  limited  use  of  adult 

8 

-202468101213Q113Q314Q114Q315Q115Q316Q116Q317Q117Q318Q118Q3Employment growth y-o-yNominal wage growth y-o-yUnemployment rate% 
 
1. Economic situation and outlook 

learning,  barriers  to  geographic  mobility,  certain 
disincentives  to  work  built  into  the  social  benefit 
system,  and  the  low  statutory  retirement  age  of 
women. 

from  outside 
in  the 

the  EU  play  an 
Workers 
important  role 
labour  market.  As 
discussed  above,  employment  figures  (Graph  1.2) 
are  likely  to  underestimate  employment  growth. 
There  are  no  precise  estimates  of  the  number  of 
migrant  workers.  Employment  procedures  and 
necessary  documents  differ  depending  on  a 
number  of  factors  such  as  worker’s  citizenship. 
Visa and residence permit data imply that in 2017, 
Ukrainian citizens’ share in total employment was 
around  4 % (3).  Poland  stands  out  among  the  EU 
Member  States  in  that  immigration  flows  from 
outside  the  EU  are  predominantly  motivated  by 
seeking  employment.  In  2017,  87 %  of  all  first 
residence  permits  issued  by  Poland  were  for 
employment reasons, by far the highest number in 
the EU.  

A  key  challenge  lies  in  ensuring  that  Poland 
remains  an  attractive  place  to  work,  not  only 
for temporary or seasonal workers. This follows 
from the already significant role played by migrant 
workers, the widespread labour shortages reported 
the  unfavourable  demographic 
by  firms  and 
outlook.  One  element  of  this  is  to  ensure  that 
migrant  workers’ skills and competences are  fully 
utilised (Section 3.3). An important trend observed 
in recent years was a gradual shift from temporary 
work to more permanent forms of employment and 
residence.  Between  2012  and  2018,  the  six-fold 
increase in the number of foreign workers insured 
in  the  Social  Insurance  Institution  has  indicated  a 
decline in informal work (Graph 1.3). At the same 
time,  the  future  attractiveness  of  Poland  for 
migrant workers and for Polish citizens (including 
those  currently  living  abroad)  will  depend  on 
policies  and  labour  market  conditions  in  home 
countries and in other EU Member States. 

Certain  institutional  features  negatively  affect 
the functioning of the labour  market. In certain 
aspects  the  labour  market  can  be  described  as 

to 

the 

largely 

features 

highly  flexible.  This  applies  in  particular  to  the 
ease  of  using  non-standard  contracts.  However, 
several, 
limit 
institutional 
flexibility,  with  potentially  negative  implications 
for  some  population  groups.  This  applies  in 
particular 
limited  use  of  part-time 
employment,  weaknesses  in  the  functioning  of 
public  employment  services,  the  social  insurance 
implications  of  a  transition  from  the  farmers' 
special  pension  regime  to  the  general  social 
security  regime  and  the  still  large  differences  in 
employment  protection  between  some  types  of 
temporary  and  permanent  work  contracts  (Section 
3.3). 

Graph 1.3:  Non-Polish citizens paying social contributions 

in Poland, 2012-2018 

Source: Polish Social Insurance Institution 

Inequality 

Strong  income  growth  for  poorer  households 
has helped limit inequality. Income inequality, as 
approximated  by  the  Gini  coefficient,  has  been 
declining since 2014 (Graph 1.4). The ratio of the 
total  income  received  by 
the  20  %  of  the 
population with the highest income to that received 
by the 20 % with the lowest income also declined 
in 2016, to 4.6, close to the average of EU Member 
States (4).This  improvement  can  be  explained  by 

(3)  For  discussion  of  assumptions  see  NBP  (2017).  Available 
recent data show that the number of  residence permits for 
Ukrainian citizens continued to grow rapidly in 2018. The 
number  of  type  D  visas  issued  declined  slightly,  but  the 
comparison is made more difficult by the visa-free regime 
introduced in 2017. 

(4)  This indicator is referred to as the S80/S20 income quintile 
share  ratio.  The  EU-SILC  survey  that  is  the  basis  for  this 
assessment likely underreports data on top incomes, due to 
a higher non-response rate. Alternative estimates using tax 
data suggested higher growth for top incomes, resulting in 
higher inequality (Bukowski and Novokmet, 2017). 

9 

010020030040050060012 Q112 Q313 Q113 Q314 Q114 Q315 Q115 Q316 Q116 Q317 Q117 Q318 Q118 Q3thousand of persons 
                                                           
 
 
                                                           
1. Economic situation and outlook 

economic  strength  of  Warsaw.  While  Polish 
regions  have  been  catching  up  with  average  EU 
income,  there  are  signs  of  economic  divergence 
within Poland, i.e. GDP is growing faster in more 
developed  regions  (Graph  1.5) (5).  However,  the 
extent  of  regional  differences  within  the  country 
may be overestimated because official statistics do 
not  fully  account  for  people  moving  from  less  to 
more developed regions. 

Graph 1.5:  Change in regional GDP per capita in PPS 

relative to the EU average (2006-2016), 
depending on the 2006 starting point 

employment  and  wage  growth  as  well  as  changes 
in the tax and benefit system. 

as 

the 

regards 

equality 

in  reducing 
The  role  of  social  benefits 
inequalities  increased  while  less  progress  was 
observed 
of 
opportunities.  The  role  of  the  tax  and  benefit 
system in reducing inequality increased somewhat 
in  2016  due  to  the  introduction  of  the  universal 
child  benefit.  The  pension  system  still  plays  the 
most  significant  inequality-reducing  role  within 
the  tax-benefit  system.  A  challenge  remains  to 
the  school  structure 
to 
ensure 
introduced  in  2017  do  not  restrain  the  role  of  the 
education  system 
inequality  of 
opportunities.  The  key  risk  lies  in  the  earlier 
tracking  into  the  vocational  and  general  streams 
(European  Commission,  2018c).  Substantial 
differences in healthcare access remain. However, 
access  to  pre-school  education  appears  to  be 
improving, although at a different pace in various 
locations (Section 3.3). 

that  changes 

reducing 

in 

Graph 1.4:  Gini coefficient of equivalised disposable 

income, 2005-2017 

(1) Each point represents an EU region. Polish regions are 
marked by the larger red dots. Inner London, Luxembourg, 
Southern and Eastern and Bucuresti-Ilfov are not shown.  
(2) PPS stands for purchasing power standards. 
Source: Eurostat 

Regional  differences  create  serious  policy 
challenges, though their extent is similar to that 
observed  in  other  large  EU  Member  States. 
Poland’s  regional  differences  are  like  those  of 
other larger EU Member States. The disparities in 
household consumption are lower than the regional 
differences  in  GDP  per  capita.  Warsaw  and  other 
the  centres  of  economic 
large  cities  are 
development.  However,  many  smaller  cities  and 
rural  areas  struggle  with  the  outmigration  of 
young,  highly  skilled  people,  and  access  to  high 
quality  public  services  such  as  healthcare, 
education  or  public  transport.  Some  regions,  in 
particular  in  the  north  and  east,  are  facing 
particular  challenges,  such  as  weaker  transport 

(5)  In contrast, data on disposable income per capita from the 
household  budget  survey  point  to  a  convergence  between 
regions during 2010-2017 (GUS, 2018a). 

(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. 
Source: Statistics Poland, Eurostat 

Regional differences 

Polish  regions  have  seen  some  of  the  fastest 
growth in the EU for the last decade. All but one 
Polish  region  were  among  the  15 %  EU  regions 
with  the  fastest  catch-up  in  terms  of  GDP  per 
capita  in  the  decade  2006-2016  (Graph  1.5). 
Growth was fastest in Mazowieckie, thanks to the 

10 

2930313233343505060708091011121314151617EU (SILC)PL (SILC)PL (HBS)-40-30-20-10010203040050100150200changein % points% of EU average in 2006 
 
 
 
                                                           
linkages to large cities or a high proportion of low 
productivity sectors such as agriculture. 

External position 

Export  performance  has  remained  robust, 
reflecting strong external competitiveness. With 
its exports rising faster than GDP and total global 
imports,  Poland  has  continued  to  gain  shares  in 
global  markets  for  both  goods  and  services.  The 
surplus  in  the  trade  in  services  has  continued  to 
grow  thanks  to  a  strong  performance  in  sectors 
computers, 
telecommunications, 
such 
information  services,  transport  and  other  business 
services.  A  broadly  stable  exchange  rate  and 
gradual — lower than in several other countries in 
the  region  —  growth  of  unit  labour  costs  have 
helped to maintain cost competitiveness.  

as 

Graph 1.6: 

Unit value of capital goods exports 

Source: Eurostat 

integrated 

increasingly 

Exports remain highly diversified and Poland is 
becoming 
in  global 
production  chains.  The  long-term  trend  towards 
closer  integration  into  global  production  chains, 
especially  those  centred  in  Germany,  is  visible. 
Germany’s  share  in  total  Polish  exports  increased 
to around 28 % in the first three quarters of 2018. 
At  the  same  time,  a  gradual  shift  towards  higher 
value-added  products  within  these  chains  can  be 
observed,  with  the  unit  value  of  intermediate  and 
capital  goods  exports  rising  faster  than  in  most 
regional peers (Graph 1.6). 

1. Economic situation and outlook 

The current account remained close to balance. 
The  current  account  has  been  close  to  balance 
since  2015.  There  have  been  limited  changes  in 
key components, with stable deficits in the primary 
income balance (around 4 %  of GDP), a high and 
growing surplus in the trade of services (increasing 
to  above  4 %  of  GDP  in  mid-2018  from  around 
3.5 %  of  GDP  a  year  earlier)  and  a  slowly 
deteriorating goods trade balance (-0.2 % of GDP). 

Poland’s  negative  net  international  investment 
position  narrowed  during  2018.  The  net 
international  investment  position  was  -57 %  of 
GDP  at  the  end  of  the  second  quarter  of  2018, 
continuing  the  trend  of  a  gradual  improvement 
since 2015. Between 2017 and 2018 foreign public 
debt  fell  the  most  among  its  components.  The 
accumulated 
foreign  direct 
investments  (around  36 %  of  GDP  in  the  second 
quarter  of 2018)  accounts  for  most  of  the  net 
the 
international 
relative  stability  of  direct  investments,  this  limits 
the  risks  associated  with  a  negative  value  of  this 
indicator 

investment  position.  Given 

stock  of 

net 

Price developments 

Inflation stayed low in 2018. Volatile energy and 
food  prices  had  the  strongest  impact  on  inflation 
during  2018.  After  reaching  2 %  in  late  2017, 
inflation  as  measured  by  harmonised  index  of 
consumer prices eased in spring to 0.7 % and then 
stayed  below  1,6  %  throughout  the  remainder  of 
the year. The consumer price inflation targeted by 
the  central  bank  followed  a  broadly  similar  path, 
not exceeding 2 % throughout the year, below the 
bank’s  2.5 %  target.  Going  forward,  delayed 
effects  of  stronger  wage  growth  are  projected  to 
translate  into  higher  inflation,  including  in  the 
services  sector.  Harmonised  index  of  consumer 
prices  inflation is expected to exceed 2.5 % in the 
second  half  of  2019  and  stay  between  2.5 %  and 
3 % until the end of 2020. 

Trends  in  asset  prices  varied  during  2018.  The 
main  index  of  the  Warsaw  Stock  Exchange 
declined  during  the  first  half  of  2018  and  has 
remained broadly stable since then. During 2018 as 
a  whole,  the  index  declined  by  around  10 %.  The 
Warsaw  Stock  Exchange  performance  was  hence 
broadly  similar  to  other  markets  in  the  region.  In 
contrast,  house  prices  accelerated,  with  growth 
reaching  around  9 %  annually  in  the  secondary 

11 

809010011012013014015005070911131517index (2005=100)CZDEHUPLSK 
 
1. Economic situation and outlook 

market  in  the  largest  cities  in  the  third  quarter  of 
2018. 

Financial sector 

The banking sector has remained strong, while 
capital  market  developments 
experienced 
setbacks.  Risks  to  financial  stability  are  waylaid 
by  the  banking  sector’s  strong  capital  buffers, 
comfortable  profitability  and  liquidity  and  sound 
asset  quality  limit  (see  Section  3.2).  This  was 
confirmed  by  the  November  2018  stress  test 
undertaken  by  the  European  Banking  Authority, 
where the two Polish banks were among the most 
stress-resistant of all of the 50 banks participating 
(EBA, 2018). While differences between banks are 
visible, and some banks continue to record losses, 
the  sector’s  profitability  increased  somewhat  in 
2018.  Risks  related  to  the  uncertain  outcome  of 
policy discussions on reducing the remaining stock 
of  foreign  currency-denominated  mortgage  loans 
appear to have  fallen in 2018. The  Warsaw  Stock 
Exchange  was  reclassified  into  the  developed 
market  category  by  one  of  the  global  index 
providers  from  September  2018.  Meanwhile,  the 
already  lagging  corporate  bond  market  saw  a 
setback  after  investors  realised  that  they  were 
likely 
losses  following  the 
bankruptcy  of  one  issuer  that  recently  (in  2017) 
entered the Warsaw Stock Exchange. 

to  sustain  heavy 

Monetary policy 

in  2019.  In 

The  National  Bank  of  Poland  has  kept  interest 
rates  unchanged  since  March  2015.  The 
Monetary  Policy  Council  has  continuously 
repeated  its  forward  guidance  of  interest  rates 
its 
remaining  unchanged,  also 
statements,  the  Council  pointed  to  low  core 
inflation  and  the  behaviour  of  the  headline  price 
index  being  largely  determined  by  factors  outside 
the  control  of  monetary  policy,  especially  energy 
prices. The November 2018 inflation projection of 
the  National  Bank  of  Poland  implied  a  high 
probability of inflation exceeding the 2.5 % target 
in  2019  and  2020,  but  remaining  within  the 
permissible  band  for  deviations  from  the  target. 
This  is  somewhat  above  the  path  implied  by  the 
European  Commission  2019  winter 
interim 
forecast (see below). 

Public finances 

The  headline  fiscal  deficit  continued  to  decline 
in  2018,  primarily  due  to  strong  revenues. 
Revenue  from  personal  and  corporate  income  tax 
and social security contributions increased strongly 
in  2018.  This  was  driven  by  the  peak  of  the 
economic  cycle,  strong  wage  growth  and  an  on-
going  shift  in  employment  towards  contracts 
subject  to  higher  social  security  contributions,  as 
well  as  the  effects  of  measures  improving  tax 
compliance. Indirect tax revenues were also on the 
in  private 
rise  driven  by 
consumption,  the  cyclical  upswing  and  effects  of 
policy  measures  aimed  at  improving  compliance 
(Section  3.1).  With  modest  growth  in  current 
public  expenditure,  these  factors  resulted  in  a 
further reduction in the headline fiscal deficit from 
1.4 % in 2017. New reforms, including new taxes, 
have  a  potential  to  broadly  stabilise  the  headline 
fiscal  deficit  until  2020,  despite  expected  slower 
economic growth. 

robust  growth 

The  structural  balance  has  remained  broadly 
stable  since  2016.  When  adjusting  for  the  effects 
of  the  economic  cycle  and  excluding  one-off  and 
temporary  measures,  the  dynamics  of  the  fiscal 
balance  looks  different.  Amid  strong  economic 
expansion,  exceeding  the  potential  growth,  no 
visible  improvement  in  the  structural  balance  has 
been  observed  in  2016  and  2017.  The  cyclically-
adjusted  fiscal  balance  thus  has  not  moved  closer 
to the  medium-term objective of  -1 % of GDP (6). 
Some  improvement  may  be  expected  in  2018. 
Increases  of 
categories  of  public 
expenditure  that  are  difficult  to  reduce  (including 
due  to  lowering  of  the  statutory  retirement  age), 
coupled with not achieving medium-term objective 
come  with  certain  risks.  The  room  for  counter-
cyclical fiscal policy reaction may be more limited 
when  economic  conditions  worsen.  This  situation 
could  also  create  challenges  in  the  medium-  and 
long-term,  given  the  expenditure  pressures  likely 
to  arise  in  certain  areas,  e.g.  linked  to  healthcare, 
pensions or infrastructure investment. 

certain 

The  general  government  debt  is  on  a  declining 
path.  A  combination  of  fast  nominal  economic 
growth and the low headline deficit contributed to 

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

12 

 
                                                           
1. Economic situation and outlook 

the  continued  decline  in  the  general  government 
debt-to-GDP ratio from 51 % at the end of 2017 to 
below 50 % at the end of 2018. The public debt is 
expected  to  continue  falling  gradually  to  around 
47 % of GDP at the end of 2020. 

13 

 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial 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. 
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation. 
Source:  Eurostat and ECB as of 31-1-2019, where available; European Commission for forecast figures (Winter forecast 2019 
for real GDP and HICP, Autumn forecast 2018 otherwise) 

14 

2004-072008-122013-1520162017201820192020Real GDP (y-o-y)5.53.52.83.14.85.13.53.2Potential growth (y-o-y)3.53.93.12.93.23.53.73.8Private consumption (y-o-y)4.13.41.93.94.94.5..Public consumption (y-o-y)3.91.73.11.93.5...Gross fixed capital formation (y-o-y)12.32.54.9-8.23.97.3..Exports of goods and services (y-o-y)10.05.16.88.89.5...Imports of goods and services (y-o-y) 12.03.06.07.610.0...Contribution to GDP growth:Domestic demand (y-o-y)5.72.92.71.04.25.1..Inventories (y-o-y)0.7-0.3-0.21.20.5...Net exports (y-o-y)-1.00.80.40.80.10.0..Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.10.40.40.20.10.20.20.2Capital accumulation (y-o-y)1.31.91.61.21.21.31.31.4Total factor productivity (y-o-y)2.21.61.11.51.92.12.22.2Output gap-1.11.3-1.3-0.70.92.12.11.6Unemployment rate15.18.98.96.24.93.32.92.8GDP deflator (y-o-y)3.23.00.50.32.01.12.42.5Harmonised index of consumer prices (HICP, y-o-y)2.43.70.1-0.21.61.22.32.7Nominal compensation per employee (y-o-y)3.15.91.85.16.06.17.07.4Labour productivity (real, person employed, y-o-y)2.63.01.82.53.4...Unit labour costs (ULC, whole economy, y-o-y)0.42.80.12.52.51.93.54.1Real unit labour costs (y-o-y)-2.7-0.2-0.42.20.60.81.01.5Real effective exchange rate (ULC, y-o-y)3.1-1.6-0.9-2.34.80.70.41.9Real effective exchange rate (HICP, y-o-y)3.6-1.2-0.4-3.52.81.0-0.70.5Savings rate of households (net saving as percentage of net disposable income)2.20.7-0.31.5-1.6...Private credit flow, consolidated (% of GDP)6.56.83.85.12.8...Private sector debt, consolidated (% of GDP)46.370.377.581.676.4...of which household debt, consolidated (% of GDP)17.333.035.636.634.9...of which non-financial corporate debt, consolidated (% of GDP)29.037.341.944.941.5...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)3.95.75.54.74.7...Corporations, net lending (+) or net borrowing (-) (% of GDP)1.15.17.75.66.35.35.24.9Corporations, gross operating surplus (% of GDP)22.423.825.424.524.523.823.523.1Households, net lending (+) or net borrowing (-) (% of GDP)-1.9-2.8-2.7-1.9.-3.6-3.7-3.6Deflated house price index (y-o-y).-5.5-0.42.31.7...Residential investment (% of GDP)3.43.32.82.42.8...Current account balance (% of GDP), balance of payments-4.6-5.0-1.3-0.50.2-0.5-0.7-1.1Trade balance (% of GDP), balance of payments-2.3-2.12.14.04.1...Terms of trade of goods and services (y-o-y)1.5-0.51.80.50.2-1.00.20.2Capital account balance (% of GDP)0.61.72.41.01.3...Net international investment position (% of GDP)-44.2-61.2-66.7-61.6-61.0...NIIP excluding non-defaultable instruments (% of GDP) (1)-10.4-24.0-26.4-22.9-20.7...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)36.851.957.561.153.0...Export performance vs. advanced countries (% change over 5 years)69.237.79.714.822.7...Export market share, goods and services (y-o-y)..4.46.36.2...Net FDI flows (% of GDP)-3.5-1.9-1.8-0.9-1.2...General government balance (% of GDP)-3.6-5.3-3.5-2.2-1.4-0.9-0.9-1.0Structural budget balance (% of GDP)..-2.8-1.9-1.8-1.9-1.9-1.8General government gross debt (% of GDP)45.651.352.554.250.649.248.347.4Tax-to-GDP ratio (%) (3)34.233.133.034.535.136.036.336.5Tax rate for a single person earning the average wage (%)28.224.724.525.0....Tax rate for a single person earning 50% of the average wage (%)25.622.522.423.3....Key economic and financial indicators - Polandforecast 
 
 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

all 

43 % 

successful 

introduction  of 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations  addressed  to  Poland  have 
recorded  at  least  ‘some  progress'  (see  Graph 
2.1).  The 
the 
expenditure  rule  and  far-reaching  liberalisation  of 
access  to  professional  services  resulted  in  ‘full 
implementation’  or  'substantial  progress’  in  the 
fields of product markets and public finance. In the 
labour  market  area,  certain  measures  tackling 
labour  market  segmentation  and  participation 
helped to achieve 'some progress' in the respective 
CSRs.  The  introduction  of  tax  incentives  and 
improving  access  to  finance  for  R&D  activities 
also  contributes  to  ‘some  progress’  in  relevant 
CSRs. Only limited progress was observed in life-
long  learning,  enforcing  contracts,  and  removing 
obstacles  to  infrastructure  investment.  So  far,  no 
in  reforming  special 
progress  was  observed 
in 
pension  regimes  for  farmers  and  miners, 
establishing  an  independent  fiscal  council  and 
limiting the use of reduced value added tax (VAT) 
rates.  The  2017  reversal  of  the  earlier  statutory 
pension age reform resulted in an assessment of no 
progress in the area of the pension system. 

