COMMISSION STAFF WORKING DOCUMENT Country Report Poland 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Poland, economic situation, green economy, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 520 final  COMMISSION STAFF WORKING DOCUMENT Country Report Poland 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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(2020) 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, reforms and investments 

3.5. 

 Environmental sustainability 

Annex A: Overview Table 

Annex B: Commission debt sustainability analysis and fiscal risks 

Annex C: Standard Tables 

Annex D: Investment guidance on Just Transition Fund 2021-2027 for Poland 

Annex E: Progress towards the Sustainable Development Goals 

References 

LIST OF TABLES 

Table 1.1: 
Table 2.1: 
Table 3.2.1: 
Table C.1: 
Table C.2: 
Table C.3: 
Table C.4: 
Table C.5: 
Table C.6: 
Table E.1: 

Key economic and financial indicators - Poland 

Assessment of implementation of 2019 country-specific recommendations 

Banking sector financial stability indicators 

Financial market indicators 

Headline Social Scoreboard indicators 

Labour market and education indicators 

Social inclusion and health indicators 

Product market performance and policy indicators 

Green growth 

Indicators measuring Poland’s progress towards the SDGs 

1 

3 

7 

14 

18 

18 
22 
24 
32 
41 

46 

52 

53 

59 

61 

66 

13 
16 
22 
53 
54 
55 
56 
57 
58 
61 

 
 
 
 
7 
7 
8 
8 
9 
10 
14 
18 
19 
20 
21 
24 
26 

26 
32 
37 

41 
42 
44 

17 
25 
40 
45 

LIST OF GRAPHS 

Consumer confidence 

Real GDP per capita, 2008-2018 

Labour productivity in market services 

Employment, wages and unemployment rate 

Index of concentration of goods exports, 2018 

Gini coefficient of equivalised disposable income, 2008-2018 

Graph 1.1: 
Graph 1.2: 
Graph 1.3: 
Graph 1.4: 
Graph 1.5: 
Graph 1.6: 
Graph 2.1: 
Graph 3.1.1:  General government revenue and expenditure change, fiscal deficit, 2010-2021 
Graph 3.1.2: 
Graph 3.1.3: 
Graph 3.1.4:  Medium-term public debt scenarios 
Graph 3.3.1:  Employment rate in Poland, 2018 
Graph 3.3.2:  Differences in employment rates between Poland and EU, 2019 (p.p.) 
Graph 3.3.3:  Working time flexibility for care and inactivity due to family or caring responsibilities, 

Time to comply with tax obligations for a medium-sized company, 2010-2019 

Overall multiannual implementation of 2011-2019 CSRs to date 

Tax revenue dynamics 

2018 

Investment rates 

Graph 3.4.1: 
Graph 3.4.2:  Freight transport performance in billion tonne-kilometers (tkm) 
Graph 3.5.1:  Greenhouse gas emissions per capita in ten EU countries with the highest emissions in 

2017 

Graph 3.5.2: 
Graph 3.5.3:  Share of solid fossil fuels in final residential energy consumption (%) 

Indigenous production of hard coal 

LIST OF BOXES 

Box 2.1: EU funds and programmes to address structural challenges and to foster 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 

Box 3.5.1: Coal Regions in Transition 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

challenges (1).  The 

Slowing  but  still  very  solid  economic  growth 
creates  a  good  basis  for  reforms  addressing 
socio-economic 
Polish 
economy  is  successfully  catching  up.  Economic 
conditions remain favourable despite an outlook of 
slower  growth.  Employment  is  high  and  the 
unemployment  rate  has  stabilised  at  record  lows. 
The short-term situation of public finances appears 
safe.  An  ageing  population,  a  falling  number  of 
people  at  working  age  and  the  subpar  quality  of 
certain key public services such as health and long-
term  care  constitute  important  challenges.  Key 
long-term  challenges  include  ensuring  a  gradual 
shift 
towards  a  knowledge-based  economy 
producing  advanced  products  and  services.  The 
Polish  economy  is  energy-intensive  and  highly 
dependent  on  fossil  fuels.  In  this  respect,  limiting 
greenhouse gas emissions by decarbonising power 
generation  and  reducing  energy  intensity  are  key. 
The transition to a low-carbon economy will have 
a significant impact on society, mainly in affected 
regions.  