Poland  corrected  its  deficit  and  increased  tax 
compliance,  while  only  limited  or  no  progress 
was  made  in  other  public  finance  areas.  As 
Poland  had  corrected  its  excessive  fiscal  deficit, 
the corresponding excessive deficit procedure  was 
closed  in  2015.  While  tax  compliance  improved, 
no progress was made in limiting the extensive use 
of  reduced  VAT  rates  (the  recently  proposed  new 
VAT  matrix  can  only  partially  address  the  issue, 
though  without  limiting  the  fiscal  cost  of  reduced 
VAT  rates).  At  the  same  time,  Poland  has  started 
to  reform  its  budget  planning  processes.  While  in 
2012, the gradual increase in the statutory pension 
age  was 
long-term 
sustainability  of  public  finances  and  to  ensure 
adequacy  of  pensions,  the  2017  reversal  of  this 
reform  is  likely  to  have  a  negative  impact  on  the 
effective  retirement  age.  Only  limited  action  was 
taken  to  reform  special  pension  arrangements, 
mainly  for  the  uniformed  services.  However,  in 
2018  the  government  announced  plans  to  reverse 
some of the reforms as regards the pension system 
for  police  officers.  No  effective  actions  to  reform 
the  special  pension  arrangements  for  miners  and 
farmers have been undertaken.  

initiated 

tackle 

the 

to 

Graph 2.1:  Overall multiannual implementation of 2011-

2018 CSRs to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact. 
** The multiannual CSR assessment looks at the 
implementation up to the 2019 country report since CSRs 
were first adopted. 
Source: European Commission 

to 

reduce 

Different policy measures had mixed impact on 
labour  market  participation  and  skills  and 
some  actions  have  been  taken  to  lower  labour 
market  segmentation.  Increasing  the  availability 
of childcare in recent years acted to help taking up 
employment.  At  the  same  time,  lowering  of  the 
statutory  retirement  in  2017  and  lack  of  effective 
action to improve access to long-term care had the 
opposite  effect.  Several  actions  adopted  during 
2015-2017  help 
labour  market 
segmentation:  measures  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.  However,  the 
work  on  the  new  labour  codes  stopped.  Some 
solutions  envisaged  in  the  reforms  of  vocational 
education  and  of  higher  education  can  help  foster 
labour  market  relevant  skills.  The  full  effects  of 
these  reforms  remain  to  be  seen.  The  lifelong 
learning strategy  was adopted in September 2013, 
but  coordination  of  adult  learning  policy  remains 
inefficient.  

the 

Progress  on 
innovative 
strengthening 
capacity  of  the  economy  and  improving  the 
regulatory  environment  was  mixed.  Despite 
measures taken, including number of amendments 
to  the  act  on  higher  education,  only  limited 
progress  was  observed  in  ensuring  better  links 

15 

17%40%36%5%2%No ProgressLimited ProgressSome ProgressSubstantialProgressFullImplementation 
 
 
2. Progress with country-specific recommendations 

of five entrepreneurship laws only limited progress 
in  improving  the  regulatory  environment  was 
observed.  No  progress  was  observed  in  ensuring 
effective  public  and  social  consultation  in  the 
legislative  process,  as 
fast 
legislative  procedures  with  limited  consultation 
continued throughout 2018. 

the  practice  of 

in 

achieved 

improving 

between  research,  innovation  and  industry.  Some 
progress  was 
the 
effectiveness  of  R&D  tax  incentives  and  better 
targeting  financial  instruments  at  the  innovation 
cycle. In 2016-2018, Poland has reformed its R&D 
tax  incentives  with  new  regulations  and  changes 
encouraging  wider  use  of  the  R&D  tax  breaks.  In 
the  regulatory  environment,  substantial  progress 
was  made  in  liberalising  access  to  professional 
services  with  the  introduction  of  the  2013  -  2015 
reform.  Only  limited  progress  was  observed  in 
other  areas  conducive  to  a  friendly  business 
regulatory  environment.  Certain  changes  to  the 
legal  procedure  and  introduction  of  electronic 
procedures 
contract 
enforcement.  The  new  Building  Code  was  to 
simplify the requirements for  construction permits 
and  to  streamline  the  spatial  planning  coverage, 
but 
introduction  remains  protracted.  New 
compliance  measures  introduced  in  recent  years, 
e.g.  split  of  tax  base  for  companies,  contribute  to 
no progress in easing the administrative  burden of 
tax  compliance.  The  use  of  and  quality  of  public 
and  social  consultations  in  the  legislative  process 
appears to have worsened in recent years. 

improved 

slightly 

its 

in 

labour 

increasing 

Overall, Poland has made limited progress (7) in 
addressing the 2018 CSRs. Limited progress was 
made  in  addressing  recommendations  on  public 
finance. The work on reforming the budget process 
continued in 2018, with a focus on defining target 
solutions  and  their  implementation  plan.  With  an 
improved  access  to  childcare  there  has  been 
limited  progress 
force 
participation,  while  no  progress  was  observed  in 
removing  remaining  obstacles  to  more  permanent 
types  of  employment.  In  addition,  no  measures 
were taken to increase the effective retirement age 
and  reform  special  pension  arrangements.  The 
announced change of certain  provisions  for police 
officers pension system seems to go in the opposite 
direction.  There  was  also  limited  progress  on 
supporting  closer  cooperation  between  business 
and  research  institutions.  The  Ministry  of  Science 
and  Higher  Education  continued  the  industrial 
doctorate programme, but the establishment of the 
Łukasiewicz  Research  Network  was  staled  as  of 
August 2018. With the introduction of the package 

(7)  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. 

16 

 
                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

Assessment of implementation of 2018 country-specific recommendations 

17 

Poland Overall assessment of progress with 2018 CSRs:  Limited CSR 1:  Ensure that the nominal growth rate of net primary government expenditure does not exceed 4.2 % in 2019, corresponding to an annual structural adjustment of 0.6 % of GDP. Take steps to improve the efficiency of public spending, including by improving the budgetary process. Limited progress*  Limited progress in improving the efficiency of public spending. Works on the budgetary process reform continued with a focus on multiannual budget planning, modernisation of the chart of accounts and efficiency of spending  CSR 2: Take steps to increase labour market participation, including by improving access to childcare and by fostering labour market relevant skills, especially through adult learning, and remove remaining 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 reforming the preferential pension schemes. No progress   Limited progress in increasing participation in the labour market by improved access to childcare. No progress in removing remaining obstacles to more permanent types of employment.  No progress in ensuring the sustainability and adequacy of the pension system with no progress in measures to increase the effective retirement age and no progress in reforming the preferential pension arrangements. CSR 3: Strengthen the innovative capacity of the economy, including by supporting closer collaboration between business and research institutions. Improve the regulatory environment, in particular by ensuring effective public and social consultations in the legislative process. Limited progress  Limited progress in strengthening the innovative capacity of the economy with certain extension of the R&D tax incentives. Limited progress in supporting closer collaboration between business and research institutions. The establishment of the Lukasiewicz Research Network was stalled.  Limited progress in improving the regulatory environment with adoption of the "Constitution for Business" and the works on a new public procurement law. No progress in ensuring effective public and social consultations in the legislative process. * This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact.   
 
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes contribute to addressing structural challenges and to 
fostering growth and competitiveness in Poland 

Poland is one of the largest beneficiaries of EU support. Financial allocations from European Structural 
and Investment Funds aiming to help Poland tackle development challenges amount to EUR 86 billion in the 
current  EU  multi-year  budget  (multiannual  financial  framework),  equivalent  to  around  2.6  %  of  GDP  in 
2014-2020.  As  of  the  end  of  2018,  some  EUR  62  billion  (around  72  %  of  the  total)  have  already  been 
allocated  to  specific  projects.  In  addition,  EUR  4.2  billion  was  allocated  to  specific  projects  on  strategic 
transport  networks  through  a  dedicated  EU  funding  instrument,  the  Connecting  Europe  Facility. 
Furthermore,  numerous  Polish  research  institutions,  innovative  firms  and  individual  researchers  benefited 
from other EU funding instruments, notably Horizon 2020 which provided some EUR 400 million. 

European Structural and Investment Funds have contributed to shared prosperity and growth. Until 
2023,  regions  will  implement  more  than  half  of  the  Cohesion  Policy  budget.  Thanks  to  its  contribution, 
eleven  Polish  regions  were  among  the  30  fastest  growing  EU  regions  in  the  last  12  years.  Even  the  least 
developed regions increased their income levels from less than a third of the EU average in 2004 to between 
40 % and 60 % in 2016 (Section 1). The ability of regional self-governments to identify and implement a 
development strategy and manage significant public investments, principally driven by EU funds, has been 
one of the main factors behind Poland's geographically widespread growth (OECD, 2018c).  

EU  funding  has  helped  to  address  policy  challenges  identified  in  the  2018  recommendations  for 
Poland. European Structural and Investment Funds have been improving access to childcare by investing in 
over 370 thousand places in childcare facilities. Furthermore, until the end of 2017, more than 520 thousand 
unemployed  including  310  thousand  young  persons  received  support.  In  2018  alone,  investments  mainly 
driven by these funds have led to the building or modernisation of 1 425 km of national roads. EU Funds 
supported  closer  collaboration  between  business  and  research  institutions,  and  R&D  investments  in  the 
private  sector.  By  the  end  of  2018,  European  Structural  and  Investment  Funds  helped  2 200  firms  build 
cooperation  with  research  institutions  and  3  400  firms  introduce  new  products  in  their  markets.  Horizon 
2020  supported  1 100  research  projects,  covering  a  very  broad  spectrum  from  health,  food  security  and 
sustainable use of biological resources to nuclear research.  

In  addition,  the  Commission  can  provide  tailor-made  technical  support  upon  a  Member  State's 
request  via  the  Structural  Reform  Support  Programme  to  help  Member  States  implement  growth-
sustaining  reforms  to  address  challenges  identified  in  the  European  Semester  process  or  other  national 
reforms.  Poland  is  receiving  support  to  strengthen  the  administrative  capacity  of  the  National  Revenue 
Administration. The Commission is also assisting the authorities in their efforts to improve public financial 
management, and to enhance research, development and innovation. In addition, in 2018, work has started 
on  the  development  of  inland  waterways  in  the  light  of  new  Polish  Water  Law,  improving  the  quality  of 
inclusive  education  and  activities  and  measures  to  promote  and  encourage  the  implementation  of  energy 
audit in the enterprise sector. 

EU  funding  helps  mobilise  private  investment.  European  Structural  and  Investment  Funds  alone 
mobilised additional private capital by allocating about EUR 2.7 billion in the form of loans, guarantees and 
equity. In addition, the European Fund for Strategic Investments  has allocated EUR 3.8 billion in Poland. 
The bulk of this financing is provided under the infrastructure and innovation window. The European Fund 
for Strategic Investments is providing for instance EUR 33 million for the construction of 1 300 affordable 
houses for low income earners in the city of Poznań. Polish small and medium enterprises are supported by 
the  dedicated  component  of  the  Fund,  under  which  13agreements  with  intermediary  banks  have  been 
approved for a total of EUR 299 million, which should mobilize around EUR 3 billion  of total financing. 
Around 45 thousand small and medium enterprises and companies are expected to benefit from this support. 

EU  projects  strengthen  national,  regional  and  local  authorities  and  civil  society  EUR  2.6  billion  has 
been  allocated  for  building  capacity  in  public  administrations  at  different  levels,  and  has  promoted  close 
cooperation with stakeholders. The Catching up Regions Initiative delivers targeted technical assistance and 
financing for tackling smog-related challenges in Poland. The Coal Regions in Transition Initiative seeks to 
improve  socio-economic  and  technological  transformation  processes  in  three  Polish  regions  with  sizeable 

18 

 
2. Progress with country-specific recommendations 

coal  mining  sectors.  The  Railway  High  Level  Group,  which  brings  together  the  national  authorities,  the 
beneficiaries  and  the  European  Commission,  discusses  systemic  deficiencies  and  possible  remedies  for 
railway  projects  at  a  strategic  level.  The  pilot  action  on  frontloading  administrative  capacity  building  in 
Lubelskie aims to analyse and address the regional needs for building administrative capacity.  

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

19 

 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

regularly standard audit files declined during 2018, 
from over 5 % in January to 2.4 % in November. 

Graph 3.1.1:  Yearly change of tax-to-GDP ratios, 2016-2018 

Tax system 

The  tax  burden  in  Poland  is  lower  than  in  the 
EU,  despite  a  recent  increase.  The  tax-to-GDP 
ratio for Poland increased from 33.5 % in 2016 to 
34.1 % in 2017, still well below the EU average of 
39.0 %.  This  supported  a  decrease  in  the  nominal 
fiscal deficit to 1.4 % of GDP in 2017 (Section 1). 
Value-added  tax  (VAT)  revenue  saw  the  biggest 
increase  relative  to  GDP,  from  7.2 %  in  2016  to 
7.8 % in 2017, driven also by better collection, and 
exceeding the EU average of 7.1 % of GDP. Taxes 
on labour remained among the lowest in the EU. 

Tax  collection  has  improved.  According  to  the 
most  recent  EU-wide  study,  in  2016  Poland 
managed  to  reduce  by  3.5 pps  the  VAT  gap,  i.e. 
the difference between VAT revenue expected and 
actually  collected  (CASE  and  IAS,  2018).  The 
21 %  VAT  gap  in  2016  was  still  well  above  the 
EU  average  of  12 %,  however,  this  did  not  yet 
factor  in  the  several  legal  changes  that  took  place 
in  2016.  A  buoyant  macroeconomic  environment 
and the tax reforms in recent years contributed to a 
continued 
revenue. 
increase 
Consequently, 
from  both 
corporate  and  personal  income  taxes  saw  double-
digit growth. Increases in revenue from those taxes 
as  well  as  from  social  security  contributions 
continued in 2018 (Graph 3.1.1). 

in 
revenue 

in  2017, 

strong 

tax 

New  measures  to  tackle  tax  avoidance  and 
fraud  entered  into  force  in  2018.  The  extension 
of the requirement to provide a standard audit file 
for  all  companies,  including  1.5  million  micro-
companies, was an important change implemented 
in 2018. On top of that, a voluntary split payment, 
a law to prevent the use of the financial sector for 
tax  fraud  and  the  so-called  tobacco  package 
entered into force. Geo-localisation for transport of 
certain  goods  was  also  deployed.  A  number  of 
changes  in  corporate  income  tax  aimed  at  to 
increasing 
revenue.  The  social  security 
premiums  payment  system  was  simplified,  which 
could also contribute to higher revenue. While the 
implementation  of  some  new  requirements  faced 
organisational  and  technical  issues,  overall  the 
measures appear to be functioning as intended. For 
instance,  the  share  of  entities  failing  to  send 

tax 

(1) Data in ESA 2010 terms, rounded to 0.1 p.p. 
(2) 2018-2017 change based on data for three quarters. 

Source: European Commission, Ministry of Finance 

Reforms of direct taxation continued into 2019. 
A  major reform of corporate and personal income 
taxes entered into force in 2019. One objective was 
to  increase  compliance;  another  was  to  comply 
with  EU  directives.  Certain  measures  were 
intended  to  simplify  the  tax  system  and  lower  the 
burden for some companies. On the one hand, the 
reform  introduced:  a  new  exit  tax;  a  new  tax  on 
high  earners;  mandatory  disclosure  rules;  and 
changes 
on 
taxation 
cryptocurrencies  and  the  withholding  tax  system. 
Poland also lowered the corporate income tax rate 
for  small  companies  from  15 %  to  9 %  and 
simplified transfer pricing rules. In addition, a tax 
incentive  to  support  innovation  (‘IP  Box’)  was 
implemented.  This  supplemented  an  investment 
tax credit, which was increased in 2018 to support 
private investment. 

profits 

the 

of 

to 

Preserving high tax revenue collection becomes 
increasingly 
important  given  the  projected 
slowdown  of  GDP  growth.  The  historical 
evidence  shows  that  tax  revenue  efficiency  tends 
to  reflect  cyclical  developments  in  the  economy 
(Graph  3.1.2;  Sancak  et  al.,  2010).  Economic 

20 

0.00.20.40.6201620172018VATCorporate income taxSocial security contributionsPersonal income taxp.p. 
 
 
 
(Section  1).  Anticipating 

growth  is  set  to  gradually  decelerate  in  the  near 
this 
future 
and 
maintaining 
in  collection 
efficiency is important if Poland is to remain able 
to finance increased expenditure levels.  

improvements 

the 

Graph 3.1.2:  Pro-cyclicality of VAT revenue to private 

consumption ratio, 1995-2017 

Source: European Commission 

implemented 
tax-related  changes 
Recently 
increased 
the  administrative  burden.  A 
significant  number  of  new  requirements  aimed  at 
increasing  tax  collection  make  compliance  more 
burdensome  (World  Bank,  2018training).  These 
measures  include  the  obligation  of  the  monthly 
reporting of VAT returns, compulsory reporting of 
standard  audit  files  by  all  entities,  differentiating 
sources  of  profits  in  corporate  income  tax  and,  in 
the  area  of  the  VAT,  an  extension  of  the  list  of 
goods  and  services  subject  to  a  reverse  charge 
mechanism.  Consequently,  even  if  the  process  of 
reporting,  paying  and  —  to  a  major  extent  — 
auditing  taxes  is  now  done  electronically,  time 
spent  by  a  model  Polish  company  on  meeting  its 
tax  obligations  increased  considerably,  from  260 
hours  in  2016  to  334  hours  in  2017.  At  the  same 
time,  the  adoption  of  new  laws,  including  tax-
related  law,  noticeably  slowed  in  2017  and  2018 
from its peak in 2016. In 2018 the number of pages 
of  new  laws  was  projected  to  have  dropped  by 
over  50 %  compared  to  2016,  to  some  14 000 
pages  (Grant  Thornton,  2018a),  but  this  still  adds 
significantly to compliance costs. 

3.1. Public finances and taxation 

Whereas  the  National  Revenue  Administration 
fulfils its tasks, some room for improvement has 
been identified. Although there were a number of 
technical, operational and human-resources related 
difficulties  following  the  creation  of  the  National 
Revenue Administration this service is performing 
well  overall.  This  was  also  confirmed  by  the 
Supreme  Audit  Office  (NIK,  2018b).  Yet,  while 
tangible results of the tax administration work are 
visible,  the  Supreme  Audit  Office  has  identified 
several  shortcomings  in  2016  and  2017.  They 
covered things like the use of different approaches 
to  taxpayers  or  insufficient  reaction  time  to 
identified 
The  National  Revenue 
Administration also faced challenges regarding its 
IT  infrastructure  and  its  capacity  to  attract  and, 
even more, retain competent staff. 

risks. 

The  system  of  reduced  VAT  rates  is  costly, 
complex  and  error-prone.  Reduced  VAT  rates 
continued to be applied to a large number of goods 
and  services.  This  led  to  significant  foregone 
revenue. According to the available data, the VAT 
gap  caused  by  applying  reduced  rates  was  among 
the  highest  in  the  EU  in  2016  (CASE  and  IAS, 
2018)  (8).  The  Polish  authorities  provide  similar 
estimates  (MF,  2016).  The  current  system  of 
reduced  rates  may  also  cause  errors  and  increase 
compliance  costs  (European  Commission,  2018c). 
It  happens  that  even  tax  authorities  when  issuing 
individual tax decisions do not clearly validate the 
assignment of reduced rates to particular products 
for 
and  services.  This 
businesses (9).  

increases  uncertainty 

late  2018,  Poland  proposed  a 

The authorities plan to address  some problems 
generated by the system of reduced VAT rates. 
reform, 
In 
recognising  the  inefficiency  and  uncertainty  for 
taxpayers caused by the current setup (10). Its aim 
is to eliminate some of the issues described above, 
implementing  a  clearer  and 
including  by 
unambiguous list of goods and services  subject to 
issuing  binding 
VAT 

reduced 

rates 

and 

(8)  The reduced rate gap stood 15.3 %, while the EU average 
amounted to 10.0 %. The actionable policy gap – covering 
foregone  revenue  from  reduced  rates  and  exemptions  – 
stood at 25.7 %, as compared to 16.5 % in the whole EU. 
(9)  As  shown  by  Grant  Thornton  (2018b),  between  2013  and 
2017, out of over 3 500 non-binding, conditional individual 
tax rulings issued by tax authorities, most cases concerned 
the application of reduced VAT rates.  

(10)  See  the  rationale  for  the  legislative  proposal  made  in 

November 2018 (MF, 2018).   

21 

-5-4-3-2-10123789101112131415959799010305070911131517VAT / consumption ratioOutput gap (rhs)% private consumption% potential GDP 
 
                                                           
3.1. Public finances and taxation 

At  the  same  time,  Poland  uses  a  traditional,  i.e. 
functional,  as  well  as  performance-based  budget 
classification  with  the  former  playing  a  primary 
role.  Budget  classification  is  composed  of  a 
significant  number  of  sections,  chapters  and 
paragraphs,  mixing  organisational  and  functional 
structure.  This  encompasses  only  a  part  of  the 
general  government  sector.  A  significant  part  of 
expenditure 
it.  A  major 
is  decided  outside 
drawback  of  the  current  situation  is  that  the 
accountability  for  funds  is  not  always  clearly 
assigned to relevant institutions. Thus, operational 
analysis, 
budget  management, 
identification  of  inefficient  spending  and  the 
reallocation of funds to priority areas are difficult. 
On top of that, Poland implemented performance-
based  budgeting  that,  in  practice,  is  not  used  as  a 
real  tool  for  performance  analysis.  In  contrast,  it 
actually complicates the budget process. 

performance 

limited.  In  spring  every  year, 

long-term  budget  planning 
Medium  and 
remains 
the 
government  adopts  a  Multiannual  Financial  Plan. 
It  consists  of  the  convergence  programme  and  a 
list of major state functions, each accompanied by 
performance  indicators.  The  programme  covers  a 
three-year  period,  but  it  does  not  translate  into 
targets  for  the  relevant  annual  budgets.  The 
convergence  programme  drafting  is  driven  by  EU 
requirements and has no direct implication for the 
actual  budget  process,  while  a  comprehensive 
medium-  or  long-term  national  budgeting  process 
has not yet been established. 

structure.  A 

is  reforming 

Poland 
its  budget  processes, 
including  for  the  medium  term.  In  2018,  work 
continued  to  address  the  identified  weaknesses  in 
the  budgetary  process.  The  ultimate  objective  of 
the  reform  is  responsible  and  coherent  budgeting 
that  goes  beyond  one-year  planning.  One  of  the 
most challenging  steps is the  simplification of the 
classification, 
budget 
integrated with a new structure of the state budget, 
has  been  planned  to  replace  the  current  dual 
classification.  To  make 
the 
authorities, supported by EU financing, are setting 
up a new chart of accounts aligned with the budget 
classification.  This is expected to be delivered by 
2020  and  subsequently  applied  in  stages.  Poland 
enhance 
continues 
also 
macroeconomic 
the 
medium-term  budgetary  framework.  The  reform 

efforts 
forecasting  and 

this  possible, 

unified 

further 

reform 

to 

information  on  the  application  of  VAT  rates.  The 
main  element  of  the  proposal  consists  of  moving 
from the national classification of goods to the EU 
common  nomenclature.  The  reform  does  not 
however  address  the  issue  of  high  foregone 
revenue, since it is supposed to be budget neutral. 
The  envisaged  implementation  date  was  set  for 
2020,  while  taxpayers  would  have  the  possibility 
to request binding rate decisions already in 2019. 

Self-employed  workers  can  opt  for  flat  rate 
income  tax.  Employees  are  subject  to  a  personal 
income  progressive  tax  regime  with  two  tax  rates 
of  18 %  and  32 %.  Simultaneously,  around  0.5 
million  self-employed  enjoy  the  right  to  a  flat 
personal  income  tax  rate  of  19 %,  which  is 
advantageous  for  taxpayers  with  high  incomes. 
These  individuals  may  also  opt  for  lower  social 
security  contributions  than  those  in  the  general 
system. This comes, however, at the cost of lower 
future pension benefits. 

Poland  does  not  fully  use  environmental  taxes 
as  effective  policy  tools.  The  implicit  tax  rate  on 
energy remained comparatively low in Poland and 
there  are  a  number  of  tax  exemptions  (European 
Commission, 2018c). However, from 2019 Poland 
applies  a  new  emission  charge  on  fuels.  The 
revenue  collected  is  to  finance  electro-mobility 
projects and fighting smog.  

Fiscal framework 

fiscal 

The 
framework  remained  broadly 
unchanged  in 2018.  All components of the  fiscal 
framework,  i.e.  numerical  fiscal  rules,  a  medium-
term  budgetary  framework,  independent  fiscal 
institutions  and  budgetary  procedures,  remained 
unchanged.  However,  Poland  amended  its  law  on 
public  finances  so  that  it  now  requires  that  the 
draft  budget  should  discuss 
the  underlying 
its  underlying 
forecast  and 
macroeconomic 
assumptions.  Moreover,  macroeconomic  forecasts 
used  for  the  budget  purposes  must  be  compared 
with  the  forecasts  of  the  European  Commission 
and  other  independent  bodies.  Additionally,  a 
relevant  deficit  and  debt  sensitivity  analysis  is 
compulsory.  The  new  requirements  were  applied 
for the first time to the 2019 budget.  

The  budget  structure  and  classifications  are 
complex  and  lead  to  inefficiencies.  The  state 
budget is divided into several dozen budget parts. 

22 

 
3.1. Public finances and taxation 

implementation  will  take  several  years.  Its  final 
target date is not yet known. 

period.  This  is  due  to  factors  such  as  increasing 
ageing costs (Annex B). 

Poland remains the only EU Member State with 
no fiscal council. Several analyses show that fiscal 
councils can improve fiscal governance, especially 
if combined with fiscal rules. When fiscal councils 
are  properly  empowered  and  staffed,  they  appear 
to  limit  the  deficit  bias  and  contribute  to  better 
budget  processes (11).  Whereas  the  exact  remit  of 
fiscal councils varies between EU Member States, 
they  fulfil  an  important  role  when  informing  the 
public  on  the  main  issues  related  to  fiscal  policy. 
Currently  in  Poland,  some  but  not  all  of  the 
functions  usually  assigned  to  fiscal  councils  are 
executed  by  several  bodies,  differing  in  terms  of 
impact  they  can  make.  This  scattered  approach 
limits  their  potential  influence  on  policymakers. 
Poland  is  the  only  EU  Member  State  that  has  no 
plans to establish a fiscal council. 

Debt sustainability analysis and fiscal risks 

risks 
fiscal 
to 
No  major 
short-term 
identified.  General 
sustainability  have  been 
government debt is currently  below 60 % of GDP 
and  projected  to  decline  further  in  the  coming 
years.  At  the  same  time,  by  2017, Poland  has  not 
its  medium-term  objective  of  a 
yet  reached 
structural  deficit  of  1 %  of  GDP.  The  2019  debt 
sustainability  analysis  (European  Commission, 
2019a) 
fiscal 
low 
sustainability risks for Poland. This was confirmed 
by  an  upgrade  of  the  government  debt  rating  by 
Standard  &  Poor’s.  Two  other  rating  agencies 
upheld their ratings in 2018. 

short-term 

indicates 

In  the  medium  term,  fiscal  sustainability 
analysis  also  points  to  a  low  risk.  Even  without 
any  adjustment  in  the  structural  primary  balance 
relative  to  the  baseline  ‘no-fiscal  policy  change’ 
scenario,  debt-to-GDP  ratio  would  stay  below  the 
reference value of 60 % by 2033. In the ‘no-fiscal 
policy  change’  scenario  after  2020  and  normal 
economic conditions, the general government debt 
would reach 48 % of GDP in 2029 (Graph  3.1.3). 
While this is a low debt-to-GDP ratio, it follows an 
ascending  path  towards  the  end  of  the  projection 

(11)  See  for  example  Nerlich  and Reuter  (2013),  Debrun  et al. 
(2009),  Debrun    and    Kinda  (2014),  Coletta  et  al.  (2015), 
Beetsma  and  Debrun  (2016). 

Graph 3.1.3:  Medium-term public debt scenarios 

Source: European Commission 

The only announced changes to special pension 
regimes  are  likely  to  increase  the  associated 
fiscal  burden.  No  changes  have  been  introduced 
to  the  costly  special  pension  arrangements  for 
miners  and  farmers.  In  late  2018,  under  the 
pressure  of  the  striking  police,  the  government 
promised to partly reverse the 2012 reform of their 
pension  regime.  Until  now,  police  officers  were 
entitled to retire after 25 years of service and after 
reaching  55  years  of  age.  The  new  proposal 
abolishes  the  minimum  age  of  55  years  –  in 
extreme cases, allowing people to retire at 44. The 
impact of the proposal is to be exactly quantified, 
but it is likely to further increase the fiscal cost. 

The projected strong drop in pension adequacy 
can  lead  to  political  pressures,  creating  fiscal 
sustainability  risks.  On  the  surface,  pension-
related  sustainability  risks  seem  contained.  In  a 
simulated  scenario  (EPC  and  EC,  2018j),  public 
pension  expenditure  remains  contained  to  around 
10 %  of  GDP  in  2070,  below  the  EU  average. 
However,  the  ratio  of  average  pension  benefits  to 
wages  is  expected  to  decline  strongly.  As  an 
illustration, in this scenario close to one third of all 
pensioners  would  receive  only 
the  minimum 
pension,  currently  equivalent  to  around  EUR  250 
before  tax.  This  is  likely  to  create  strong  political 
pressure  to  increase  pensions,  resulting  in  fiscal 
sustainability risks. 

23 

40455055201820202022202420262028Baseline no-policy change scenarioGDP growth lower by 0.5 pp than baseline scenarioGDP growth higher by 0.5 pp than baseline scenario% GDP 
                                                           
 
2018)  coincides  with  around  half  of  residential 
property  transactions  paid  in  cash  as  investment 
alternatives to bank deposits. Almost all mortgage 
loans are based on variable interest rates, implying 
risks  once  interest  rates  start  increasing.  Fixed 
interest  rate  products  barely  exist  in  the  Polish 
banking  sector.  This  is  being  addressed  by  the 
through  a 
Financial  Supervisory  Authority 
revision of one recommendation. 

Graph 3.2.1:  Lending developments 

3.2.  FINANCIAL SECTOR 

The  banking  sector  is  overall  well  capitalised 
and solid. For the sector as a whole, capital ratios 
remain  significantly  above  regulatory  minimum 
requirements.  This  remains  the  case  even  if  these 
are  to  some  extent  negatively  affected  by  higher 
risk  weights  on  foreign  currency-denominated 
mortgages.  At  the  same  time,  while  this  part  of 
liquidity 
is  gradually  diminishing, 
portfolios 
indicators,  such  as  the  liquidity  coverage  ratio 
(148 % in the second quarter of 2018 relative to a 
minimum  requirement  of  100 %),  leave  ample 
space  for  future  loan  growth  (Table  3.2.1). Polish 
through 
banks 
domestic  deposits,  representing  61 %  of 
the 
balance  sheet.  In  turn,  market  funding  make  up 
19 % of assets. This share may well increase since 
banks look bound to issue more securities to meet 
minimum  requirements  (by  2023)  and  to  make 
more  use  of  covered  bonds  following  recent  legal 
changes.  Meeting  the  minimum  requirement  for 
own funds and eligible liabilities targets is likely to 
be challenging for the Polish banking sector that is 
not  accustomed  to  funding  its  operations  through 
fixed income instruments. 

remain  predominantly 

funded 

Table 3.2.1: 

Financial stability indicators of the Polish 
banking system 

Source: ECB 

(*) ECB aggregated balance sheet: loans and deposits to 
the private non-financial sector. 
(**) For comparability, only annual values are presented. 
Source: ECB 

lending  has  been  growing  modestly, 
Bank 
driven  by  a  supportive  economic  environment 
and  low  interest  rates.  Lending  to  the  private 
sector  has  continued  to  increase  at  a  rate  broadly 
similar  to  nominal  GDP  growth  (Graph  3.2.1). 
Unsecured  consumer  and  corporate  loans  have 
increased  the  most.  Banks’  growing  appetite  for 
higher  yielding  loans  comes  with  risks  in  the 
medium  and  long  run.  These  are  mitigated  by  the 
favourable  macroeconomic  outlook  and 
low 
indebtedness  of  households  and  non-financial 
corporations.  For  instance,  household  debt  was 
equivalent to 36 % of GDP in mid-2018, compared 
to  the  euro  area  average  of  58 %.  The  modest 
increase in mortgage lending (4 % annually in June 

the 

Bank’s  profitability  has  been  gradually 
improving.  Rapid  GDP  growth,  a  pickup  in 
investments  and  low  provisioning  costs  have 
the  banking  sector  remain  profitable. 
helped 
Profits  remain  negatively  affected  by  low  interest 
rates,  given 
importance  of  floating  rate 
mortgages  in  banks’  assets.  Banks  have  reduced 
funding costs,  mostly by lowering deposit interest 
rates  to  historic  lows.  On  the  revenue  side  the 
focus  on  higher  yielding  small  business  and 
consumer  loans  is  starting  to  pay  off.  In  the  first 
three quarters of 2018 the average return on assets 
increased slightly, while remaining below regional 
peers.  Net  profits  are  still  being  negatively 
impacted  by 
financial 
institutions 
the  value  of  assets 
excluding equity and Polish sovereign bonds).  

the  special 

(0.44 %  of 

levy  on 

The  booming  economy  has  supported  assets 
quality.  The  level  of  non-performing  loans  in  the 
system  has  been  gradually  improving  as  robust 
economic  growth  makes  it  easier  for  indebted 
borrowers  to  manage  repayments.  Loans  to  non-

24 

(%)2015201620172018Q2Non-performing loans6.66.46.67.0Coverage ratio54.555.856.254.3Loan to deposit ratio*97.293.993.696.0Tier 1 ratio14.515.416.316.0Capital adequacy ratio15.816.918.017.9Return on equity**7.77.56.9-Return on assets**0.90.80.8-0246810121416Jan 12Jul 12Jan 13Jul 13Jan 14Jul 14Jan 15Jul 15Jan 16Jul 16Jan 17Jul 17Jan 18Jul 18Total privateNon-financial corporationsHouseholdsMortgage credit% y-o-y 
 
 
 
 
 
 
3.2. Financial sector 

financial corporations remain generally riskier than 
loans to households and mortgages have the lowest 
non-performing loans ratio (Table 3.2.1) (12). 

There  is  uncertainty  over  potential  legislation 
affecting  the  existing  stock  of  foreign  currency 
mortgage  loans.  Loans  in  foreign  currency  are 
decreasing  by  around  8  %  annually  and  their 
quality  is  generally  high  with  non-performing 
loans  ratio  around  3.7 %.  Yet,  the  exchange  rate 
risk  makes  these  borrowers  more  vulnerable  than 
Polish  zloty  borrowers.  Also,  most 
foreign 
currency  mortgages  have  a  high  loan-to-value 
ratio,  making 
to  sell  underlying 
properties.  Several  initiatives  to  address  the  issue 
have been announced, some risking the stability of 
the  banking  sector.  None  of  them  was  eventually 
introduced, but uncertainty remains. 

it  difficult 

Concentration  in  the  banking  sector  continues. 
Lower  prospects  for  profit  generation,  growing 
capital  requirements,  and  uncertainty  about  the 
final  shape  of  the  legislation  addressing  the  issue 
of  foreign  currency  mortgages  are  some  of  the 
factors  that  have  pushed  lenders  towards  mergers 
and  acquisitions  for  the  last  few  years.  This  trend 
is  expected  to  continue,  possibly  leading  to  the 
emergence  of  a  market  with  a  small  number  of 
universal players and some specialised lenders, for 
instance mortgage banks. Simultaneously, the state 
directly  or  indirectly  controls  about  39 %  of  the 
sector’s  total  assets,  including  the  two  biggest 
lenders  in  the  country.  These  two  banks  control 
about  one  third  of  the  market  across  many 
segments  of  the  banking  sector.  The  process  of 
consolidation  is  seen  as  ‘natural’  by  the  Financial 
Supervisory  Authority  as  it  looks  to  supervise  a 
more  efficient  banking  sector,  able  to  compete  in 
an increasingly digital world.  

Several  changes  aim  to  reinforce  financial 
supervision  and  investor  protection.  Financial 
supervision was shaken in November 2018 by the 
allegations  of  corruption  that  led  to  the  abrupt 
the  Financial 
resignation  of 
the  head  of 
interconnection 
Supervisory  Authority.  Tight 
between  the  sovereign  and  the  financial  system 
the  particular  supervisory 
(see  above)  poses 

(12)  As  from  2018  non-performing 

loans  are  calculated 
the  new  International  Financial  Reporting 
following 
Standard 9 methodology, implying a swifter recognition of 
credit losses. 

to 

challenge  of  paying  close  attention 
the 
governance structure, to ensure that politics is kept 
at  arms’  length  from  commercial  decisions.  In 
parallel,  the  legislator  amended  laws  affecting 
financial  supervision,  in  particular  to  modify  the 
funding of the Authority’s office. Yet, the new law 
also  enlarges  the  composition  of  the  Authority, 
government 
number 
increasing 
representatives  (13).  Additionally,  the  Authority 
obtained  supplementary  powers  allowing  it  to 
authorise,  through  an  administrative  decision,  the 
swift acquisition of a failing or likely to fail lender 
by a stronger financial institution.  

the 

of 

two 

Poland’s  capital  market  has  matured.  The 
transformation  undergone  by  the  Polish  financial 
system  is  a  success  story  (European  Commission, 
2018c).  Today,  the  country’s  financial  sector 
increasingly resembles the structure of other well-
developed  markets.  This  was  recently  reflected  in 
the  promotion  of  Poland’s  capital  market  from 
Advanced  Emerging  to  Developed  Market  status 
by 
further 
index  companies.  To  ease 
enhancements,  the  Capital  Markets  Development 
Strategy  project  was  launched  The  project  has 
defined  key  challenges,  including  a  list  of  20 
barriers  to  the  further  development  of  the  Polish 
capital market. Some of the key challenges include 
low levels of savings and investment, especially by 
retail  clients,  insufficient  efficiency,  transparency 
and  liquidity  of  many  market  segments,  and  lack 
of taxation incentives for issuers and investors. 

New  employee’  capital  pension  funds  could 
provide  a  boost  to  capital  markets.  The  new 
scheme  puts  in  place  the  framework  for  capital 
plans  for  voluntary  savings  contributions  by 
employees, topped up by employers and the Polish 
state.  It  complements  existing  voluntary  schemes 
and 
the  mandatory  pension  schemes.  Once 
implemented,  between  late  2019  and  2021,  the 
new scheme is expected by the authorities to cover 
around  8.6  million  employees 
(provided  a 
participation  rate  of  75 %)  and  inject  into  capital 
markets  funds  equivalent  to  about  0.7 %  of  GDP 
annually, deepening domestic capital markets. The 
expected  demand  of  the  future  pension  funds  for 
long-term  assets  could  help  develop  various 
segments  of  the  capital  market,  including  banks’ 
long-term bonds, covered bonds and stocks. 

(13)  Only  one  newly  added  government  representative  has 

voting rights. 

25 

 
                                                           
                                                           
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

Labour market 

the  first 

Employment  growth  slowed 
in  2018,  with 
unemployment  stabilising  at  historically  low 
three  quarters  of  2018, 
levels.  In 
employment increased by around 0.5 %. New jobs 
were  mainly  created  in  manufacturing  and  some 
services  sectors,  while  agricultural  employment 
continued  to  fall.  The  number  and  share  of 
fast,  while 
permanent  contracts  has 
risen 
temporary  employment  continued 
to  decline, 
although  close  to  24 %  of  all  employees  still  had 
such  contacts  in  the  third  quarter  of  2018,  well 
above  the  EU  average.  This  resulted  from  a 
combination of an improved general labour market 
situation  and  a  number  of  legislative  changes  that 
made temporary contracts relatively less attractive. 
Still,  some  features  of  the  outdated  Labour  Code 
discourage  employment  on  permanent  contracts. 
The  unemployment  rate  stabilised  in  the  range  of 
3.6 – 3.8 % in mid-2018. 

in 

the 

Labour  shortages  and  negative  demographic 
outlook  emphasise  the  challenge  of  increasing 
labour  force  participation  and  investment  in 
finding  workers  with 
skills.  Difficulty 
appropriate  skills  has  become  a  key  problem  for 
business  growth  in  several  sectors.  This  coincides 
with 
shrinking  working-age  population 
(Section  1).  The  potential  for  increasing  labour 
supply depends on migration (including the return 
of  Polish  citizens  currently  abroad)  and  on 
activating  people  currently  detached  from  the 
labour  market,  such  as  those  with  low  skills  or 
facing  different  barriers  and  disincentives  that 
prevent them starting to look for jobs. 

Labour  market  participation  of  young  women 
has  declined.  At  just  above  63 %  in  the  first  half 
of 2018 the activity rate of women aged 15-64 was 
well  below  the  EU  average  of  68 %.  In  the  past, 
this gap used to be mainly explained by low labour 
market  activity  by  women  with  below-tertiary 
education and by all women aged 50-64. This still 
holds  true,  but  during  2017  and  2018,  activity  by 
young  women  aged  25-39  declined  visibly.  This 
may  be  linked  to:  rising  pressure  to  take  care  of 
older family members (the population aged 80 and 

above increased by more than 100 thousand or 7 % 
between  2015  and  2018);  insufficient  availability 
of childcare facilities; and a generous child benefit 
scheme  introduced  in  2016  (Magda  et  al.,  2018). 
The  statistics  on  declared  main  reasons  of 
inactivity  are  consistent  with  this.  Between  2015 
and 2017, the share of inactive women aged 25-49 
pointing  to  caring  responsibilities  increased  by 
almost 5 pps to 48 %. Only 4 % of  men indicated 
the same barrier. 

Labour  market  participation  by  people  with 
disabilities  and  their  carers  faces  challenges. 
There has been little change in the activity rate of 
people  with  disabilities  between  2013  and  2018 
(27 %  in  the  first  half  of  2018),  despite  a 
significant  improvement  observed  in  this  period 
for the whole population. Available data point to a 
wide  activity  gap  between  Poland  and  the  EU 
average (14).  Disability-related  policies  are  not 
mainstreamed  into  other  social  policy  areas.  A 
range  of  barriers  prevents  higher  labour  market 
activity  of  people  with  disabilities.  These  include 
architectural, transport and communication barriers 
that 
and  underutilised 
could 
live 
independently.. The government recently launched 
a  program  that  is  expected  to  partly  address  these 
challenges. 

technological  solutions 
disabilities 

people  with 

help 

this 

Few older people are in work and lowering the 
retirement  age  aggravated 
further. 
Employment rates of older people are significantly 
lower than the EU average, with the gap of almost 
10  pps  in  2018  in  the  50-64  age  group.  Rates 
dropped  visibly  after  the  statutory  retirement  age 
was  lowered  in  the  fourth  quarter  of  2017  (Graph 
3.3.1).  The  key  factors  contributing  to  this  low 
labour  market  engagement  are  related  to  health, 
skills  and  the  quality  of  jobs,  including  the 
satisfaction  derived 
(Myck  and 
Oczkowska,  2017).  Part-time  work,  often  used  by 
older  people  in  many  EU  countries,  is  relatively 
rarely used in Poland. 

from  work 

(14)  In 2016, the employment rate of people with disabilities in 
Poland was 10.5 percentage points below the EU average, 
based on a survey on income and living conditions. 

26 

 
 
                                                           
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  is  designed  as  a  compass  for  a  renewed  process  of  upward 
convergence towards better working and living conditions in the European Union (1). It sets out twenty 
essential  principles  and  rights  in  the  areas  of  equal 
opportunities  and  access  to  the  labour  market;  fair 
working  conditions;  and  social  protection  and 
inclusion. 

supporting 

the  Social  Scoreboard 

Poland performs relatively well on the indicators 
of 
the 
European Pillar of Social Rights. Poland performs 
well  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 lags behind in areas such as 
digital skills development or early childcare. 