Economic  growth  stayed  strong 
in  2019. 
Household consumption remained the main driver 
of  GDP  growth  estimated  at  4.0%  in  2019.  The 
favourable  labour  market  situation  and  to  some 
extent  increased  social  transfers  and  lowered 
personal  income  taxes  supported  this.  Private  and 
public investment, including the projects supported 
by EU funds, also contributed positively to growth. 
Export 
generally 
favourable,  especially  against  the  backdrop  of 
weakened global and EU trade. 

performance 

remained 

Future  growth  potential  will  be  determined  by 
trends 
in  capital  accumulation,  skills  and 
migration. A significant inflow of labour migrants 
from  outside  the  EU  has  helped  to  sustain  strong 
growth.  Given  the  increased  share  of  migrants  in 
the total work force and the large number of Polish 
citizens  who  have  moved  to  other  EU  countries, 
future  migration  trends  are  expected  to  have  a 
substantial  impact  on  growth.  Increasing  labour 
participation  of  certain  groups  of  people  will  be 

(1)  This  report  assesses  Poland’s  economy  in  light  of  the 
European  Commission’s  Annual  Sustainable  Growth 
Strategy,  published  on  17  December  2019.  In 
this 
document, the Commission sets out a new strategy on how 
to address not only the short-term economic challenges but 
also  the  economy's  longer-term  challenges.  This  new 
economic agenda of competitive sustainability rests on four 
dimensions:  environmental  sustainability,  productivity 
gains, fairness and macroeconomic stability. 

also  important.  While  gains  in  skills  are  likely  to 
have played an important role in driving growth in 
trends 
the  past,  maintaining  positive 
is  an 
accumulation, 
challenge.  Capital 
important 
including  infrastructure  and,  machinery,  but  also 
non-tangible capital including patented innovation 
is  another  important  factor  with  the  potential  to 
boost  productivity  and  growth.  Perceptions  of 
macroeconomic  stability  and 
the  quality  of 
Poland’s  policies, 
institutions,  and  regulatory 
environment  (including  the  legislative  process,  in 
particular  public consultations)  are  expected  to be 
increasingly  important  in  determining  investment 
trends. 

internally  and 

Overall, Poland is well integrated economically 
with  the  EU and the  world,  and  its  economy  is 
well  balanced 
externally. 
Poland’s  current  account  has  remained  close  to 
balance  and  its  net  foreign  debt  continued  to  fall 
during 2019. Exports remain highly diversified and 
are  gradually  shifting  towards  higher-value-added 
products  and  services.  Public  and  private  debt 
remains low in comparison with the EU average. 

in 

policy 

growth  prospects  depend 

on 
Economic 
investment 
areas. 
several 
Decarbonising  power  generation,  improving  the 
energy  efficiency  of  buildings  and  investing  in 
more sustainable transport can put the economy on 
a  more  environmentally  sustainable  development 
path.  Investment  in  innovation  will  help  Poland 
produce  more  advanced  products  and  services. 
Expanding broadband network will allow for equal 
access 
in  social 
inclusion, healthcare, childcare and long-term care 
can 
increase 
improve 
employment.  

social  cohesion  and 

internet.  Investment 

the 

to 

Poland  has  made 
addressing 
the 
recommendations.  

limited  (2)  progress 
2019 

in 
country-specific 

Some  progress  was  observed  in  strengthening 
Poland’s capacity for innovation.  

There  has  been  limited  progress  in  the  following 
areas: 

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

3 

 
 
                                                           
                                                           
 

Improving the efficiency of public spending;  

 

Increasing labour force participation; 

  Focusing  investment-related  economic  policy 
on  innovation,  transport,  digital  and  energy 
infrastructure, healthcare and cleaner energy.  

There has been no progress in the following areas: 

 

Increasing the effective retirement age;  

  Reforming preferential pension schemes; 

  Strengthening  the  role  of  consultations  of 
social  partners  and  public  consultations  in  the 
legislative process. 