Although 

challenges. 

Despite  overall  good  employment  performance, 
the  gender  employment  gap  remains  one  of  the 
important 
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. 

Poland's  rate  of  early  school  leaving  is  very  low. 
This  owes  to  compulsory  schooling  and  learning 
requirements as well as cultural and social factors.  

(1)  The European Pillar of Social Rights was proclaimed on 17 November 2017 by the European Parliament, the Council 
and  the  European  Commission.  https://ec.europa.eu/commission/priorities/deeper-and-fairer-economic-and-monetary-
union/european-pillar-social-rights/european-pillar-social-rights-20-principles_en 

for 

the 

future 

The  attractiveness  of  the  Polish  labour  market 
to  migrants  and  returning  Poles  will  be 
important 
labour  supply. 
Migrants  from  outside  the  EU  and  especially 
Ukraine  already  play  an  important  role  in  the 
labour market (see Section 1). The influx of these 
workers  could,  however,  decrease 
if  other 
countries,  also  facing  labour  shortages,  adopt 
policies  to  increase  attractiveness  of  their  labour 
markets. Similarly, the motivation of an estimated 
2  million  plus  Polish  citizens  living  in  other  EU 
countries to return to Poland will depend on factors 
like  wage  and  other  labour  markets  developments 
in  Poland  vis-à-vis  other  Member  States,  notably 
the United Kingdom and Germany. Recognition of 
migrants’  skills  and  their  ability  to  work  in 
professions in line with their skills and experience 

is  an  important  element  of  a  migrant-friendly 
environment.  The  government  has  initiated  work 
on  a  migration  strategy,  but  its  content  remains 
unknown.  

Vocational training in enterprises has risen, but 
is  still  underutilised  especially  by  small  firms. 
Between  2010  and  2015,  the  share  of  enterprises 
with  10  or  more  employees  providing  vocational 
training to staff increased significantly, from 23 % 
to 45 %. This was still much below the EU average 
of 73 %. This gap in training provision was larger 
in  the  smallest  firms.  Micro-businesses  employ  a 
large part of the labour force in Poland. Training of 
workers requires further investments. In addition, a 
lack of long-term skill strategies and understanding 

27 

Early leavers from education and training (% of population aged 18-24)Best performersGender employment gapTo watchIncome quintile ratio (S80/S20)On averageAt risk of poverty or social exclusion (in %)Better than averageYouth NEET (% of total population aged 15-24)On averageEmployment rate (% population aged 20-64)On averageUnemployment rate (% population aged 15-74)Better than averageLong-term unemployment (% population aged 15-74)Better than averageGDHI per capita growth Best performersNet earnings of a full-time single worker earning AWTo watchImpact of social transfers (other than pensions) on poverty reductionBetter than averageChildren aged less than 3 years in formal childcareCritical situationSelf-reported unmet need for medical care Better than averageIndividuals' level of digital skillsTo watchSocial protection and inclusionDynamic labour markets and fair working conditionsEqual opportunities and access to the labour marketSOCIAL SCOREBOARD FOR POLANDMembersStatesareclassifiedaccordingtoastatisticalmethodologyagreedwiththeEMCOandSPCCommittees.ThemethodologylooksjointlyatlevelsandchangesoftheindicatorsincomparisonwiththerespectiveEUaveragesandclassifiesMemberStatesinsevencategories(from"bestperformers"to"criticalsituation").Forinstance,acountrycanbeflaggedas"betterthanaverage"iftheleveloftheindicatorisclosetoEUaverage,butitisimprovingfast.Formethodologicaldetails,please consult the draft Joint Employment Report 2019, COM (2018)761 final.NEET:neitherinemploymentnorineducationandtraining;GDHI:grossdisposablehousehold income.                       
 
3.3. Labour market, education and social policies 

transport 

mobility. 

Barriers 
infrastructure 

differences  in  human  capital  and  in  regions’ 
limitations  on 
economic  structures  but  also 
include 
geographical 
and 
underdeveloped 
services  (see  Section  3.4),  insufficient  access  to 
affordable  housing  in  locations  with  high  demand 
for  labour  (especially  larger  cities),  disincentives 
the 
the  benefit  system  and  features  of 
in 
unreformed  special  pension  regime  for  farmers 
(European Commission, 2017a). 

in  2018 

Social  dialogue  faces  challenges,  in  part  due  to 
the  legislative  practices  of  the  government. 
Positive  developments 
included  an 
extension  of  the  rights  of  the  Social  Dialogue 
Council and a legal amendment giving all workers 
the right to join trade unions, regardless of the type 
of  a  work  contract.  The  number  of  trade  union 
members remains low and the representation of the 
rising  share  of  temporary  agency  workers  and 
immigrants  constitutes  an  increasing  challenge. 
The  social  partners  report  that  the  quality  of 
consultations  in  the  Social  Dialogue  Council  has 
deteriorated,  in  particular  due  to  government 
eschewing consultation of some key laws (Section 
3.4; Eurofund, 2018; ETUC, 2019). 

Education and skills 

Remaining  gaps  in  access  to  and  provision  of 
early  childhood  education  and  care  require 
further investments. The  number of facilities for 
children  up  to  the  age  of  three  has  increased  in 
recent  years,  but  access  remains  insufficient,  in 
particular in rural areas and in some regions (GUS, 
2018b).  This  flags  as  critically  low  in  the  Social 
Scoreboard  supporting  the  European  Pillar  of 
pre-school 
Social  Rights.  Participation 
education by children aged four and above is close 
to  the  EU  average,  but  the  situation  in  the  age 
group 3–4 is worse in particular in rural areas and 
some regions. 

in 

While  Polish  lower  secondary  school  pupils 
acquire  high  level  of  basic  skills,  transversal 
skills could be improved. The 2015 PISA results 
confirmed an above average level of skills attained 
by Polish lower secondary school pupils compared 
to  other  EU  countries.  Still,  there  is  room  for 
strengthening the role of schools in helping pupils 
develop  transversal  skills  related  to  independent, 
creative  and  critical  thinking  or  problem-solving 
(European  Commission,  2018c).  In  addition, 

of  the  benefits  of  training  in  many  small  and 
medium enterprises is an important challenge. 

is 

that 

implies 

limited.  Moreover,  some  of 

Active  labour  market  policies,  in  particular 
those  focused  on  skill  upgrades,  have  limited 
reach  and  are  not  optimally  structured. 
Institutional  design 
the  main 
beneficiaries of these policies are people registered 
as  unemployed.  The  impact  on  other  groups,  e.g. 
people receiving disability or old age pensions, or 
farmers, 
the 
registered  unemployed  might  not  be  genuinely 
interested  in  finding  employment  and  improving 
their  skills,  e.g.  because  they  work  in  the  shadow 
economy and for them registration only serves as a 
guarantee of health insurance. Also, the training on 
offer is not always adapted to labour market needs. 
The coverage of  unemployment benefits is low in 
comparison  to  other  EU  countries  (European 
Commission,  2018d).  A  discussion  on  reforming 
public  employment  institutions  started  in  2018 
with the publication of a draft law, but the process 
appears  to  have  stalled  and  the  draft  is  no  longer 
publicly available. 

Graph 3.3.1:  Effects of retirement age changes on 

employment rate, 11Q1–18Q3 

(1) The retirement age for women (men) increased from 60 
(65) years before 2013 up to above 61 (66) in 17Q3 before 
being reduced to 60 (65). 
(2) Employment rates shown as a 4-quarter moving average. 
Source: Eurostat, Polish Social Insurance institution (ZUS). 

Labour  market  outcomes  and  employment 
challenges  differ  between  regions.  There  remain 
substantial  differences  in  unemployment  rates 
between  and  within  regions.  This  in  part  reflects 

28 

7.57.67.77.87.988.11214161820222411Q112Q113Q114Q115Q116Q117Q118Q1Employment rate: men 65-69Employment rate: women 60-64Number of pensioneers (rhs)reform: retirementageincreasemillionreformreversal: retirementagedecrease% 
 
3.3. Labour market, education and social policies 

Tertiary education continues to be the choice of 
a  large  share  of  young  people,  but  concerns 
regarding  its  quality  persist.  In  2017,  almost 
tertiary 
46 %  of  people  aged  30-34  had 
qualifications,  well  above 
the  EU  average. 
However, the quality of  some of higher education 
institutions  remains  subpar.  Weaknesses  result 
from factors such as: the drawbacks of the quality 
assurance  system;  fragmentation  of  the  higher 
education  sector;  its  limited  internationalisation 
and  the  suboptimal  design  of  financial  incentives 
(NIK, 
European 
supply  of  new 
Commission,  2017c).  The 
researchers is small, with the ratio of new doctoral 
graduates  to  population  aged  25-34  being  among 
the lowest in the EU. 

2018a;  OECD, 

2018b; 

A recent reform of the higher education system 
aims  to  improve  quality.  Eligibility  to  offer 
studies and a new classification of institutions will 
be  based  on  periodic  evaluations  of  scientific 
activities  according  to  revised  criteria.  Doctoral 
studies  will  be  reorganised,    scholarships  will  be 
granted  for  all  doctoral  students  and  a  mid-term 
evaluation  of  PhD  students’  progress  will  be 
introduced.  At  the  same  time  no  significant 
changes  have  been  proposed  to  improve  the 
transparency  of  recruitment  procedures  at  higher 
education  institutions  and  planned  wage  increases 
might  prove  insufficient  to  attract  talent.  The  full 
effects  of  the  reform  will  only  become  visible  in 
several years’ time. 

in 

Adults rarely engage in education and training. 
Many  adults  have  weak  literacy,  numeracy  and 
digital  skills  (OECD,  2018b).  It  is  also  this  group 
that  participates 
formal  and  non-formal 
education  and  learning  particularly  rarely.  Some 
steps have been taken to implement the Upskilling 
Pathways  Council  Recommendation,  but  further 
efforts  are  needed 
low  adult 
to 
participation  in  learning.  In  2017,  only  4 %  of  all 
people  aged  25-64  declared  participation  in  the 
four weeks prior to the survey compared to the EU 
average  of  10.9 % (15).  In  2018,  the  government 
started  to  develop  its  Integrated  Skills  Strategy 
covering  adult  learning,  but  further  efforts  are 
needed to improve co-ordination of policies. 

improve 

(15)  The  international  comparability  of  such  data  is  not 
straightforward. Given its many possible forms, measuring 
learning intensity for adults is not easy (Stec et al., 2017).  

access to educational and professional counselling 
at  all  levels  of  education  and  its  quality  is  still 
insufficient. 

Local  authorities  and  schools  face  challenges 
adapting  to  the  new  school  structure.  Phasing 
out lower secondary schools will lead to a two-fold 
increase in the number of pupils starting secondary 
schools  in  2019.  This  will  result  in  overcrowding 
and  associated  difficulties  in  many  secondary 
schools  for  several  years  (European  Commission, 
2017a).  This  change  may  also  increase  inequality 
in access to good quality schools in rural areas. 

to 

reform 

learning.  The 

Poland  initiated  a  reform  of  initial  vocational 
education and training. Such education currently 
takes  place  mainly  in  schools,  with  only  limited 
work-based 
be 
implemented  from  the  2019/2020  school  year 
introduces  measures  to  strengthen  links  with  the 
labour  market  through  changes  in  curricula,  the 
financing  system,  practical  training  and  increased 
involvement by employers. The financing formula 
is to take into account the extent to which schools’ 
offer matches the demand for specific occupations. 
Demand  projections  are  to  be  co-ordinated  by  the 
Ministry  of  Education.  Vocational  schools  also 
face  difficulties  in  equipping  pupils  with  general 
basic skills, such as numeracy and literacy. 

is 

financial  attractiveness  of 

The  average  competences  of  teachers  leave 
room for improvement, while teachers face low 
the 
salaries.  The 
teachers’ 
limited  with 
teaching  profession 
starting 
in 
low 
salaries  being  particularly 
comparison  to  the  average  wages  of  people  with 
tertiary  qualifications  (OECD,  2018a).  This  likely 
contributes  to  the  negative  selection  of  those 
entering  the  profession  and  associated  relatively 
low  numeracy  skills  of  teachers  (Hanushek  et  al., 
2018; Herbst, 2018). Teachers' training often lacks 
quality (NIK, 2017b). 

Progress  has  been  made  on  special  education 
needs  but  new  rules  on  individualised  teaching 
raise concerns. The inclusiveness of education has 
increased  in  recent  years  as  more  pupils  with 
disabilities  attended  mainstream  education  (NIK, 
2018d).  The  2017  regulation  on  individualised 
teaching  for  pupils  with  special  education  needs 
was  meant 
this  process.  No 
assessment  of  its  effects  is  yet  available  (RPO, 
2018; MEN, 2018). 

to  strengthen 

29 

 
                                                           
3.3. Labour market, education and social policies 

seen (18).  Overall,  poverty,  health  problems, 
disability and unemployment are the main reasons 
for  people  to  seek  social  assistance  (OIS,  2017). 
There  is no comprehensive approach  to the active 
inclusion  of  vulnerable  people.  The  separation  of 
social  assistance  and  public  employment  offices 
has  its  rationale  but  limits  options  for  offering 
integrated  support  to  people  in  need.  The  deficits 
in  provision  of  social  services  are  partly  filled  by 
non-governmental  organisations,  though  not  in  a 
systematic way (Golinowska, 2018). 

for 

the  socio-
A  comprehensive  strategy 
economic  integration,  including  independent 
living  of  persons  with  disabilities  and  mental 
health problems is lacking. The support system is 
fragmented,  lacks  coordination  and  consistency 
between  different  forms  of  support  and  does  not 
take full account of individual needs of the people 
with  disabilities  and 
their  families  (Badania 
Społeczne  MSK,  2017).  The  availability  of 
community-based  services  addressing  individual 
needs, 
services  and 
supported  housing,  is  not  sufficient  and  requires 
investments.  The  support  system  discourages 
persons with disabilities and carers from taking up 
jobs. 

in  particular  assistant 

The growing number of elderly and the forecast 
drop in adequacy of pensions, in particular for 
women,  pose  important  long-term  challenges. 
The  population  aged  80  and above  is  projected  to 
increase  more  than  two-fold  between  2018  and 
2040  and  three-fold  by  2070.  At  the  same  time, 
future  pension  benefits  are  expected 
to  be 
significantly lower than at present. Some scenarios 
indicate  that  by  the  mid-2050s  the  ratio  between 
pension  benefits  and  the  final  salary  will  fall  by 
around  half  compared  to  2016  (SPC  and  EC, 
2018).  NIK  (2018c)  found  that  the  care  needs  of 
the elderly were not properly diagnosed, and there 
were  issues  with  access  to  and  standards  of  home 
care  services.  The  system  of  day-care  centres  and 
home  care 
investments  and  stable 
financing  to  develop  in  line  with  needs.  A 
mechanism  for  quality  assurance  and  control  and 
is  also 
integration  with  healthcare  services 

requires 

Social inclusion  

Since  2008,  Poland  has  registered  the  largest 
decrease 
in  the  risk  of  poverty  or  social 
exclusion rate in the EU. While in 2007/2008 the 
share  of  people  at  the  risk  of  poverty  or  social 
exclusion still stood at 30.5 %, in 2016/2017 it was 
19.5 %  (16).  This  was  due  to  the  improved  labour 
market  situation  and  increased  family  benefits  in 
2016.  The  latter  helped  reduce  child  poverty  by 
one third, from 21 % in 2015 to 14 % in 2016. 

Income  poverty  risk  is  higher  among  less 
educated  people  and 
in  precarious 
employment.  In  2016,  the  gap  in  income  poverty 
rates  between  more  and  less  educated  adults  was 
higher in Poland than the EU average.  

those 

There remain large differences in poverty risks 
between  regions  and  between  urban  and  rural 
areas.  The  household  budget  survey  for  2017 
indicates an extreme poverty rate in rural areas, at 
7.3 %,  compared  to  4.1 %  in  towns  below  20 
thousand inhabitants and only 1.5 % in large cities 
(above 0.5 million inhabitants) (17). The difference 
in relative poverty rates between the best and worst 
performing regions exceeded 15 pps. The national 
relative poverty rate stood at 13.4 %, but exceeded 
20 % in four regions. 

No  overall  assessment  of  the  social  benefits 
system in a broader policy  context is available. 
The most important change in recent years was the 
introduction of the child benefit without changes in 
other  elements  of  the  social  assistance.  This 
increased the role of all social transfers (excluding 
pensions)  in  poverty  reduction.  Child  benefit 
in  overall  poverty 
played  an 
reduction  but  it  contributed  to  the  withdrawal  of 
some  women  from  the  labour  market  (Magda  et 
al., 2018). The long-term implications for women, 
including  their  future  work  prospects  or  pension 
rights,  as  well  as  for  their  children,  remain  to  be 

important  role 

(16)  This indicator counts people facing at least one of the three 
challenges: low income, inability to afford certain expenses 
or  living  in  a  household  with  very  low  work  intensity. 
Income  data  used  for  calculation  refer  to  2016,  whereas 
other data refer to the situation in 2017. 

(17)  People living in extreme poverty are defined as those with 
expenditures  below  a  threshold  estimated  on  the  basis  of 
basic  needs.  Relative  poverty 
in 
households  with  expenditure  below  50 %  of  the  mean 
expenditure. 

to  people 

refers 

(18)  For  studies  looking  at  the  negative  consequences  of 
reliance  on  social 
in 
households with low work intensity in next generations, see 
e.g. Edmark and Hanspers (2012), Bellani and Bia (2016). 

transfers  and  growing  up 

in 

30 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

lowest in EU. As one consequence, the number of 
carried  surgeries  is  lowered  by  the  insufficient 
number  of  surgeons  and  equipment  gaps.  The 
medical  staff  is  ageing  fast  and  the  scale  of 
emigration remains significant. Following protests 
in  2018,  some  increases  in  minimum  wages, 
especially  for  new  doctors,  were  agreed  with  the 
government. While the Ministry of Health already 
implements  the  Strategy  for  the  Development  of 
Nursing and Midwifery in Poland, and there  were 
some  improvements  in  working  conditions  for 
doctors,  there  is  no  overall  formal  structure  or 
strategy on health workforce planning and forecast 
(Domagała and Klich, 2018). 

The health care system remains overly hospital 
based,  but  strengthening  of  primary  and 
ambulatory  care  has  started.  Health  resources 
are  unevenly  spread  across  regions.  Poland  has 
developed maps of healthcare needs, but they have 
not  yet  become  tools  for  supporting  decisions  on 
purchasing  of  health  services  and  investments. 
Primary  and  ambulatory  care  are  underdeveloped 
and  lack  resources,  requiring  further  investments. 
Currently implemented pilot projects are expected 
to 
to  provide 
limit 
unnecessary 
improve 
coordinated  care.  Efficiency  and  quality  of  care 
can  be  improved  by  centralising  procurement  for 
hospitals  and 
interoperable 
electronic  prescriptions,  referrals,  registration  for 
patients and eventually electronic medical records. 

information  on  ways 
and 

hospitalisations 

introducing 

fully 

is  underdeveloped, 

Long-term  care 
lacking 
standardised  services  and  a  coherent  strategic 
approach. Medical care homes are the institutions 
for providing care, but in fact most long-term care 
is  provided  by  informal  carers,  often  family 
members who have almost no institutional support. 
Inequalities  in  access  to  services  across  regions 
and long waiting times for residential care services 
reported.  Proper  diagnosis  of  needs, 
are 
standardised  services  and  sufficient  resources 
including  for  investment  purposes  could  improve 
this situation. 

Investment 

Investment  in  skills,  education,  healthcare  and 
social  inclusion  are  important  for  improving 
long-term 
inclusive  growth  and  associated 
social  outcomes.  Skills  shortages  are  among  the 
main  obstacles  to  firms’  growth,  pointing  at  the 

important 
independently as long as possible (19). 

enable 

the 

elderly 

to 

to 

live 

A  significant  number  of  children  remain  in 
institutionalised  foster  care.  At  the  end  of  2017 
this applied to around 17 thousand children, close 
to  one  fourth  of  all  children  in  foster  care.  The 
deinstitutionalisation of  foster care has progressed 
slowly  in  Poland  (WiseEuropa  et  al.,  2018).  A 
system  of  support  for  families  experiencing 
difficulties 
in  fulfilling  care  and  educational 
functions is being developed but this process faces 
challenges (Opening Doors, 2018). 

Health 

Health outcomes have continued to improve but 
remain  below  the  EU  average.  Despite  strong 
gains  in  recent  decades,  life  expectancy  remains 
three years below the EU average. Preventable and 
amenable  mortality  is  above  the  EU  average, 
which  means  that  many  deaths  could  be  avoided 
through better control of the wider determinants of 
health  and  better  quality  of  care.  Further 
improvement  of  health  promotion,  disease 
prevention  and  diagnosis  measures  constitute  a 
challenge and require investments. 

Improving  the  efficiency  and  co-ordination  of 
healthcare  remain  priorities.  The  system  is 
characterised  by  low  efficiency  of  spending,  high 
dependency  on  hospital  care,  underdeveloped 
primary  care,  lack  of  medical  practitioners  with 
certain  specialisations,  long  waiting  lists,  and  an 
inefficient referral system. Recent reform attempts 
have not been completed. Unmet needs for medical 
services declined in 2017, but remained among the 
highest  in  the  EU.  Waiting  time  and  travelling 
distance  remained  among  the  highest  in  the  EU, 
especially for people with low income. 

Access  to  and  effectiveness  of  the  healthcare 
system  is  affected  by  low  spending  and  staff 
shortages.  The  government  plans  to  increase 
public  health  expenditure  from  4.6 %  of  GDP  in 
2016, well below the EU average of 7 %, to 6 % of 
GDP  in  2024.  The  number  of  practising  doctors 
and nurses relative to population size is among the 

(19)  For  discussion,  see  NIK  (2017a).  The  importance  of 
ensuring adequate care services in the place of residence is 
also related to the fact that their cost is around a quarter of 
the costs of residential care services. 

31 

 
                                                           
3.3. Labour market, education and social policies 

need  to  invest  in  training  of  the  existing  and 
potential labour force and strengthen the education 
system (notably vocational and tertiary education). 
Ensuring  social  cohesion  and  high  employment 
requires investment in social inclusion and related 
services,  healthcare  as  well  as  in  the  capacity  of 
public  employment  services,  childcare  and  long-
to 
term  care  services,  paying  due  attention 
geographical disparities in their availability. 

32 

 
3.4. COMPETITIVENESS AND INVESTMENT 

3.4.1.  PRODUCTIVITY AND INVESTMENT 

Investment and productivity trends 

Investment has been weak since 2016. The ratio 
between  investment  and  GDP  used  to  be  slightly 
above  the  EU  average  in  2009-2015.  It  then 
declined  strongly  to  17.7 %  in  2017,  compared  to 
the  EU  average  of  20.2  %.  This  can  be  explained 
by developments in public and private investment. 

amounted 

to  GDP 

to  a  quarter  of 

Public investment plays a relatively large role in 
Poland, with a significant contribution from EU 
funds.  In  2008-2017,  the  average  ratio  of  public 
investment 
to  6.4 %, 
significantly  above  the  EU  average  of  3.1 %  and 
higher than in peer countries such as Slovakia, the 
Czech  Republic  or  Hungary.  EU  funds  directly 
financed  close 
total  public 
investment  expenditure.  In  2016,  a  transition  year 
between two EU investment programming periods, 
a  substantial  drop  in  EU  funds  explained  half  of 
the 
investment 
in 
expenditure.  With  the  implementation  of  the  EU 
public 
investment 
investment  is  expected  to  rise  much  faster  than 
GDP  during  2019-2020  (see  Section  1).  The 
financial instruments of EU funds, such as loans or 
investment 
guarantees,  also 
financing, but their uptake remains limited (20). 

facilitate  private 

programmes 

advancing, 

decrease 

public 

total 

employees was carried out by firms headquartered 
in four (out of a total of 16) regions: Mazowieckie, 
Śląskie, Dolnośląskie and Wielkopolskie. 

Several structural and statistical factors add to 
low  private  investment  in  the  last  decade. 
Multiple  structural  and  statistical  reasons  can 
contribute  to  the  relatively  low  private  and,  in 
particular,  corporate  investment.  First,  this  is 
related  to  the  size  of  the  companies.  The  largest 
firms,  which  are  characterised  by  the  highest 
investment  per  worker,  account  for  a  lower  share 
of  total  employment  than  the  average  for  EU 
countries  for  which data  is available.  At the same 
time, employment in microenterprises (with lowest 
investment  intensity  per  worker)  has  been  well 
above  the  EU  average  (European  Commission, 
2018c). Second, the particularly low investment in 
intellectual  property  products 
(for  example 
software  or  patent  rights)  suggests  some  specific 
barriers  to  such  investment,  or  statistical  issues 
with  recording  such  expenditure.  Third,  other 
statistical phenomena might play a role as well. An 
example  is  a  sizeable  decline  of  prices  for 
investment  goods  relative  to  the  GDP  deflator, 
which was not observed in other EU countries (see 
also PKO BP, 2018). 

Graph 3.4.1:  Private investment to GDP ratio 

Private  investment  remains  subdued  and  the 
situation worsened after 2015. In 2008-2017, the 
average  ratio  of  private 
investment  to  GDP 
amounted to 15 %, well below 22 % in the  Czech 
Republic, 18 % in Slovakia, and the EU average of 
17 % (Graph 3.4.1). This is predominantly because 
of  the  low  level  of  corporate  investment,  despite 
significant support to private investment offered by 
EU funds (see Box 3.4.1). The concentration of the 
largest  firms  in  certain  regions  implies  that  their 
also  geographically 
investment  outlays  are 
concentrated. As an illustration, in the first half of 
2018  around 
thirds  of  all  non-financial 
corporate  investments  by  firms  with  50  or  more 

two 

(20)  These  instruments  are  to,  inter  alia,  help  SMEs  and 
innovative start-ups often facing credit restrains due to the 
missing  credit  history  or  impossibility  to  establish  loan 
collateral.  Poland  progressed  with  the  use  of  financial 
instruments,  even  though  at  the  end  of  2018,  their  uptake 
was low, at some 7 % of the total allocation for the 2014 – 
2020, against 15 % for the EU. This may be partially due to 
complex  administrative  procedures  and  challenging 
requirements for final recipients. 

Source: European Commission 

The strong decline in private investment in 2016 
and its relative weakness since then is likely due 
to  increased  uncertainty.  While  structural  and 
statistical reasons might help explain the low level 
over  the  last  decade,  they  cannot  explain  the 
further  decline 
the  continued 
in  2016  and 
weakness  since  then  (Graph  3.4.1).  Uncertainty 
perceived  by  entrepreneurs  appears  to  be  among 

33 

13151719212325270102030405060708091011121314151617181920EUPLDECZSK% GDPforecast 
 
                                                           
 
3.4. Competitiveness and investment 

Finally,  higher  energy  efficiency  and  more 
extensive  use  of  renewable  energy  sources  would 
allow  Poland  move  towards  cleaner  energy  and 
help limit  greenhouse emissions and air pollution. 
This  would 
investment 
opportunities,  improving  quality  of  life  for  Poles 
and reducing social costs. 

also  help 

create 

Innovative capacity 

structure 

economic 

is  uneven  across 

innovation  performance  remains 
Poland’s 
modest  and 
regions. 
Knowledge-intensive  sectors  in  Poland  contribute 
less to total value added than in regional peers, and 
low-tech  sectors  still  play  a  dominant  role  in  the 
country’s 
(European 
Commission,  2018g).  Despite  continuous  and 
sizeable efforts to improve the innovative capacity 
of  the  economy  (European  Commission,  2017a, 
2018c), Poland continues to rank in the lower end 
of moderate innovators in the European Innovation 
Scoreboard  (European  Commission,  2018e).  In 
terms  of  spending, 
in  2017  gross  domestic 
expenditure on R&D remained at about half of the 
EU average of 2.1 % of GDP. On a regional level, 
in  2015  five  regions  spent  well  above  1 %  of 
regional  GDP  on  R&D,  but  in  four  regions  this 
ratio was below 0.35 %. 

to 

and 

links 

continue 

science-business 

Science-business 
be 
underdeveloped  in  Poland.  Weak  cooperation 
between  science  and  business  is  a  drag  on 
productivity  and  competitiveness.  Although  under 
national 
regional  Smart  Specialisation 
Strategies  (22)  considerable  efforts  were  made  to 
strengthen  knowledge  transfer,  Poland  scores  low 
in 
(European 
Commission,  2018c).  The  National  Centre  for 
Research and Development and the Foundation for 
Polish  Science  offer  multiple  schemes  to  support 
joint  projects  between  business  and  science,  but 
the  available  budgets  are  significantly  lower  than 
those  devoted  by  individual  firms  for  in-house 
industrial  R&D  (European  Commission,  2018g). 
The  obstacles  to  science-business  cooperation  are 

links 

(23) 

a 

is 

place-based 

(22)  Smart  Specialisation 

approach 
characterised  by  the  identification  of  strategic  areas  for 
intervention based both on the analysis of the strengths and 
potential  of  the  economy  and  on  an  Entrepreneurial 
Discovery Process with wide stakeholder involvement. 
(23)  For example, in 2017 there were only 5.4 public-private co-
publications per million inhabitants as compared to the EU 
average of 40.9 (European Commission, 2018EIS). 

reasons 

the  key 
(NBP,  2018).  Sources  of 
uncertainty  in  Poland  include  in  particular  the 
instability  of  the  regulatory  framework  resulting 
from weaknesses in the legislative process. This is 
frequently  quoted  by  business  in  Poland  as  an 
important  factor  (see  Section  3.4.4).  Increasing 
difficulties in finding adequately skilled workforce 
are another important reason.  

Labour  productivity  has  been  growing  fast  in 
Poland,  from  a  low  starting  point.  Labour 
productivity  growth  continued  to  be  among  the 
strongest in the EU. Between 2010 and 2017, real 
labour  productivity  per  hour  worked  increased  by 
close to 20 %, almost three times stronger than for 
the  EU  as  a  whole  (7 %).  This  allowed  a  gradual 
convergence of labour productivity towards the EU 
average, although the gap still remains significant. 
In  2017, 
level,  as 
approximated  by  the  ratio  between  GDP  and  the 
number  of  hours  worked  in  the  economy  reached 
61 %  of  the  EU  average  (21).  Average  wage 
developments  broadly  followed  productivity  in 
recent  years,  with  a  significant  gap  remaining  in 
wage levels with the EU average. 

labour  productivity 

the 

from 

to  move 

labour  shortages 

Investments  to  support  skills  development, 
innovation,  better  infrastructure  and  cleaner 
energy  are  crucial  for  Poland’s  future  growth. 
Poland’s long-term economic prospects depend on 
the  economy’s  capacity 
the 
production  of  relatively  low-technology  goods  to 
more  advanced  products  and  services.  In  this 
context,  the  negative  demographic  outlook  and 
emerging 
(see  Section  1) 
emphasise  the  role  of  capital  accumulation  in 
increasing labour productivity. Workers’ skills are 
importance  of 
also  key,  highlighting 
investment in skills development (see Section 3.3). 
Investment  with  a  potential  to  introduce  vital 
innovations and to facilitate innovation diffusion is 
importance.  Transport, 
also 
communication  and  energy  networks  can  play  a 
crucial  productivity-enhancing  role  and  facilitate 
the  efficient  the  efficient  market  functioning  and 
investment. 
deployment  of 

innovation-oriented 

particular 

the 

of 

(21)  This comparison takes into account price level differences 
when  calculating  GDP.  Various  data  weaknesses  may 
affect  the  comparability  of  estimates  of  levels  of  labour 
productivity. Ward et al (2018) show that official statistics 
may  underestimate  labour  productivity  for  Poland  by 
around 12 %.  Under-reporting  of  employment  of  migrants 
would have an opposite effect.  

34 

 
                                                           
                                                           
3.4. Competitiveness and investment 

linked  to  financial  and  non-financial  incentives, 
such  as  complex  administrative  procedures  for 
project funding and the limited skills of academics 
in  managing  joint  public-private  R&D  projects 
(European Commission, 2018k). 

The higher education reform addresses some of 
the  challenges  for  developing  the  science  base. 
The new law on higher education and science was 
adopted in July 2018. It increases the autonomy of 
higher  education  institutions,  strengthens  funding 
at  central  university  level  and  reduces  external 
oversight  of  it,  lessening  administrative  burdens. 
The  act,  however,  proposes  only  limited  increase 
in  remuneration  for  scientists.  The  evaluation 
process  of  scientific  organisations  will  be  carried 
out within disciplines and rely on formal measures 
of  performance  for  each  scientist  within  the 
organisation.. The act has ambiguous effects on the 
internationalisation  of  Polish  science.  While  it 
introduces  a  requirement  for  PhD  graduates  to 
know  a  foreign  language,  it  sets  its  level  of 
command at intermediate only. Also, international 
exposure  is  no  longer  compulsory  for  scientists 
applying  for  the  title  of  professor  (European 
Commission, 
the 
competitive calls launched by the National Agency 
for  Academic  Exchange  in  2018  are  expected  to 
promote  mobility  and  internationalisation  within 
the country’s research and innovation system. The 
‘Excellence  Initiative  –  a  research  university’  and 
the  ‘Łukasiewicz  Research  Network’  aim 
to 
overcome the fragmentation of the research sector. 
Although  promising,  the  latter  has  still  not  been 
established, due to stalled legislative work in 2018. 

Nevertheless, 

2018g). 

the 

tax 

former 

income 

rate  on 

increased, 

was 
regional  special 
economic  zones  were  broadened  and  now  cover 
the entire country and a preferential corporate and 
from 
personal 
intellectual  property  rights  will  be  implemented 
from 2019. Progress in digitalisation of businesses, 
a  factor  conducive  to  innovation (25),  is  hampered 
by limited access to highly qualified specialists, as 
indicated  by  one  third  of  ICT  sector  companies 
(European Commission, 2018ds). 

income 

Energy  

The  functioning  of  the  energy  sector  is  an 
important  determinant  of  competitiveness.  The 
key  link  is  uninterrupted  access  to  electricity  and 
other  energy  products  and  their  cost.  The  recent 
example  is  provided  by  the  strong  increase  in 
electricity  prices  on  the  spot  market  observed  in 
2018, resulting from rising prices of CO2 emission 
allowances  and  higher  fuel  costs  (mainly  coal). 
the 
This 
direct 
has 
competitiveness  of 
its 
relatively high energy intensity (26). 

the  economy,  given 

implications 

for 

Rising  electricity  demand  is  currently  met 
predominantly be new power plants using fossil 
fuels.  Poland  is  among  the  EU  countries  with  the 
fastest  growth  in  domestic  electricity  production 
and  consumption  in  recent  years.  In  2017,  both 
increased  by  around  2 %.  With  a  share  close  to 
80 %,  coal  and  lignite  dominate  in  the  electricity 
generation mix. New generation capacity installed 
since 2017 and planned for 2019 is predominantly 
based on coal, with a smaller role for gas. 

The 
is 
innovative  activity  of  businesses 
hampered  by  some  barriers.  Polish  small  and 
medium  enterprises  engage  in  cooperation  with 
each  other  much  less  than  in  most  other  Member 
States  (European  Commission,  2018e),  so  the 
actual impact of clusters and formalised corporate 
networks  remains  limited  in  diffusing  innovative 
solutions.  These 
improve 
considerably despite the fact that the EU Structural 
Funds financed a number of institutions supporting 
business  innovation (24)  under  the  2007-2013  EU 
financial  perspective 
(European  Commission, 
2018f).  The  tax  deductibility  of  R&D  spending 

linkages  did  not 

(24)  These  include  science/technology  parks,  entrepreneurship 
incubators,  technology  transfer  offices  and  innovation 
brokers. 

The draft Polish Energy Policy strategy foresees 
a  large  role  for  fossil  fuels  at  least  until  2040. 
The  draft  was  published  in  November  2018  and 
public consultations lasted until January 2019. The 
strategy  envisages  strong  growth  in  electricity 
production.  Coal  is  to  remain  the  main  fuel  until 
2030  and  its  role  is  to  decline  fast  thereafter.  The 
construction  of  a  first  nuclear  power  plant  (1-1.5 
GW)  is  planned  by  2033,  and  its  extension  until 

(25)  Digital  technologies  allow  knowledge  diffusion,  support 
new business models and enable SMEs to scale up quickly 
through  tools  such  as  cloud  computing  or  data  analytics. 
Poland  is  committed  to  the  advancement  of  new  digital 
technologies through digital investment priorities of Digital 
Europe Programme. 

(26)  Energy  intensity  is  defined  as  the  ratio  of  energy 

consumption and gross value added. 

35 

 
                                                           
                                                           
3.4. Competitiveness and investment 

2043.  Onshore  wind  generation  is  to  decline, 
despite  its  effectiveness  recently  confirmed  in  the 
November  2018  auction  for  1  GW  renewable 
energy generation. At the same time, the document 
envisages  tapping  the  significant  potential  for 
offshore wind energy (up to 10 GW). 

role of gas as a fuel for district heating is limited in 
part  because  of  underdeveloped  gas  distribution 
network  in  some  areas.  Several  studies  indicate 
large  parts  of  Poland  have  geothermal 
that 
resources  suitable  for  heating  via  district  heating 
and/or heat pumps (GEODH, 2014). 

to 

declined 

consumption 

Investment  in  renewable  energy  faces  barriers 
and Poland is at risk of missing its  2020 target. 
In  2017,  the  share  of  renewables  in  gross  final 
energy 
10.9 %. 
Investment  in  new  renewable  energy  capacity  has 
slowed down, presenting a challenge for achieving 
the  2020  renewables  target  of  15 %.  This  was 
predominantly  due  to  changes  in  the  regulation 
applicable  to  wind  farms  (European  Commission, 
2018c). In mid-2018, the legislative framework for 
on-shore  wind  improved  but  significant  barriers 
remain,  such  as  strict  rules  on  minimal  distances 
between  wind  farms  and  local  buildings  and 
procedural  uncertainty  concerning  permits  and 
connecting  agreements.  The  potential  for  solar 
energy so far remains largely untapped. Poland has 
a potential, so far unused, of geothermal energy. A 
new program to tap into this  potential has  started. 
Investment  to  improve  the  energy  efficiency  of 
buildings  and  industry  is  key  for  containing 
rising  energy  consumption.  Poland  was  among 
the  few  EU  countries  where  energy  consumption 
was on the rise in recent years. While the transport 
sector contributed most to this growth, the highest 
potential  for  its  reduction  are  opportunities  to 
realise energy efficiency gains in the industry and 
household sectors, especially as regards buildings. 
This  would  require  substantial  investment  from 
public  and  private  sources,  leading  to  large  cost 
reductions.  In  2018,  Poland  launched  a  10-year 
Clean Air Programme, aiming to invest into energy 
efficiency renovations of residential houses (27). 

District  heating  systems  in  many  small  and 
medium  municipalities  require  investment  (28). 
With  coal  dominating  in  heat  generation  (74 %), 
the  use  of  waste  and  renewable  energy  is  limited. 
Renewable  energy  sources  for  heating  are  largely 
limited to biomass, which often needs to be either 
imported  or  transported  over  long  distances.  The 

(27)  Success  and  efficiency  of  such  programmes  also  depends 
on  ensuring  the  correct  balance  between  attractiveness  of 
grant and loan based instruments (MF and MIR, 2015).  
(28)  Only  about  20 %  of  heating  or  cooling  systems  meets  the 
criterion  of  an  energy-efficient  system  established  in 
Directive 2012/27 / EU. 

Transport and internet access infrastructure 

Lubuskie, 

The  road  network  in  Poland  has  improved 
significantly,  although  certain  infrastructure 
gaps remain. At the end of 2018 more than 1 400 
km  of  national  roads  were  under  construction  or 
modernisation, whereof 490 km are to be delivered 
in  2019.  Roads  completed  in  2018  include  over 
300  km  of  express  roads  located  notably  in 
and 
Dolnośląskie, 
Wielkopolskie.    The  financing  for  the  new  road 
infrastructure  is  safeguarded  under  the  financial 
framework  of  the  National  Road  Construction 
Programme,  with  a  large  role  of  debt  instruments 
(including  form  European  Investment  Bank)  and 
EU funds. According to the Programme, however, 
road  investments  to  be  completed  by  2024  will 
concentrate  mainly  in  the  eastern  part  of  the 
country  leaving  some  northern  regions  relatively 
less connected. 

Podlaskie 

and 

delays 

its  road 

Railways  investment  is  proceeding  slower  than 
that  for  roads.  Poland  has  been  making  progress 
in  building 
infrastructure.  However, 
planning  and  completing  railway  infrastructure 
projects  have  proved  more  difficult  than  building 
roads.  An  accumulation  of  large  infrastructure 
investments  within  short  periods  contributes  to 
cost spikes at the time of highest concentration of 
work 
(see  European 
project 
investment 
Commission,  2018c).  Moreover, 
backlogs often adversely affect the punctuality and 
reliability  of  on-going  rail  transport,  including 
passenger  traffic.  The  rail  development  outlook  is 
also  impaired  by  a  lack  of  a  balanced  long-term 
(until 2030) planning for rail and road investments 
with  identified  funding  sources.  The  government 
presented  plans  to  amend  the  railway  network  to 
facilitate  the  connectivity  of  the  planned  new 
airport west of Warsaw. This project remains at an 
early planning stage. 

Rail freight transport remains uncompetitive in 
relation  to  the  road  sector.  The  market  share  of 
rail  in  freight  shipments  has  been  declining 
steadily for the last few years. In 2016, it dropped 

36 

 
                                                           
3.4. Competitiveness and investment 

and  productivity.  Climate  and  environmental 
aspects  are  important  for  the  quality  of  life  and 
hence  attractiveness  of  places  for  setting  up 
business  and  for  mobility  of  people,  including 
those  with  the  highest  skills (30).  Changes  in  the 
climate  lead  to  a  rising  incidence  of  extreme 
weather conditions and related events with a direct 
negative  economic  impact,  as  illustrated  by  the 
summer  2018  drought  in  Poland  (EASAC,  2018). 
This may create a challenge for public investment, 
e.g.  in  flood  prevention  and  protection.  Finally, 
innovations  in  the  areas  linked  to  environmental 
themselves  a  significant 
protection  have 
potential  for  cost  savings  and  productivity  gains. 
Given  a  low  starting  point,  this  potential  appears 
particularly strong in Poland (Wiśniewska, 2017).  

in 

Poland 

emissions. 

has  made 

Nevertheless, 

Further  improving  energy  efficiency  is  key  to 
mitigating  energy  demand  and  greenhouse 
emissions. 
significant 
achievements in decoupling economic growth and 
greenhouse 
the 
greenhouse  gas  intensity  of  the  Polish  economy 
(emissions  per  euro  of  GDP)  remains  among  the 
highest in the EU being almost three times higher 
than  the  EU  average.  In  recent  years,  transport 
emissions  have  continued  to  grow  strongly  (14 % 
increase  between  2012  and  2016).  According  to 
the  latest  national  projections,  Poland  is  expected 
to  achieve  its  2020  emission  target  for  sectors 
outside 
the  EU  Emissions  Trading  Scheme. 
However, the 2030 target (a reduction of emissions 
by  7 %  compared  to  2005)  could  be  missed  by  a 
wide margin if no additional measures are taken. 