Poland performs relatively well in several areas 
covered by the European Pillar of Social Rights. 
In  recent  years,  Poland  has  made  substantial 
progress in improving labour market outcomes and 
reducing  the  share  of  people  at  risk  of  poverty. 
However,  challenges  remain  notably  as  regards 
access to healthcare (as highlighted for instance by 
data on self-reported unmet need for medical care), 
the  gender  employment  gap  and  very 
low 
availability of  childcare. 

limited 

the  71% 

Progress in reaching the national targets under 
the  Europe  2020  strategy  is  mixed.  Poland 
performed best on the employment rate (72.2% in 
tertiary  education 
target), 
2018  vs 
attainment  (45.7%  in  2018  vs  45%  target)  and 
poverty reduction (the population at risk of poverty 
declined  by  4.5  million  vs  the  target  of  1.5 
million).  Progress 
in  R&D 
remains 
investment (1.2% of GDP in 2018 vs 1.7% target) 
and the share of people leaving early the education 
system  (4.8%  in  2018  vs  4.5%  target).  Reaching 
the  Europe  2020  targets  related  to  energy  and 
climate will be very challenging. In 2018 primary 
energy  consumption  reached  101  Mtoe  and  final 
energy  consumption  72  Mtoe,  i.e.  both  exceeded 
the 2020 target levels. In 2018, Poland achieved a 
renewables  share  of  11.2%,  against  the  2017-18 
indicative trajectory of 12.3%. Emissions from the 
sectors  outside  of  the  EU  Emissions  Trading 
System have already increased by 21% from 2005 
levels, overshooting Poland’s commitment to limit 
the increase of these emissions to 14% by 2020. 

Executive summary 

Poland made overall a significant progress with 
regard  to  the  United  Nations’  SDGs.  Poland  is 
above  the  EU  average  concerning  the  majority  of 
the  indicators  pertaining  to  SDG  1  (no  poverty), 
SDG  4  (quality  of  education)  and  SDG  10 
(reduced 
significant 
inequalities).  Despite 
progress,  Poland  remains  below  the  EU  average 
with  respect  to  SDG  3  (good  health  and  well-
being),  SDG  8  (decent  work  and  economic 
growth),  SDG  9 
innovation  and 
infrastructure). The key challenge for Poland with 
respect 
to  meeting  sustainable  development 
objectives concerns SDG 13 (climate action) (3).  

(industry, 

The  key  structural  issues  for  Poland’s  economy 
analysed in this report are the following: 

  The  short  term  outlook  for  public  finances 
remains  favourable  but 
long-term  risks 
remain. The fiscal deficit is estimated to have 
increased in 2019, reversing the gradual decline 
seen  in  previous  years.  By  contrast,  high 
nominal GDP growth ensured a further decline 
in  the  ratio  of  public  debt  to  GDP.  Several 
changes  in  taxation  were  implemented  during 
2019.  Some  of  them  have  the  potential  to 
simplify tax compliance, but others work in the 
opposite  direction.  In  a  longer  term,  risks  to 
fiscal  sustainability  risks  are  likely  to  emerge, 
in particular due to the population ageing. 

  Work  to  reform  the  budgetary  system 
continues.  The  expenditure  rule  remains  the 
cornerstone of the fiscal framework. However, 
its 
the 
functioning  was  weakened  by 
circumvention  of  the  rule  in  some  recent 
expenditure  programmes.  Poland  remains  the 
only  Member  State  without  an  independent 
fiscal  council.  The  work  on  reforming  the 
budgetary  system  has  continued  and  given  the 
complexity it is expected to take several years. 
It  has  the  potential  to  increase  the  efficiency 
and  effectiveness  of  spending,  a  crucial 
challenge  considering  the  increase  in  public 

(3)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present  report contains  reinforced  analysis  and  monitoring 
on  the  SDGs.  A  new  annex  (ANNEX  E)  presents  a 
statistical  assessment  of  trends  in  relation  to  SDGs  in 
Poland during the past five years, based on Eurostat’s EU 
SDG indicator set.  