Poland plans to adapt the National Energy and 
Climate Plan by 31 December 2019, in line with 
the  Regulation  on  the  Governance  of  the 
Energy Union and Climate Action (31). The plan 
will  provide  an  overview  of  its  investment  needs 

(30)  As  an  illustration  climate  and  environmental  aspects  are 
taken  into  account  in  various  quality  of  life  rankings  of 
countries or cities. Examples include the Better Life Index 
of the OECD or Mercer's Quality of Living Ranking. 
(31)  Regulation  (EU)  2018/1999  of  the  European  Parliament 
and  of  the  Council  of  11  December  2018  on  the 
Governance  of  the  Energy  Union  and  Climate  Action, 
amending  Regulations  (EC)  No  663/2009  and  (EC)  No 
715/2009  of  the  European  Parliament  and  of  the  Council, 
Directives  94/22/EC,  98/70/EC,  2009/31/EC,  2009/73/EC, 
2010/31/EU, 2012/27/EU and 2013/30/EU of the European 
the  Council,  Council  Directives 
Parliament  and  of 
2009/119/EC and (EU) 2015/652 and repealing Regulation 
(EU)  No  525/2013  of  the  European Parliament and  of  the 
Council (Text with EEA relevance.) 

road 

infrastructure  but  also 

below  25  %,  while  the  available  data  for  2017 
point  to  a  further  decline.  This  results  from 
improved 
from 
weaknesses of rail transport:  low  speed, high cost 
and  poor  reliability  of  services  combined  with 
infrastructure.  The 
insufficient 
resulting 
road 
transport  hampers  efforts  to  reduce  the  impact  of 
transport on the environment. 

strengthening  dominance  of 

transhipment 

for 

Despite  improvements,  road  fatality  remains 
among  the  highest  in  the  EU.  In  2017,  Poland 
remained  far  above  the  EU  average  in  terms  of 
fatalities  per  million  inhabitants,  in  particular  as 
regards  pedestrians 
(European  Commission, 
2018h,  2018i).  Excessive  speed  and  forcing  the 
right  of  way  have  been  identified  as  the  main 
reasons 
in  Poland. 
lethal  car  accidents 
(KRBRD,  2018).  Preliminary  figures  for  2018 
show a stagnation compared to the 2017 outcome, 
therefore  the  targets  of  the  Polish  Road  Safety 
Programme for 2013-2020 (reducing road fatalities 
by  50 %  and  serious  injuries  by 40  %)  are 
endangered. In recent years Poland has invested in 
safety  solutions  in  high-risk  accident  sites,  – 
however, 
safety 
substantial  deficiencies 
infrastructure in built-up areas and inefficient rules 
enforcement remain challenges for road security. 

in 

access 

internet 

Fast 
infrastructure  has 
developed  quickly  with  new  challenges  arising 
due  to  a  technological  leap.  Supported  by  EU 
the  fast  broadband  (above  30  Mbps) 
funds, 
coverage  target  for  2020  is  expected  to  be  met. 
Recent  data  indicate  a  raising  uptake  of  fast  and 
ultrafast  (above  100  Mbps)  internet,  while  only 
half  of  households  have  access  to  ultra-fast  (100 
Mbps)  networks  (European  Commission,  2019c). 
Achieving the European Gigabit Society targets for 
2025 (29)  is  uncertain  without  public  support. 
Effective  deployment  of  the  5G  networks  may  be 
helpful in assuring reliable and fast connectivity in 
rural and remote areas. 

Climate and environmental issues  

Climate  and 
environmental  policies  are 
increasingly  intertwined  with  competitiveness 

(29)  The targets are: (1) Gigabit per second connectivity for all 
schools, transport hubs, etc.; (2) uninterrupted 5G coverage 
in  urban  areas  and  terrestrial  transport  paths;  (3)  internet 
access of at least 100 Mbps, upgradable to 1 Gigabit for all 
households (European Commission, 2016). 

37 

 
                                                           
                                                           
3.4. Competitiveness and investment 

until  2030  for  the  different  dimensions  of  the 
Energy Union, including renewable energy, energy 
efficiency,  security  of  supply,  and  climate 
information 
mitigation  and  adaptation.  The 
provided, including in the draft plan submitted on 
8  January  2019,  will  further  contribute  to  the 
identification  and  assessment  of  energy  and 
climate-related investment needs for Poland. 

introduced  quality  standards 

While  first  steps  have  been  taken,  so  far  there 
has  been  no  progress  in  improving  air  quality. 
Air  pollution  remains  a  major  health  concern, 
especially  in  several  towns  and  cities  in  the  south 
of  Poland  (Graph  3.4.2).  In  September  2018,  the 
government 
for 
heating  solid  fuels  for 
individual  houses.  It 
provides,  however,  a  long  transition  period  (until 
June  2020)  for  phasing  out  some  of  the  most 
polluting  fractions  of  coal.  In  September  2018, 
Poland launched a Clean Air programme, offering 
grants  and  preferential  loans  for  coal  boiler 
replacement  and  thermal  retrofitting  of  individual 
houses. Many households, however, may continue 
to use sub-standard boilers, as there is no national 
regulatory  framework  for  phasing  them  out.  In 
addition,  some  70 %  of  individual  households  are 
insulated  below  minimum  energy  efficiency 
requirements (32). As a consequence, up to 20 % of 
the  households  are  unable  to  afford  adequate 
heating due to a combination of low income, high 
energy expenditure and weak energy efficiency of 
their  homes (33).  Transport-related  pollution  is 
above  the  EU  average  due  to  a  high  share  of  old 
vehicles  with  obsolete  emission  standards,  and 
strong dependence on private cars. 

progress 

Recycling  of  waste  and  treatment  of  urban 
challenge,  despite 
wastewater  remains  a 
substantial 
infrastructure 
in 
development.  Disposal  of  municipal  waste  has 
been  shifting  away  from  landfilling  thanks  to 
infrastructure  using  EU  co-
development  of 
financing (34).  However,  the  waste  management 
system  is  underperforming  in  terms  of  recycling 
and  recovery  of  waste.  This  slows  the  process  of 
bringing  Poland  closer  to  a  circular  economy 
limiting  the  benefits  from  using  secondary  raw 

(32)  As  laid  down  in  Directive  2010/31/EU  on  the  energy 

performance of buildings. 

(33)  There is no official definition of energy poverty in Poland, 
however, it is being developed (Sokołowski et al., 2019). 
(34)  Between  2014  and  2016,  landfilling  decreased  by  12% 
(from 58% to 46%) in favour of incineration and recycling. 

by 

the 

materials.  As 
latest 
confirmed 
Commission’s  review,  Poland  was  among  the 
countries  considered  at  risk  of  missing 
the 
recycling  target  of  50 %  for  municipal  waste  by 
2020  (European  Commission,  2018b).  Deficient 
functioning  of  extended  producer  responsibility 
schemes  for  waste  packaging (35)  and  ineffective 
penalties  for  non-complying  municipalities  are 
among the main reasons for the underperformance. 
In  addition,  despite  efforts  and  on-going  EU 
funding  support,  over  one  thousand  urbanised 
areas remain unconnected to wastewater collecting 
networks or are served by sub-standard wastewater 
treatment  plants.  This  leads  to  pollution  of  the 
Baltic  Sea.  The  additional  investment  to  bring 
waste water treatment up to EU standards has been 
estimated  at  EUR  6.1  billion (see  European 
Commission, 2017b). 

Graph 3.4.2:  Air pollution in regions according to number of 

days with exceeded PM10 limits, 2017 

Source: Supreme Audit Office 
(https://www.nik.gov.pl/aktualnosci/dbaj-o-zdrowie-nie-
oddychaj.html)  

3.4.2.  MARKET FUNCTIONING 

Many  sectors  operate  efficiently  in  a  highly 
competitive  environment.  High  competition,  fast 
deployment  of  innovation  and  high-quality  goods 
and  services  offered  at  relatively  low  cost  are  a 
feature  of  several  sectors  in  Poland.  As  an 
illustration,  in  2017  Poland  had  the  lowest  price 

(35)  These  are  schemes  making  producers  accountable  for  the 
management  of  product’  packaging  after  the  product  was 
used by consumers. 

38 

 
                                                           
 
                                                           
3.4. Competitiveness and investment 

competition  might 

market.  Limited 
affect 
investment in the sector and the future capabilities 
of  the  gas  sector,  and  more  broadly  the  energy-
intensive industry, to compete in the EU market. 

documents.  Although 

The  governance  framework  for  state-owned 
enterprises does not seem to be fully in line with 
OECD  guidelines.  Following  the  2017  change 
(European  Commission,  2017a,  2018c), 
the 
centralisation of the governance  was reinforced in 
2018, with a transfer of over 30 entities (including 
large  companies)  into  direct  supervision  by  the 
Chancellery of the Prime Minister, though key line 
ministries  remain  in  charge  of  most  companies  in 
their respective sectors (e.g. energy). The rationale 
for  public  ownership  still  remains  hardly  defined 
and  is  dispersed  through  different  legal  sources 
and 
framework 
introduced in 2017 provides for the disclosure and 
transparency  standards 
line  with  OECD 
guidelines,  in  practice  detailed  reporting  data  for 
non-listed SOEs is not easily accessible. The scope 
of  responsibilities  of  SOEs'  boards  is  broadly 
convergent  with  the  OECD  guidelines,  while  the 
to  be 
appointment  procedures  do  not  seem 
standardised, 
vacancy 
through 
announcements  or  the  binding  involvement  of 
independent  bodies  in  the  assessment  of  merit. 
Some important guidelines are not regulated under 
the current  framework (e.g. equitable treatment of 
shareholders),  while  some  practices  go  against 
them,  for  example  certain  initiatives  of  Polska 
Fundacja Narodowa (37). 

public 

e.g. 

the 

in 

transboundary  gas  and  electricity 
Crucial 
infrastructure 
investments  are  progressing. 
Poland  is  engaged  in  gas  interconnectors'  projects 
linking  it  to  Lithuania,  Slovakia  and  Norway  via 
Denmark.  Furthermore,  Poland  has  decided  to 
extend  the  capacity  of  the  liquefied  natural  gas 
terminal  in  Świnoujście.  Poland  has  committed 
its 
the  synchronisation  of 
towards  achieving 
electricity grid with the Baltic States by 2025. 

Import of electricity is still limited, contributing 
to  a  strong  increase  in  electricity  prices.  The 

(37)  In 2018, Polska Fundacja Narodowa, which was funded by 
the  biggest  Polish  SOEs  to  promote  Polish  culture 
worldwide, was involved in the organisation and financing 
of  the  campaign  supporting  the  controversial  judiciary 
changes  by  the  ruling  party,  thus  was  broadly  against  the 
OECD  recommendation  V,  G  on  SOEs'  involvement  in 
financing political activities. 

level  in  the  communication  sector,  with  some  of 
the  lowest  costs  and  highest  coverage  of  mobile 
broadband  internet  services.  Polish  banks  were 
among  the  fastest  in  adopting  new  technologies 
such as contactless payments (Visa, 2016). Poland 
also  had  rather  unrestrictive  regulations  of  the 
retail sector (European Commission, 2018a) (36).  

innovation 

The  role  played  by  state-owned  enterprises  in 
some  sectors creates challenges for  competition 
and  regulatory  policies.  In  recent  years,  state-
owned  and  state-controlled  companies  (SOEs) 
gained  importance,  following  the  government's 
agenda  to  transform  the  SOEs  into  key  private 
leaders.  The  strong 
investors  and 
expansion  was  mainly  observed 
in  banking, 
insurance  and  energy  sectors,  and  the  increasing 
role  of  the  SOEs  is  confirmed  by  their  growing 
share  in  sectoral  indices  at  the  Warsaw  Stock 
Exchange  (European  Commission,  2017a,  2018c). 
Increased state ownership in key sectors presents a 
new  challenge  to  competition  and  the  regulatory 
framework.  The  independence  of  regulators  is 
becoming increasingly important given potentially 
social 
conflicting 
between 
e.g. 
considerations 
to  energy  prices  and 
interests  of  minority  shareholders  (including  all 
future  pensioners  via  pension  funds)  of  energy 
companies.  Similar  tensions  may  arise  in  the 
financial sector (see Section 3.1). 

interest, 
related 

The  strengthening  of  the  dominant  position  of 
the  state-owned  gas  company  due  to  policy 
measures  is  crowding  out  competitors  and 
decreasing  the  transparency  of  gas  prices.  The 
natural  gas  market  provides  an  illustration  of 
challenges for market functioning in sectors with a 
dominant role for state-owned companies. In 2017, 
following  an  amendment  of  legal  acts  on  gas 
stock-piling, net gas imports of competitors of the 
state-owned incumbent firm, PGNiG, fell by more 
than 40 % from a year earlier and the market share 
of PGNiG increased to above 80 %. The role of the 
gas  exchange  has  increased  in  recent  years,  to 
around 60 % of all gas trade in 2017. However, a 
large  share  of  all  transactions  happen  between 
entities from the PGNiG group or take the form of 
long-term  contracts  between  PGNiG  and  other 
state-controlled  companies  (PGNiG,  2018).  This 
impacts  the  transparency  of  price  terms  in  the 

(36)  The assessment concerned 2017 pre-dating the introducing 

of a partial ban on Sunday shop opening. 

39 

 
                                                           
                                                           
3.4. Competitiveness and investment 

in 

(Graph  3.4.3). 
the  share  of 
In  2016/2017, 
population at risk of poverty or social exclusion in 
urban  areas  amounted  to  14.6 %,  while  exceeding 
rural  areas.  Significant,  although 
24 % 
sometimes  declining,  disparities  between  urban 
and  rural  areas  are  visible  in  a  number  of  other 
fields.  The  exact  quantification  of 
regional 
disparities  is  hampered  by  the  fact  that  available 
data  do  not  fully  reflect  international  and  internal 
migrations. 

Graph 3.4.3:  Urbanisation rate and regional GDP in PPS per 

capita, 2016 

(1) Blue points show Polish regions, red point shows Poland. 
(2) PPS means purchasing power standard. 
(3) Urbanisation means share of population aged over 15 
living in urban areas in total population aged over 15. 
Source: Eurostat, Główny Urząd Statystyczny 

Metropolitan areas are the growth drivers. The 
highest  increase  in  GDP  per  capita  in  the  decade 
ending  in  2016  was  observed  in  regions  with  the 
largest  Polish  agglomerations.  Large  cities 
succeeded  in  attracting  domestic  and  foreign 
investments,  in  particular  thanks  to  high-quality 
education  and  growing  innovative  and  creative 
sectors.  The  key  challenge  for  large  cities  will  be 
their  productivity  growth  and 
to  maintain 
innovativeness.  Private 
an 
important role in this. Cities offering opportunities 
and good living conditions have witnessed a steady 
growth of population in recent years. For example, 
only  between  2014  and  2017  the  population  of 
Warsaw or Gdańsk increased by around 2.0 % (39), 
compared  with  a  decline  of  0.1 %  in  the  whole 

investment  has 

(39)  As  discussed 

in  Section  1, 

these  numbers 

likely 

underestimate the population flows. 

limited  capacity  for 
interconnectors  enabling 
electricity  imports  played  its  role  in  a  particularly 
strong  increase  in  wholesale  electricity  prices  in 
2018.  In  the  second  quarter  of  2018,  prices  in 
Poland  were  significantly  higher  than  in  its  EU 
neighbouring  countries.  Despite  improvements  in 
commercial  imports  from  Germany,  the  Czech 
Republic and Slovakia, there are still inefficiencies 
inherent  to  the  unscheduled  electricity  flows  in 
Central  Europe,  notably  between  Germany  and 
Poland,  limiting  the  amount  of  electricity  Poland 
can 
interconnectors. 
Internal  electricity  network  is  not  sufficiently 
developed 
of 
interconnectivity.  Regulatory  changes  introduced 
in  the  last  days  of  2018  entail  a  government 
intervention  in  electricity  prices,  which  might 
interfere with energy market fundamentals such as 
profitability,  revenues,  and  growth  potential  of 
firms. 

through  Western 

advantage 

import 

take 

full 

to 

3.4.3.  REGIONAL DIMENSION 

While  all  Polish  regions  have  benefitted  from 
fast  improvements  in  living  standards  for  the 
last  decade,  strong  disparities  persist.  Between 
2006 and 2016, Polish regions were amongst those 
experiencing the fastest increase in GDP per capita 
(Graph  1.5).  The  Mazowieckie  region,  which 
includes  Warsaw,  recorded  the  strongest  increase 
in  GDP  per  capita,  gaining  30  pps  relative  to  the 
EU  average.  At  the  same  time,  Poland's  regional 
disparities  remained  substantial  over  that  period 
(see Section 1). 

level, 

Disparities  at  sub-regional 
including 
between  rural  and  urban  areas,  are  even  more 
pronounced.  In  many  areas  disparities  become 
even  more  evident  at  sub-regional  level.  For 
instance,  while  in  2017  the  number  of  children  in 
nurseries per 1 000 children varied from 57 to 139 
between 
the 
differences  were  significantly  higher.  Within  the 
Lubelskie  region  alone  this  indicator  ranged  from 
8  to  175  at  the  powiat (38)  level.  Disparities  are 
also substantial between urban and rural areas. The 
level  of  urbanisation,  measured  as  the  share  of 
population  living  in  urban  areas,  is  strongly 
positively  correlated  with  regional  income  levels 

sub-regional 

regions,  at 

level 

(38)  Powiat is an intermediate level of administration, between 

a region and a municipality (gmina). 

40 

0204060801001204050607080% of EU GDP average in 2016% of population aged over 15 years  living in urban areasPoland 
                                                           
 
                                                           
3.4. Competitiveness and investment 

amplify  regional  disparities.  In  some  areas, 
travelling  within  and  between  regions,  as  well  as 
going abroad, is time-consuming. 

the 

income 

While  disparities  often  result  from  long-lasting 
structural issues, a targeted policy  may help to 
reduce them. Various long-term geographical and 
historical  factors,  such  as  distance  to  economic 
centres, access to trade and transport routes, state-
building,  war and  migration  histories  have  a  large 
and lasting bearing on human and physical capital 
and 
levels  of  regions  (see  e.g. 
Puttermann  and  Weil,  2010).  While  overall  in 
Poland,  disparities  also  result  from  long-term 
structural factors, a targeted investment effort may 
help  diminish  their  impact.  This  concerns  in 
particular  connectivity  as  it  crucial  for  reducing 
disparities.  In  this  respect  the  capacity  of  local 
governments  to  implement  investment  plays  an 
important  role.  Similarly,  the  possibility  to  offer 
public services like health and education are key.  

3.4.4.  INSTITUTIONAL QUALITY AND 

GOVERNANCE  

Specific features of the regulatory environment 
continue to hinder the investment  and business 
the  generally 
favourable 
climate.  Despite 
environment 
(European 
for  doing  business 
Commission,  2017a,  2018c),  compliance  with 
certain administrative requirements and procedures 
remains  burdensome.  Paying  taxes  became  more 
complicated due to changes mainly in value-added 
and  corporate  income  taxation  (Section  3.1).  The 
administrative  procedures  for  issuing  building 
permits are still long and burdensome, prolonging 
investment  processes.  The  arbitrary  use  of 
administrative decisions in the areas lacking spatial 
plans  delays  business  investment  (40).  The  use  of 
EU  funds  is  also  hampered  by  bureaucratic 
procedures  (41),  difficult  investment  coordination 
in certain sectors and areas, and the limited use of 
digital  solutions,  from  submission  of  project 
(European 
applications 

financial  controls 

to 

(40)  In some regions, more than a half of building permits were 

issued in this manner (IBDR, 2018). 

(41)  Requirements  concerning  application  documents  are 
stricter than in the other countries. While 16 pages need to 
be  completed  in  the  French  application  form,  a  similar 
form in Poland might reach 134 pages. In case of forms for 
payment claims, 3 pages need to be completed in France or 
Italy while in Poland the number of pages can go up to 11. 

country.  Urban  sprawl  underlines  the  importance 
of strategic planning in functional areas, including 
around agglomerations, to reduce commuting time 
and  costs  for  providing  local  public  services 
(Śleszyński, 2018). The level of traffic congestion 
in  urban  areas  and  their  functional  zones  remain 
among the highest in the EU. 

Smaller cities face specific long-term challenges. 
The share of big firms having their headquarters in 
small  cities  has  decreased  (Śleszyński,  2018). 
Small cities are confronted  with depopulation that 
is  expected  to  increase.  According  to  a  long-term 
forecast  (GUS,  2014),  the  population  of  several 
small  and  medium  cities  may  drop  by  35 %  — 
40 %  between  2015  and  2050.  This  is  likely  to 
amplify  the  already  observed  problems  of  fast 
ageing  and 
to 
mismatch  of  skills.  In  the  future,  the  challenges 
will  be  related  to  access  to  public  services  and 
infrastructure.  

labour  force  constraints  due 

1.6  million 

in  agriculture 

Small size of agricultural holdings and difficult 
access  to  public  services  negatively  affect  rural 
is 
areas.  While  employment 
declining,  with 
individuals, 
representing close to 10 % of total employment, it 
still  is  significant.  Except  for  the  North-western 
regions,  agricultural  holdings  are  generally  small 
and generate low income: in 2018, the average size 
of a holding varied from 4 hectares in Małopolskie 
to 31 hectares in Zachodniopo-morskie. More than 
24 % of the rural population was at risk of poverty 
or  social  exclusion  in  2016/2017.  Difficulties  in 
accessing  quality  education, 
jobs  or  cultural 
institutions reduce prospects as compared to urban 
citizens. In 2017, the share of young people (15 — 
34  years  old)  neither  in  employment,  nor  in 
education  or  training  amounted  to  17 %  in  rural 
areas, compared to 10 % in cities.  