4 

 
 
                                                           
Executive summary 

expenditure,  which  is  difficult  to  reverse  as 
well  as  expected  expenditure  pressures,  e.g. 
due to the ageing population. 

remains  high,  but  has  been  consistently 
declining in recent years. 

including 

  The condition of the banking sector remains 
favourable.  Overall,  the  sector  remains  well 
capitalised and resilient. The solvency of most 
banks  remains  strong  amid  prudent  regulatory 
measures.  Lending, 
residential 
property financing, has been rising in line with 
fundamentals.  The  share  of  non-performing 
loans  is  limited,  which  keeps  risks  contained. 
In  turn,  following  legal  actions,  the  risks 
related  to  the  remaining  stock  of  foreign-
currency 
have 
increased and may require additional capital for 
some banks. The gradual implementation of the 
workplace  pension  scheme  might  provide 
support  to  the  development  of  the  capital 
market. 

denominated  mortgages 

  Large state ownership in the financial sector 
increases  the  importance  of  independent 
financial supervision. The state controls close 
to  40%  of  the  banking  sector,  as  well  as  the 
biggest  insurance  company.  This  increases  the 
importance  of  a  strong,  independent  financial 
supervisor, with appropriate powers. 

for 

some 

living  and  working 

  Employment  rates  reached  all-time  highs, 
but  certain  barriers  hinder  labour  market 
participation 
groups.  The 
unemployment rate stabilised at around 3.5%, a 
record  low.  Labour  shortages  have  hampered 
firms’  growth  in  many  sectors.  The  future 
labour  supply  in  part  depends  on  trends  in  the 
return  migration  of  Poles  living  in  other  EU 
countries  and  on  the  integration  of  non-EU 
migrants  currently 
in 
Poland.  Women,  older  people,  persons  with 
disabilities, and those with lower qualifications 
participate in the labour market much less than 
in  many  other  EU  countries.  This  is  due  to 
several  factors,  such  as  limited  access  to 
childcare  and  long-term  care,  underdeveloped 
public transport outside large cities, and a low 
statutory  retirement  age.  Unreformed  special 
pension  regimes  and  a  lack  of  flexibility  in 
working  time  arrangements  are  among  the 
factors  limiting  the  labour  market  flexibility. 
The  share  of  temporary  employment  contracts 

secondary 

  Skill  development  has  the  potential  to 
support  productivity  and  labour  market 
participation.  Lower 
schools, 
recently abolished due to a reform of the school 
system,  have  proven  good  at  fostering  basic 
skills  in  students,  with  Polish  15-year-olds 
being among the best in the EU in 2018. Early 
school  leaving  has  been  among  the  lowest  in 
the EU. Concerns remain as regards the quality 
of  higher  education,  average  teachers’  skills 
related 
teaching 
profession,  the  labour  market  relevance  of 
vocational 
of 
transversal  skills  and  equal  opportunities 
following  the  abolition  of  lower  secondary 
schools.  Adults  rarely  engage  in  training  and 
other forms of learning. There remain questions 
on  the  effectiveness  of  labour  market  policies, 
including  measures  focusing  on  acquiring  and 
upgrading skills. 

to  attractiveness  of 

development 

education, 

the 

  Poverty  and  inequality  have  declined  in 
many  dimensions,  but  certain  challenges 
remain. The share of people at risk of poverty 
and  social  exclusion  has  declined  in  recent 
years.  Income  inequality  continued  to  decline 
in  2018,  following  a  reduction  in  previous 
years.  This  reduction  is  to  some  extent  due  to 
favourable  labour  market  trends,  including  the 
relatively  fast  growth  of  lower  wages.  The 
changes to the child benefit introduced in mid-
2019 
inequality-reducing 
its 
impact.  Future  pensions  are  expected  to  be 
significantly  lower  in  relation  to  wages,  than 
the  ones  currently  paid.  This  implies  risks  for 
rising  old  age  poverty,  amplified  by  an 
underdeveloped  long-term  care  system.  Given 
low statutory retirement age, the key challenge 
lies in encouraging labour market participation 
beyond 
remain 
this  age.  Social  services 
underdeveloped,  including  for  persons  with 
disabilities. 

diminished 

  Low  public  expenditure  and  its  suboptimal 
allocation created problems in the operation 
of  the  healthcare  system  and  access  to  it. 
Low  pay  may  limit  the  attractiveness  of 
practising  medical  professions  in  Poland.  The 
number  of  practising  doctors  and  nurses 

5 

 
 
Executive summary 

relative  to  the  population  remains  among  the 
lowest in the EU. Public health expenditure has 
been  among  the  lowest  in  the  EU  for  many 
years.  Key  challenges  regarding  the  allocation 
of  resources  include  the  underdevelopment  of 
primary care, placing a burden on hospitals. 

investments  in  urban  mobility,  many  people 
have  no  direct  access  to  public  transport. 
Improvement  in  road  safety  has  stalled.  There 
has  been  significant  progress  in  ultrafast  and 
mobile  broadband  take-up,  although  Poland  is 
still far from its connectivity targets. 