Connectivity  is  a  key  determinant  of  regional 
growth  prospects.  Nearly  half  the  inhabitants  of 
large  cities’  suburbs  have  no  access  to  public 
transport  within  walking 
distance,  which 
perpetuates  dependence  on  individual  transport 
(Janas  and  Jarczewski,  2017).  Accessibility  of 
public transport is even lower outside urban areas, 
where  around  2/3  of  residents  lack  access  to 
transportation  organised  by  local  governments 
(Komorowski  and  Stanny,  2017).  This  hampers 
access  to  public  services  and  employment,  lowers 
the  economic  potential  of  rural  areas  and  may 

41 

 
                                                           
3.4. Competitiveness and investment 

the 

that 

is  noted 

the  perception  of 

justice  system  (42).  The  situation 

concern is  that  the cumulative effect of the recent 
changes  affecting  the  judiciary  are  limiting  its 
independence,  infringing  upon  the  separation  of 
powers.  The  common  pattern  of  these  changes  is 
that the executive and legislative  powers  now can 
interfere throughout the entire structure and output 
of 
is 
deteriorating  as  many  of  the  contested  legislative 
measures are being implemented and consolidated. 
It 
judicial 
independence  by  businesses  decreased  further 
throughout  2018  (European  Commission,  2019b). 
On  24  September  2018,  the  Commission  decided 
to  refer  Poland  to  the  Court  of  Justice  for 
violations of the principle of judicial independence 
by the new law on the Supreme Court lowering the 
retirement  age  of  judges.  The  Court  of  Justice 
granted  interim  measures  on  17  December  2018 
until  a  final  judgement  is  rendered.  On  1  January 
2019,  an  amendment  to  the  law  on  the  Supreme 
Court  entered  into  force  which  was  adopted  in 
view  of  implementing  the  order  of  the  Court  of 
Justice  and  which  i.a.  changes  the  contested 
retirement  regime.  The  implementation  of  the 
order  is  being  examined  by  the  Commission,  also 
taking into account this recent law.  

and 

stable 

a  more 

Various  policy  measures  to  support  small  and 
medium  sized  firms  were  adopted  in  2018.  In 
April,  a  set  of  five 
laws  (‘Constitution  for 
Business’)  entered  into  force.  The  aim  is  to 
provide 
coherent 
entrepreneurship environment, including making it 
easier  to  start,  suspend  or  close  a  business.  Also, 
social security contributions were lowered in some 
cases  for  new  businesses  and  unregistered  small-
scale  activity  was  introduced.  The  new  law  also 
provides  for  the  creation  of  an  small  and  medium 
enterprises’  Ombudsperson,  who  is,  inter  alia,  to 
public 
foster 
relations  with 
administration.  In 
the 
succession  of  ownership  in  sole  proprietorships 
entered  into  a  force.  It  enables  a  smoother 
succession  of  ownership  in  the  event  of  the  death 
of  the  owner,  including  new  arrangements  for 
transition management. The changes introduced by 
the  ‘Constitution  for  Business’  were  broadly 
welcomed by the business stakeholders, with some 
caveats.  In  addition,  work  on  a  new  public 

the 
law  on 

late  2018,  a 

their 

(42)  On  26  June,  18  September  and  11  December  2018,  the 
Council  held  hearings  on  Poland  under  the  Article  7(1) 
Treaty on European Union procedure. 

Commission, 2018g). The relatively slow progress 
in  digital  public  services  can  also  be  observed  in 
other  areas,  including  the  process  of  digital  ID 
deployment (Ministry of Digital Affairs, 2017). 

Uncertainty for business persists  due to factors 
like the number of regulatory changes, the poor 
quality of some laws and lack of effective public 
consultations.  In  the  first  half  of  2018,  close  to 
20 %  of  laws  passed  had  been  proposed  by 
members of parliament of the ruling party, and as 
such  were  not  subject  to  public  consultation  or 
impact  assessment  requirements.  In  addition, 
between  November  2017  and  May  2018  almost  a 
quarter  of  new  laws  proposed  by  the  government 
had  no  public  consultations.  In  cases  when  draft 
laws  were  subject  to  public  consultation,  these 
were  often  conducted  in  a  short  time  (average 
consultation  time  for  all  laws  passed  was  only  13 
days)  (Obywatelskie  Forum  Legislacji,  2018). 
Finally,  comments  and  proposals  resulting  from 
public  consultations  were  rarely  discussed  or 
reflected  in  the  finalisation  of  the  laws.  A  recent 
example  is  the  law  introducing  a  nation-wide 
public  holiday  on  12  November  2018.  The  draft 
law  was  tabled  only  3  weeks  in  advance  with  the 
President’s signature a few days ahead of the date. 
envisage  public 
The  proceeding  did  not 
lacked  a 
consultations  with  stakeholders  and 
relevant  impact  assessment.  The  law  was  adopted 
despite 
employer 
organisations. 

protests 

strong 

all 

by 

The  rule  of  law  and  an  effective  justice  system 
are  crucial  for  supporting  a  stable  investment 
climate.  To  invest,  firms  require  a  predictable 
framework  that  ensures  that  they  will  be  treated 
equally  by  an  independent  judiciary.  The  rule  of 
law  and  an  effective  justice  system  are  therefore 
essential for mutual trust, including in the seamless 
operation of the Internal Market. As highlighted in 
recent  studies,  factors  like  respect  for  the  rule  of 
law  and  high-quality  institutions  are  vital  for 
sustainable  long-term  growth  as  they  are  key  for 
economic  incentives  to  invest  (Masuch  et  al., 
2018). 

The risk of a serious breach of the rule of law in 
Poland  persists.  The  Commission  activated 
Article  7(1)  of  the  Treaty  on  European  Union 
proposing  to  the  Council  to  adopt  a  decision 
determining  a  clear  risk  of  a  serious  breach  by 
Poland of the rule of law. The Commission’s main 

42 

 
                                                           
3.4. Competitiveness and investment 

contribute  to  some  public  institutions  focusing  on 
procedural  aspects  rather  than  optimising  value-
for-money  and  the  quality  of  procured  goods  or 
services  (UZP,  2018).  On  the  business  side,  this 
reduces  interest  in  working  for  public  sector 
clients,  resulting  in  limited  competition  in  public 
tenders.  For  example,  some  51  %  of  tenders 
published in the supplement to the Official Journal 
of  the  EU  attracted  only  one  single  bid  in  2018, 
among the highest such shares for Member States.

procurement law is advancing,  which may contain 
solutions to increase participation by an small and 
medium enterprises in public tenders. To tackle the 
important  problem  of  arrears  the  government  is 
preparing new legislation (MPiT, 2018). 

institutional  weaknesses 

Some 
the 
efficiency  of  the  public  procurement  system. 
The  public  procurement  system  faces  various 
competition.  They 
challenges 

hinder 

lower 

that 

43 

 
3.4. Competitiveness and investment 

Box 3.4.1: Investment challenges and reforms in Poland 

Macroeconomic perspective 

Investment  activity  was  gradually  recovering  in  2018,  though  investment-to-GDP  ratio  is  estimated  to  have  remained 
around  18 %.  The  main  driver  was  the  booming  public  investment  that  was  supported  by  increasing  utilisation  of  EU 
funds, further motivated by the local and regional elections in the autumn. Private investment and in particular corporate 
investment  growth  stayed  positive  but  relatively  weak.  This  was  in  part  due  to  labour  supply  constraints  and  elevated 
uncertainty perceived by entrepreneurs. 

Assessment of barriers to investment and ongoing reforms 

A number of investment barriers still affects Poland’s investment climate. These include in particular: 

1.  An  unstable  regulatory  environment.  Weaknesses  in  the  law-making  process,  in  particular  limiting  the  scope  and 
effectiveness of consultations on draft laws, result in the low quality of some passed laws (Section 3.4.4). The frequent 
changes  and  the  lack  of  clarity  in  tax  law  is  another  barrier  (Section  3.1).  Frequent  regulatory  changes  concerning 
renewable energy generation increase uncertainty (Section 3.4.1). The major changes in the judicial system introduced in 
2015–2018 create increasing concerns as regards independence of the judiciary and legal certainty. 

2. Insufficient availability of adequately skilled labour, affecting several sectors. The outlook is also unfavourable, due to 
demographic  trends  and  uncertainty  concerning  future  policy  on  labour  migration.  Vocational  education  and  training 
programmes  are  not  sufficiently  adjusted  to  market  needs.  Adult  learning  is  underdeveloped  (Section  3.3  and  Section 
3.4.1). 

In  Poland,  the  national  promotional  and  development  bank  is  the  Bank  Gospodarstwa  Krajowego  (BGK).  The  BGK 
supports the economic growth by providing finance for infrastructure projects. It also aims to promote of entrepreneurship 
and  develop  micro  companies  and  SMEs  by  offering  guarantees  and  surety  instruments.  The  BGK  is  also  active  in 
stimulating cooperation between enterprises, the public sector, and financial institutions.  

44 

Regulatory/ administrative burdenTaxationPublic administrationCSRAccess to financePublic procurement /PPPsCooperation btw academia, research and businessCSRJudicial 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 
 
 
ANNEX A: OVERVIEW TABLE 

Commitments 

Summary assessment(43) 

2018 Country-specific recommendations (CSRs) 

CSR 1: Ensure that the nominal growth rate of net 
primary  government  expenditure  does  not  exceed 
4.2  % 
to  an  annual 
structural adjustment of 0.6 % of GDP. Take steps 
to  improve  the  efficiency  of  public  spending, 
including by improving the budgetary process. 

in  2019,  corresponding 

Ensure that the nominal growth rate of net primary 
government  expenditure  does  not  exceed  4.2  %  in 
2019,  corresponding 
to  an  annual  structural 
adjustment of 0.6 % of GDP.  

Take  steps  to  improve  the  efficiency  of  public 
spending,  including  by  improving  the  budgetary 
process. 

limited  progress 

Poland  has  made 
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  included  in  spring 
when final data for 2018 will be available. 

Limited  progress has been  made in improving 
the  efficiency  of  public  spending:  works  to 
reform the budget process initiated in 2016 were 
continued in 2018. Currently, they focus on the 
analysis  of  the  current  situation  and  defining  a 
target solution and its implementation plan. The 
main  effort  focuses  currently  on  multiannual 
budget  planning,  modernisation  of  the  chart  of 
accounts  and  efficiency  of  spending  (spending 
reviews).  The  overall  reform  will  be  time 
consuming and its final implementation date has 
not yet been communicated. 

CSR  2:  Take  steps  to  increase  labour  market 
participation,  including  by  improving  access  to 
childcare  and  by  fostering  labour  market  relevant 
skills,  especially 
learning,  and 
remove  remaining  obstacles  to  more  permanent 

through  adult 

Poland has made limited/no [TBC] progress in 
addressing CSR2. 

Limited  progress  in  increasing  labour  market 
participation  by  improved  access  to  childcare. 

(43)  The following categories are used to assess progress in implementing the 2018 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. 

45 

 
 
                                                           
 
types of employment. Ensure the sustainability and 
adequacy of the pension system by taking measures 
to  increase  the  effective  retirement  age  and  by 
reforming the preferential pension schemes. 

Take  steps  to  increase  labour  market  participation, 
including  by  improving  access  to  childcare  and  by 
fostering  labour  market  relevant  skills,  especially 
through  adult  learning,  and  remove  remaining 
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  reforming  the 
preferential pension schemes. 

by 

including 

CSR  3:  Strengthen  the  innovative  capacity  of  the 
closer 
economy, 
collaboration  between  business  and 
research 
institutions. Improve the regulatory environment, in 
particular  by  ensuring  effective  public  and  social 
consultations in the legislative process. 

supporting 

Strengthen the innovative capacity of the economy, 
supporting  closer  collaboration 
including  by 
between business and research institutions. 

Improve  the  regulatory  environment,  in  particular 
social 
by 
consultations in the legislative process. 

effective 

ensuring 

public 

and 

A. Overview Table 

Poland  made  limited  progress  in  fostering 
labour  market  relevant  skills.  Progress  in  VET 
and  higher  education  remain  to  be  seen.  No 
progress  in  adult  learning.  No  progress  in 
removing 
to  more 
permanent types of employment. 

remaining 

obstacles 

No  progress  in  ensuring  the  sustainability  and 
adequacy of the pension system, as no progress 
was  observed  in  measures  to  increase  the 
effective  retirement  age  and  in  reforming  the 
preferential pension arrangements. In November 
to 
2018,  the  government  announced  plans 
reverse some of the 2013 reforms as regards the 
pension system for police officers. 

Poland  has  made 
addressing CSR3. 

limited  progress 

in 

its 

strengthening 

research  organisations 

Limited  progress 
the 
in 
innovative  capacity  of  the  economy  through: 
increased R&D tax incentives with higher rates 
of tax deductions; The Ministry of Science and 
industrial 
Higher  Education  continued 
the  NCBR 
doctorate  programme,  while 
continued  with  the  Gospostrateg,  a  strategic 
initiative  linking  Higher  Education  institutions, 
public 
(PROs)  and 
to  address  key 
government  organisations 
challenges for the economy. Limited progress in 
supporting 
between 
business 
institutions.  The 
establishment  of  the  Lukasiewicz  Research 
Network,  which  was  supposed  to  integrate  the 
activities  of  multiple  PROs  and  facilitate  their 
cooperation  with  business  partners,  remains  at 
the stage of a draft law in the parliament. 

collaboration 

research 

closer 

and 

Limited  progress  in  improving  the  regulatory 
environment.  “Constitution  for  Business”  was 
adopted  in  early  2018.  In  2018,  a  law  on  the 
succession  of  ownership  in  sole  proprietorship 
enterprises entered into force. In addition, works 
on a new public procurement law are advancing 
to  address,  among  others,  the  issue  of  low 
participation of SMEs. No progress observed in 
ensuring 
social 
consultations  in  the  legislative  process.  Fast 
track  legislative  procedures,  with  limited  scope 
of consultations, remain to be used on a regular 
basis.  Most  recent  examples  include  the  law 
introducing  a  nation-wide  public  holiday  on  12 

effective 

public 

and 

46 

 
A. Overview Table 

November 2018 and the December 2018 law on 
the energy taxation reduction to cushion electric 
energy price increases for 2019.  

In  2017  employment  rate  reached  70.9 %,  just 
below the target. Data for the first three quarters 
of 2018 indicate that Poland likely met its target 
in that year. 

In  2017,  R&D  intensity  in  Poland  was  1.03 % 
of  GDP  composed  of  64 %  private  investment 
(0.67 %  of  GDP)  and  35 %  public  investment 
(0.36 % of GDP).  

This is still significantly below the target. R&D 
intensity has been growing on average by 6.3 % 
annually  over  the  2007-2017  period.  There  has 
been  a  7  %  increase  in  2017  as  compared  to 
2016. BERD  has  increased  by  19.7 %  annually 
in  the  2010-2017  timeframe,  growing  from 
0.63 %  of  GDP  in  2016  to  0.67 %  of  GDP  in 
2017. 

In  2016  Poland  had,  for  the  first  time,  higher 
emissions in sectors outside the EU ETS than its 
annual  emission  allocations.  In  2017  non-ETS 
emissions were 3 percentage  points higher than 
the  annual  target  according  to  the  preliminary 
data.  This  means  that  Poland  will  have  to  use 
allocations  banked  over  2013-2015  or  other 
flexibilities  foreseen  under  the  Effort  Sharing 
legislation  to  comply  with  the  obligations  for 
2016  and  2017.  According  to  the  latest  own 
national  projections,  Poland  is  still  expected  to 
achieve its 2020 target. 

the  gross 

In  2017,  renewable  energy  had  a  10.9 %  share 
in 
final  energy  consumption. 
Investment  in  new  renewable  energy  capacity 
has  slowed  down,  presenting  a  challenge  for 
achieving  the  2020  renewable  energy  target  of 
15 %. 

Contrary  to  the  EU  trend,  since  2005,  Poland 
has increased both its primary energy and  final 
energy  consumption  due  to  strong  economic 
growth and historically high energy intensity of 
the Polish economy. In 2017, Poland’s primary 
energy  consumption 
reached  99.8  Mtoe, 
exceeded its 2020 indicative target. Final energy 

Europe 2020 (national targets and progress) 

Employment rate target: 71 % 

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

Greenhouse gas (GHG) emissions target:  

- National greenhouse gas (GHG) emissions target: 
+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 

Energy 
consumption  

efficiency: 

reduction 

of 

energy 

Poland  has  set  an 
indicative  national  energy 
efficiency  target  of  13.6  Mtoe  primary  energy 
savings in 2020 reaching a 2020 level of 96.4 Mtoe 
primary  energy  consumption  and  71.6  Mtoe  final 

47 

 
A. Overview Table 

energy consumption. 

Early school leaving target: 4.5 % 

Tertiary education target: 45 % 

consumption,  at  71.0  Mtoe  was  just  below  the 
2020 indicative target. 

Poland  is  one  of  the  best  EU  performers  on 
early school leavers with the rate of 5 % in 2017 
being less than half the EU average of 10.6 %. 

Poland  is  among  the  EU  countries  with  a  high 
tertiary educational 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 45.7 % in 
2017 therefore the national target was met. 

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 
2017 the number of people at risk of poverty or 
social exclusion declined by 4.2 million. 

48 

 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

49 

General Government debt projections under baseline, alternative scenarios and sensitivity tests2017201820192020202120222023202420252026202720282029Gross debt ratio50.649.248.347.446.345.945.945.946.146.446.847.348.0Changes in the ratio (-1+2+3)-3.7-1.4-0.9-0.8-1.1-0.50.00.00.20.30.40.50.7of which(1) Primary balance (1.1+1.2+1.3)0.20.60.60.40.1-0.2-0.6-0.7-0.7-0.8-0.8-0.8-0.8(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)-0.3-0.5-0.5-0.4-0.5-0.5-0.6-0.7-0.7-0.8-0.8-0.8-0.8(1.1.1) Structural primary balance (bef. CoA)-0.3-0.5-0.5-0.4-0.4-0.4-0.4-0.4-0.4-0.4-0.4-0.4-0.4(1.1.2) Cost of ageing0.00.10.20.20.30.30.40.40.4(1.1.3) Others (taxes and property incomes)0.00.00.00.00.00.00.00.00.0(1.2) Cyclical component0.51.11.10.80.50.30.00.00.00.00.00.00.0(1.3) One-off and other temporary measures0.00.00.00.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-1.9-1.4-1.4-1.3-1.0-0.7-0.6-0.7-0.5-0.5-0.4-0.3-0.1(2.1) Interest expenditure1.61.51.41.41.51.51.51.61.61.71.81.91.9(2.2) Growth effect-2.4-2.3-1.7-1.5-1.4-1.2-1.2-1.3-1.3-1.3-1.2-1.3-1.1(2.3) Inflation effect-1.1-0.6-1.2-1.2-1.1-1.0-0.9-0.9-0.9-0.9-0.9-0.9-0.9(3) Stock-flow adjustments-1.60.61.10.80.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Fiscal Sustainability Report (FSR) 2018. b. For the medium-term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained thereafter) to bring the debt-to-GDP ratio to 60 % by 2033. The critical values used are 0 and 2.5 pps. of GDP. The DSA classification is based on the results of 5 deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long-term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps. of GDP. The DSA results are used to further qualify the long-term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018.PL - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long-term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 3035404550556020162017201820192020202120222023202420252026202720282029Debt as % of GDP -PLBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario3040506020162017201820192020202120222023(% of GDP)Stochastic debt projections 2019-2023 -PLp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline3035404550556020162017201820192020202120222023202420252026202720282029Debt as % of GDP -PLBaselineHistorical SPB scenarioSGP scenario3035404550556020162017201820192020202120222023202420252026202720282029Debt as % of GDP -PLBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWLOWLOWLOWLOWLOWDebt level (2029)48.056.150.550.648.3Debt peak year20182029202920292018Percentile rank66.0%76.0%Probability debt higher24.6%Dif. between percentiles16.8MEDIUMLong termDSALOWDebt sustainability analysis (detail)Medium termLOWLOWShort termLOW(S0 = 0.2)(S1 = -0.7)S2MEDIUM(S2 = 2.2)S1 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2018. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2018. 
(3) Quarterly values are annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

50 

201320142015201620172018Total assets of the banking sector (% of GDP)1)91.592.391.795.295.292.9Share of assets of the five largest banks (% of total assets)45.248.348.647.747.5-Foreign ownership of banking system (% of total assets)2)61.359.158.956.545.245.1Financial soundness indicators:2)              - non-performing loans (% of total loans)-7.26.66.46.67.0              - capital adequacy ratio (%)15.614.915.816.918.017.9              - return on equity (%)3)10.09.47.77.56.97.4Bank loans to the private sector (year-on-year % change)1)4.05.45.83.87.36.1Lending for house purchase (year-on-year % change)1)3.03.54.52.92.64.3Loan to deposit ratio2)-94.995.193.393.793.2Central Bank liquidity as % of liabilities1)0.00.00.00.00.00.0Private debt (% of GDP)75.478.178.981.676.4-Gross external debt (% of GDP)2) - public28.329.329.228.426.123.3    - private28.529.028.830.429.528.2Long-term interest rate spread versus Bund (basis points)*246.3235.3220.6294.6310.3280.6Credit default swap spreads for sovereign securities (5-year)*77.460.861.175.958.754.2 
 
 
 
C. Standard Tables 

Table C.2: 

Headline Social Scoreboard indicators 

(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) Long-term unemployed are people who have been unemployed for at least 12 months.       
(4) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019.       
(5) 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).       
(6) Average of first three quarters of 2018 for the employment rate, long-term unemployment rate and gender employment 
gap. Data for unemployment rate is seasonally adjusted (annual series, for EE, EL, HU, IT and UK data based on first three 
quarters of 2018).       
Source: Eurostat. 

51 

201320142015201620172018 6Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)5.65.45.35.25.0:Gender employment gap (pps)14.514.213.814.214.614.2Income inequality, measured as quintile share ratio (S80/S20)4.94.94.94.84.6:At-risk-of-poverty or social exclusion rate1 (AROPE)25.824.723.421.919.5:Young people neither in employment nor in education and training (% of population aged 15-24)12.212.011.010.59.5:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)64.966.567.869.370.972.2Unemployment rate2 (15-74 years)10.39.07.56.24.93.8Long-term unemployment rate3 (as % of active population)4.43.83.02.21.51.0Gross disposable income of households in real terms per capita4 (Index 2008=100) 110.2113.4117.7124.8::Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)12061126061322113757::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)1.63.14.54.8::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction524.826.423.124.537.5:Children aged less than 3 years in formal childcare5.05.55.37.911.6:Self-reported unmet need for medical care8.87.87.36.63.3:Individuals who have basic or above basic overall digital skills (% of population aged 16-74)::40.144.446.4: 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator. 
(1) 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.       
(2) PISA (OECD) results for low achievement in mathematics for 15 year-olds. 
(3) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science. 
(4) Average of first three quarters of 2018. Data for youth unemployment rate is seasonally adjusted (annual series, for EE, EL, 
HU, IT and UK data based on first three quarters of 2018). 
Source: Eurostat, OECD 

52 

Labour market indicators201320142015201620172018 4Activity rate (15-64)67.067.968.168.869.6:Employment in current job by durationFrom 0 to 11 months11.011.711.111.511.3:From 12 to 23 months9.29.39.610.010.1:From 24 to 59 months16.415.815.615.916.3:60 months or over62.762.562.361.160.8:Employment growth* (% change from previous year)-0.11.71.50.81.10.7Employment rate of women(% of female population aged 20-64)57.659.460.962.263.665.1Employment rate of men (% of male population aged 20-64)72.173.674.776.478.279.3Employment rate of older workers* (% of population aged 55-64)40.642.544.346.248.348.9Part-time employment* (% of total employment, aged 15-64)7.17.16.86.46.66.5Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)26.828.328.027.526.124.6Participation in activation labour market policies(per 100 persons wanting to work)15.417.322.425.3::Transition rate from temporary to permanent employment(3-year average)18.818.418.822.025.7:Youth unemployment rate (% active population aged 15-24)27.323.920.817.714.811.6Gender gap in part-time employment5.95.95.76.06.35.9Gender pay gap1 (in undadjusted form)7.17.77.47.2::Education and training indicators201320142015201620172018Adult participation in learning(% of people aged 25-64 participating in education and  training)4.34.03.53.74.0:Underachievement in education2::17.2:::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)40.542.143.444.645.7:Variation in performance explained by students' socio-economic status3::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 

53 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare4.14.24.0:4.6:Disability1.61.61.5:1.3:Old age and survivors10.911.311.2:11.1:Family/children1.31.41.5:2.5:Unemployment0.30.30.2:0.2:Housing0.10.10.1:0.0:Social exclusion n.e.c.0.10.10.1:0.1:Total18.418.918.7:19.9:of which: means-tested benefits0.70.80.7:0.9: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):23.723.123.322.9:Children at risk of poverty or social exclusion (% of people aged 0-17)*29.329.828.226.624.217.9At-risk-of-poverty  rate1 (% of total population)17.117.317.017.617.315.0In-work at-risk-of-poverty rate (% of persons employed)10.410.710.611.210.89.9Severe material deprivation rate2  (% of total population)13.511.910.48.16.75.9Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan3.63.42.53.02.83.4Tenant, rent at market price20.818.414.219.819.515.9Proportion of people living in low work intensity households4 (% of people aged 0-59)6.97.27.36.96.45.7Poverty thresholds, expressed in national currency at constant prices*105481054910847112471199412663Healthy life years (at the age of 65)Females7.87.88.18.48.9:Males7.47.27.57.68.2:Aggregate replacement ratio for pensions5 (at the age of 65)0.60.60.60.60.60.6Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::41.740.145.952.4GINI coefficient before taxes and transfers*47.747.747.847.946.647.3GINI coefficient after taxes and transfers*30.930.730.830.629.829.2 
 
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

(1) Value added in constant prices divided by the number of persons employed. 
(2) Compensation of employees in current prices divided by value added in constant prices. 
(3) The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.  
(4) 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 75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the 
application is still pending or don't know.       
(5) Percentage population aged 15-64 having completed tertiary education. 
(6) Percentage population aged 20-24 having attained at least upper secondary education. 
(7) 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 
(8) 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). 

54 

Performance indicators201220132014201520162017Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry2.89-1.472.052.190.102.56Labour productivity growth in construction-1.170.539.954.37-9.136.71Labour productivity growth in market services1.703.41-0.942.684.473.30Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry2.380.161.12-1.153.422.48ULC growth in construction1.831.48-6.81-2.1914.53-3.11ULC growth in market services3.630.482.980.452.714.71Business environment201220132014201520162017Time needed to enforce contracts3 (days)685685685685685685Time needed to start a business3 (days)39.037.037.037.037.037.0Outcome of applications by SMEs for bank loans4:0.590.750.460.530.40Research and innovation201220132014201520162017R&D intensity0.880.870.941.000.961.03General government expenditure on education as % of GDP5.405.305.305.305.00:Employed people with tertiary education and/or people employed in science and technology as % of total employment394041424344Population having completed tertiary education5222324242526Young people with upper secondary education6909090919191Trade balance of high technology products as % of GDP-1.97-1.68-1.44-1.67-1.59-1.63Product and service markets and competition200320082013OECD product market regulation (PMR)7, overall2.422.041.65OECD PMR7, retail2.522.432.55OECD PMR7, professional services3.293.333.24OECD PMR7, network industries83.202.702.34 
 
 
 
 
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 (Europe 2020-2030)(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 use in industry (in kgoe) divided by gross value added of industry, including construction 
(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 use in transport sector including international aviation, (in kgoe) divided by transport 
industry gross value added (in 2010 EUR) 
Transport carbon intensity: GHG emissions in transport sector divided by gross value added of the transport activities   
Energy import dependency: net energy imports divided by gross inland energy consumption plus consumption of 
international maritime bunkers    
Aggregated supplier concentration index:  Herfindahl-Hirschman index for net imports of crude oil and NGL, natural gas and 
hard coal. Smaller values indicate larger diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl-Hirschman index of the main energy products in the gross inland consumption of 
energy 
* 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); Eurostat (all other indicators) 

55 

Green growth performance201220132014201520162017MacroeconomicEnergy intensity kgoe / €0.250.250.230.230.230.23Carbon intensity kg / €1.031.010.940.920.91-Resource intensity (reciprocal of resource productivity)kg / €1.801.681.621.531.551.58Waste intensity kg / €0.42-0.44-0.42-Energy balance of trade % GDP-3.4-2.7-2.6-1.6-1.4-2.0Weighting of energy in HICP%15.415.714.915.713.513.7Difference between energy price change and inflation %2.9-1.3-0.10.6-1.9-0.1Real unit of energy cost% of value added21.220.119.920.320.8-Ratio of environmental taxes to labour taxesratio0.210.190.200.200.20-Environmental taxes% GDP2.62.42.62.72.72.7Sectoral Industry energy intensity kgoe / € 0.120.120.120.110.110.10Real unit energy cost for manufacturing industry excl. refining% of value added24.722.021.121.622.0-Share of energy-intensive industries in the economy% GDP14.113.913.813.914.1-Electricity prices for medium-sized industrial users€ / kWh0.090.090.080.090.080.09Gas prices for medium-sized industrial users€ / kWh0.040.040.040.040.030.03Public R&D for energy % GDP0.010.010.010.010.000.00Public R&D for environmental protection% GDP0.020.020.030.030.030.03Municipal waste recycling rate%12.015.126.532.534.833.8Share of GHG emissions covered by ETS*%51.752.451.952.149.9-Transport energy intensitykgoe / €0.830.760.760.800.880.95Transport carbon intensitykg / €2.252.062.062.192.45-Security of energy supplyEnergy import dependency%31.826.429.529.930.838.3Aggregated supplier concentration indexHHI29.827.027.427.225.7-Diversification of energy mixHHI0.360.370.360.350.340.33 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX D: INVESTMENT GUIDANCE ON COHESION POLICY 

FUNDING 2021-2027 FOR POLAND 

Building  on  the  Commission’s  proposal  for  the  next  Multi-Annual  Financial  Framework  for  the  period 
2021-2027  of  2  May  2018  (COM  (2018)  321),  this  Annex  D  presents  the    preliminary  Commission 
services views on priority investment areas and framework conditions for effective delivery for the 2021-
2027  Cohesion  Policy  (44).  These  priority  investment  areas  are  derived  from  the  broader  context  of 
investment bottlenecks, investment needs and regional disparities assessed in the report.  It provides the 
basis  for  a  dialogue  between  Poland  and  the  Commission  services  in  view  of  the  programming  of  the 
cohesion policy funds (European Regional Development Fund, Cohesion Fund and European Social Fund 
Plus). 

Policy Objective 1: A Smarter Europe – Innovative and smart industrial transformation 

Poland’s innovation performance remains  far below the EU average,  much of  which is due to  meagre 
research  and  development  investments,  especially  private  ones,  and  modest  cooperation  of  public  and 
private  innovation  partners.  High  priority  investment  needs(45)  have  been  identified  to  enhance 
research and innovation capacities and the uptake of advanced technologies, to be implemented in 
synergies  with  other  EU  programmes  and  initiatives  such  as  Horizon  Europe,  Life,  Coal  Regions  for 
Transition Initiative, Catching-up Regions Initiative and others, and in particular through: 

  supporting risky elements of  research and development business investments, including  pilot lines, 

early product validation, certification and advanced manufacturing; 

 

facilitating  business  –  science  cooperation  schemes  and  projects  to  enable  larger  research 
commercialisation and providing research-based and innovative solutions for business; 

  building critical research mass and attracting talent in strategic smart specialisation areas; 

  enhancing research and development networking and cooperation (intra-regional, regional, clusters, 
international,  including  within  the  Baltic  Sea  Strategy),  especially  within  smart  specialisations  to 
foster truly innovative projects and ensure better integration into regional and global networks. 

The  productivity  of  small  and  medium-sized  enterprises  is  growing  slowly.  Smaller  businesses  also 
strive to remain competitive and trade on domestic and foreign markets. High priority investment needs 
have been identified to  increase the competitiveness and internationalisation of small and medium-
sized enterprises, in particular through: 

  supporting  measures  increasing  productivity  such  as  improvement  of  technology,  management 

practices and workplace skills for better integration in global value chains; 

 

 

facilitating access to advanced business services; 

further  stimulating  the  entrepreneurial  environment,  including  industrial  cluster  development, 
enhanced  cooperation  between  small  and  medium-sized  enterprises  and  research  institutions,  and 
sustained  engagement  of  small  and  medium-sized  enterprises  in  the  development  of  smart 
specialisation areas. 

The use of information technologies by firms and digital interaction of citizens  with public authorities 
remain  low.  Priority  investment  needs  have  been  identified  to  reap  the  benefits  of  digitisation  for 
citizens, companies and governments, and in particular to: 

  upscale and accelerate e-government, including e-health; 

  support  the  integration  of  digital  technology  by  small  and  medium-sized  enterprises  to  increase 

productivity and efficiency;  

  promote digital skills, including upskilling and reskilling to address the gap between the demand for 

(44)  This Annex is to be considered in conjunction with the EC Proposal for a Regulation of the European Parliament and of the 
Council on the European Regional Development Fund and on the Cohesion Fund COM(2018) 372 and the EC Proposal for a 
Regulation of the European Parliament and of the Council on the European Social Fund Plus COM(2018) 382, in particular as 
regards the requirements for thematic concentration and urban earmarking outlined in these proposals. 

(45)  The intensity of needs is classified in three categories in a descending order – high priority needs, priority needs, needs. 

56 

 
 
                                                           
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Poland 

and availability of a digitally-skilled workforce. 

Labour shortages translate into growing skills mismatches, which hamper the growth of innovative and 
fast-developing  sectors.  Investment  needs  have  been  identified  to  enhance  skills  within  small  and 
medium-sized  enterprises  and  research  institutions  as  regards  smart  specialisation  areas, 
industrial transition and entrepreneurship through: 

  developing skills in smart specialisation areas, innovative business models, technology transfers and 

innovation management, also as an integral part of other investments under Policy Objective 1; 

  strengthening of work-based learning in smart specialisation areas.  

Policy Objective 2: A low carbon and greener Europe  – Clean and fair energy transition, green 
and blue investment, circular economy, climate adaptation and risk prevention46 

The Polish economy is among the least carbon-efficient. Poor insulation of public and private buildings 
contributes  to  higher  energy  consumption  and  energy  poverty.  The  country  also  hosts  the  most  air-
polluted cities in the EU, especially in the southern and central regions. Clean energy transition needs 
additional  support,  as  pointed  out  within  the  Coal  Regions  for  Transition  Initiative.  High  priority 
investment  needs  have  been  identified  to  increase  the  share  of  low  carbon  intensive  and  cleaner 
energy production and to decrease energy consumption, in particular through: 

  deep energy efficiency renovation of public and private buildings; 

 

replacement  of  fossil  fuel  boilers  with  low  carbon  intensive  installations  (including  investments  in 
related  infrastructure  or  in  district  heating),  accompanied  by  energy  efficiency  renovation  of 
buildings  (also  by  taking  into  consideration  the  ongoing  work  within  the  Catching-up  Regions 
Initiative);  

 

increase of renewable energy production at small scale with related infrastructure. 

Urban  wastewater  is  still  not  collected  and  treated  adequately  despite  the  progress  made.  Priority 
investments  needs  have  been  identified  to  promote  sustainable  water  management,  in  particular 
through: 

 

further development of urban waste water collection and treatment systems in agglomerations above 
10.000 inhabitants, with a view of contributing to the EU Strategy for the Baltic Sea Region, along 
with investments in efficiency of water use. 

Negative impacts of climate change, including floods, heat waves and severe storms are increasingly felt 
across  the  country,  in  particular  in  urban  areas.  Investment  needs  have  been  identified  to  promote 
climate change adaptation, risk prevention and disaster resilience, in particular through: 

  natural  disasters  protection  and  prevention  with  priority  for  ecosystem-based  solutions,  including 
sharing best practice and pooling resources with neighbouring regions and countries e.g. in the Baltic 
Sea Region; 

 

implementation of adaptation plans of cities to climate change. 

Waste management lags behind with regard to recycling, recovery and a circular economy. Investment 
needs have been identified to promote transition to a circular economy, in particular through: 

  supporting  recycling  of  municipal  waste  and  resource  efficiency  in  small  and  medium-sized 

enterprises; 

 

raising awareness of citizens and small and medium-sized enterprises to trigger behavioural change.  

Policy  Objective  3:  A  more  connected  Europe  –  Mobility  and  regional  Information  and 
Communications (ICT) connectivity 

46 While outside of the scope of the ERDF and the Cohesion Fund (art. 6, paragraph 1(h), COM (2018)372), energy interconnectors 
could be financed by the Connecting Europe Facility in line with its objectives (art. 3, paragraphs 1 and 2 (b), COM(2018) 438). 

57 

 
                                                           
 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Poland 

The  transport  sector  exhibits  connectivity  gaps,  especially  in  rail  Trans-European  Transport  Network 
(TEN-T),  and  poor  environmental  and  safety  standards.  High  priority  investment  needs  have  been 
identified  to  develop  a  sustainable  intermodal  mobility,  including  the  TEN-T  and  cross-border 
links, and in particular to:  

  eliminate gaps in the rail TEN-T and support shift from road to rail and other sustainable modes of 

transport; 

 

 

 

remove regional disparities in road TEN-T accessibility, especially in the north of Poland; 

improve accessibility of peripheral, rural and cross-border areas by public transport;  

further reduce environmental impact and improve safety of transport. 

Poor  public  transport  and  long  commuting  times  in  urban  areas  perpetuate  dependence  on  individual 
transport, resulting in congestion and a high number of accidents. Priority investment needs have been 
identified to promote sustainable multimodal urban mobility, and in particular to:  

  promote integrated, clean and safe public transport and active forms of mobility, as provided for in 
sustainable urban mobility plans, especially aiming to improve connectivity between cities and their 
commuting zones. 

The fixed internet connectivity in Poland remains one of the lowest in the EU, with ultra-fast broadband 
(above  100  Mbps)  available  mainly  in  big  cities.  Priority  investment  needs  have  been  identified  to 
enhance digital connectivity, and in particular to: 

  deploy ultra-fast broadband in the market failure areas. 

Policy Objective 4: A more social Europe – Implementing the European Pillar of Social Rights 

The  Polish  labour  market  overall  performs  well,  but  the  transition  to  a  knowledge-based  economy 
creates important challenges on skills development, adult learning and broadening labour supply. High 
priority  investment  needs  have  been  identified  to  improve  access  to  employment,  in  particular  of 
long-term unemployed, and of inactive people, enhance women’s labour market participation, as 
institutions,  to  promote  upskilling  and  reskilling 
well  as  to  modernise 
opportunities, including for migrant worker and to better anticipate change, and in particular to: 

labour  market 

  modernise  public  employment  services  for  effective  targeting  active  labour  market  policies  to  the 
inactive, low skilled, women, older people, persons with disabilities, and the long-term unemployed; 
support job creation in the social economy; 

  promote  gender  equality  in  employment,  in  particular  through  affordable,  quality  childcare  for 
children  below  3  years,  and  improve  work  life-balance,  including  through  flexible  forms  of 
employment;  

 

improve  social  dialogue  by  increasing  the  capacity  of  social  partners  and  non-governmental 
organizations; 

 

further develop and coordinate labour market and skills forecasting and policies; 

  upgrade  basic  skills  and  promote  adult  learning;  provide  upskilling  and  reskilling  measures, 

including through support to training by employers. 

Despite  good  results  on  some  education  indicators,  serious  challenges  persist  for  the  quality  and 
outcomes of Polish education and training system. High priority investment needs have therefore been 
identified  to  promote  equal  access  to  and  improve  the  quality,  effectiveness  and  labour  market 
relevance of education and training at all levels, and in particular to: 

  support  the  development  of  key  competences,  including  digital  skills,  skills  for  innovation  and 

entrepreneurship, and combating stereotypes, at all educational levels; 

58 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Poland 

 

improve labour market relevance of the vocational education and training system, including through 
work-based learning; 

  promote  excellence  in  higher  education  teaching  and  learning,  including  increase  of  international 

cooperation and mobility, and a more effective quality assurance system; 

  develop the competences of teachers and enhance the attractiveness of their profession; 

  enhance access to quality early childhood education and care infrastructure and services; 

  enhance inclusiveness and quality of education and training and support for individual learners from 

disadvantaged groups; 

  support career guidance, counselling, good quality and effective apprenticeship/traineeship schemes 

and systems for validation of non-formal and informal learning. 

Poverty  and  social  exclusion  are  decreasing  overall,  but  still  affect  relatively  more  certain  types  of 
households and regions, and shortcomings in the integration of the migrant workforce remain. Priority 
investment needs have been identified to foster active inclusion, to address material deprivation, to 
promote socio-economic integration of third country nationals, and in particular to:  

  support  integrated  active  inclusion  measures  aimed  at  increasing  an  individualised  outreach  to 

disadvantaged people; 

  enhance the system of family support and speed up the process of deinstitutionalisation, in particular 

for children deprived of parental care; 

  develop and implement a framework for the integration of third country nationals. 

Long-term  care  for  elderly,  persons  with  disabilities  and  persons  with  chronical  diseases  is  under-
developed, and health outcomes are  only slowly improving. Health system is too hospital-centred and 
lacks effective coordination. High priority investment needs have been identified to promote active and 
healthy ageing, enhance the equal and timely access to quality, sustainable and affordable services 
and to improve accessibility, effectiveness and resilience of healthcare system and long-term care, 
and in particular to: 

  support  accessibility  of  products  and  services,  as  well  as  housing  and  inclusive  infrastructure  for 

persons with disabilities/functional limitations; 

  support  transition  from  hospital/institutional  care  to  affordable  and  quality  home-care  and 

community-based services and coordination of healthcare, social care and long-term care;  

 

foster  equal  access 
to  affordable  healthcare  services,  particularly  for  vulnerable  groups, 
strengthening  primary  care,  integration  of  care,  health  promotion,  disease  prevention  and  digital 
health solutions; 

  build  up  skilled  health  workforce  planning  and  forecasting  as  well  as  to  support  upskilling  and 

reskilling of healthcare and long-term care personnel. 

Policy Objective 5 – A Europe closer to citizens by fostering the sustainable and integrated 
development of urban, rural and coastal areas and local initiatives 

Uncoordinated  strategic  planning  and  insufficiently  developed  integrated  approach  to  interventions  by 
different  levels  of  the  public  administration  create  negative  externalities  and  make  it  more  difficult  to 
address  regional  and  sub-regional  disparities.  Investment  needs  have  been  identified  to  foster  the 
integrated  development  in  urban  and  rural  areas  and  to  strengthen  administrative  capacity  of 
local  authorities  through  integrated  territorial  investments,  community-led  local  initiatives  and  other 
specific tools, and in particular to: 

 

reinforce the role of metropolitan areas as drivers of growth, innovation and productivity; 

  counteract the negative effects of urban sprawl, including air pollution, and rationalise the provision 

of public services, especially in metropolitan areas and their agglomerations;  

  accelerate socio-economic regeneration of declining areas, particularly in small and medium cities, 

59 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Poland 

including deprived urban neighbourhoods, post-industrial zones and within regions in industrial and 
low-carbon  transition  (also  by  taking  into  account  the  results  of  the  Coal  Regions  for  Transition 
Initiative); 

 

reinforce  urban-rural  linkages,  in  particular  through  investments  in  smart  and  innovative  solutions 
addressing mobility challenges; 

  mitigate the impact of demographic changes and poverty, especially in rural areas. 

Factors for effective delivery of Cohesion policy 

  programming built up on the successful implementation of the regional operational programmes and 
the  best  practice  from  the  programming  period  2014-20,  including  under  the  Catching-up  Regions 
and  the  Coal  Regions  in  Transition  Initiatives  as  well  as  the  pilot  action  on  frontloading 
administrative capacity building in Lubelskie; 

  strengthened  capacity  of  beneficiaries,  especially  in  the  rail  sector  and  in  the  areas  facing  socio-

economic challenges;  

  adequate  participation and strengthened capacity of social partners, civil society and other relevant 

stakeholders in the delivery of policy objectives; 

  simplified  procedures  and  reduced  administrative  burden  for  beneficiaries,  especially  small  and 

medium-sized enterprises; 

  consolidation and/or better  strategic coordination of programmes intervening in the  same sector or 

geographical area as well as better targeted and less bureaucratic health investments; 

 

identification of smart specialisation areas on the basis of national and regional needs and potential 
to strengthen innovation performance and foster productivity growth; 

  broader use of financial instruments and/or contributions to the ‘Member State compartment’ under 

InvestEU for revenue-generating and cost-saving activities; 

 

 

improved spatial planning and project management, particularly within functional areas; 

improved public procurement performance. 

60 

 
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