  Recent  policy  measures  aim  to  strengthen 
innovation.  Poland  took  various  measures  to 
enhance  the  economy’s  innovative  capacity, 
including  changes  in  higher  education,  in  the 
organisation  of  research 
the 
functioning of various tax and subsidy measures. 
Inputs  measured  by  R&D  expenditure  have 
continued  rising,  while  staying  well  below  the 
EU average. It remains to be seen to what extent 
these measures will translate into better science-
business co-operation and innovation outcomes. 

institutes  and 

remains 

favourable, 

  Various  factors  act  to  limit  investment 
activity.  Labour  shortages  are  an  important 
investment  barrier.  While  overall  the  business 
environment 
some 
regulatory  deficiencies  weigh  on  confidence 
and  certainty.  Business  uncertainty  remains 
high  concerning  some  key  laws,  such  as  those 
related  to  tax  and  social  security  systems  or 
energy  policies.  Some  of  important  laws  were 
passed  or  proposed  using  fast-track  legislative 
procedures,  without  proper  social  partner  and 
public  consultations.  A  clear  risk  of  a  serious 
breach of the rule of law in Poland continues to 
exist and may negatively impact the investment 
climate. The  important  role  played  by  state-
owned and state-controlled companies in some 
sectors  make  it  essential  to  ensure  a  level 
playing field for private competitors. 

  Infrastructure  development  is  progressing, 
but  sizeable  investment  needs  remain.  The 
domestic  energy  generation  infrastructure  is 
ageing  and  not  up  to  the  task  of  moving  to  a 
climate  neutral  economy.  Its  renewal  is  set  to 
require  significant  investment  in  the  years  to 
come.  The  capacity  and  quality  of  road 
improved, 
transport 
contributing  to  high  growth  in  road  transport, 
but  also  to  the  associated  greenhouse  gas 
emissions. In turn, the share of rail in transport 
services is declining, being hindered by lagging 
modernisation  projects.  This  also  affects  the 
connections.  Despite 
seaports´ 

infrastructure 

inland 

have 

6 

for 

vision 

improving 

generation 

  Curbing  greenhouse  gas  emissions  by 
decarbonising 
and 
power 
heating,  and  reducing  energy  intensity  are 
key challenges. Poland faces a risk of missing 
its  2020  climate  and  energy  targets.  Given  the 
difficult  starting  point,  developing  a  coherent 
long-term 
the 
environmental 
sustainability  of  Poland’s 
economy  is  particularly  important.  In  the 
absence  of  coordinated  action,  greenhouse  gas 
emissions  have  been  increasing  since  2014, 
increasing  the  future  scale  and  cost  of  the 
decarbonisation.  The  large  role  of  coal  in 
energy 
electricity  generation, 
efficiency  of  buildings  and  fast  growing 
emissions  from 
transport  modes  represent 
priority  areas  for  intervention  and  investment 
due to not only the climate impact concerns but 
also  environmental  pressures  of  air  pollution 
and water scarcity.  

the  poor 

  The transition to a climate neutral economy 
is an opportunity to modernise the economy, 
while  addressing  developmental  challenges 
and citizens’ needs. Continued investment in a 
carbon-intensive infrastructure poses the risk of 
stranded  assets  and  competitive  disadvantage 
due  to  the  growing  cost  of  carbon.  The  future 
growth of the industry depends on the ability to 
deploy  innovative,  technologies  aligned  with 
the  circular  economy  model  and  power  sector 
decarbonisation.  The  Commission’s  proposal 
for  the  Just  Transition  Mechanism  under  the 
next  multi-annual  financial  framework  for  the 
period  2021-2027  includes  a  Just  Transition 
Fund, a dedicated just transition scheme under 
InvestEU, and a new public sector loan facility 
with  EIB.  It  is  designed  to  ensure  that  the 
transition towards EU climate neutrality is fair 
by helping the most affected regions in Poland 
to 
economic 
social 
consequences. Key priorities for support by the 
Just Transition Fund are identified in Annex D, 
building  on  the  analysis  of  the  transition 
challenges outlined in this report.  

address 

and 

the 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

2019,  yet  at  a  much  slower  pace.  By  contrast, 
private  investment  growth  strengthened  in  2019, 
after  several  years  of  weakness.  EU  funds 
supported both public and private investments (see 
Section 3.4.1). 

Graph 1.2:  Consumer confidence 

GDP growth 

Economic  growth  remained  strong  in  2019. 
Estimated  at  4.0%  in  2019,  GDP  growth  slowed 
from  peaks  of  around  5%  annually  in  the  period 
2017-2018.  Nevertheless,  Poland  was  still  among 
the  fastest  growing  EU  Member  States.  Domestic 
demand  remained  the  main  growth  driver  and 
export  performance  stayed  relatively  favourable 
compared 
to  several  other  EU  economies. 
Nonetheless,  weakening  global  trade  affected  the 
performance of Polish exports. 

Graph 1.1: 

Real GDP per capita, 2008-2018 

Source: ECFIN (BCS) 

Growth is projected to fall below its potential in 
2020 and 2021 (4). Private consumption is forecast 
to  continue  rising,  though  at  gradually  slower 
rates, thanks to higher consumer confidence driven 
by  favourable  labour  market  conditions  and  –  in 
early  2020  –  also  due  to  changes  in  personal 
income  tax.  Public  investment  expenditure  is 
expected  to  increase  in  2020,  as  some  previously 
be 
delayed 
EU-funded 
implemented.  Private 
is 
expected  to  weaken,  given  the  uncertainty  on  the 
demand  outlook,  especially  in  foreign  markets, 
limiting export growth. 

projects 
investment  growth 

should 

Potential growth 

inflow  of 

Productivity  gains  and 
foreign 
workers helped keep potential growth high. The 
capital  accumulation  contribution 
to  potential 
growth increased from the lows of 2016-2017, but 
remained 
limited  by  historical  comparison. 
Productivity  gains  played  the  largest  role  and 
Poland  has  continued  to  catch  up  in  productivity 
with  more  developed  EU  Member  States. 

(4)  Potential  growth  is  estimated  at  around  4%  (European 

Commission, 2019d).  

Source: Eurostat 

Private  consumption  contributed  the  most  to 
growth  for  the  fifth  consecutive  year.  After 
rising  by  4.2%  in  2018,  private  consumption 
expanded  by  an  estimated  4%  in  2019.  Several 
factors contributed. First, labour market conditions 
remained  favourable  and  were  accompanied  by 
tax  and  benefit 
high  wage  growth.  Second, 
measures increased disposable incomes, especially 
for  middle-  and  high-income  households.  Third, 
consumer 
to 
multiannual highs in 2019, in particular supported 
by  a  favourable  view  on  the  labour  market 
situation  (Graph  1.2).  Finally,  spending  was  also 
supported by easy access to credit. 

confidence 

remained 

close 

in  2019.  Public 
rising 
Investment  kept 
investment, 
the  solid 
the  key  force  behind 
investment expansion in 2018, continued to rise in 

7 

80901001101201301400809101112131415161718Index 2008=100EUCZDEPLSKLT-35-30-25-20-15-10-5051015Jan 13Jul 13Jan 14Jul 14Jan 15Jul 15Jan 16Jul 16Jan 17Jul 17Jan 18Jul 18Jan 19Jul 19IndexConsumer confidenceEconomic climateWilligness to buy 
   
   
                                                           
1. Economic situation and outlook 

growth  was  broad-based,  and  visible  in  both  the 
manufacturing  and  services  sectors  (Graph  1.3). 
Despite  this  robust  performance,  there  remains 
substantial  room  for  further  catch-up.  In  2018, 
labour  productivity  was  still  equivalent  to  only 
around  63%  of  the  EU  average  when  controlling 
for  differences 
in  purchasing  power.  Capital 
investment and skills upgrading have the potential 
to continue strengthening productivity growth. 

Labour market 

strong. 

growth 

With  unemployment  stabilising  at  record  lows, 
wage 
Total 
remained 
employment gains, as captured by the labour force 
survey,  moderated  from  1.4%  in  2017  to  0.4%  in 
2018 and are estimated to essentially have come to 
a  halt  in  2019  (Graph  1.4).  Constrained  labour 
supply  was  a  key  factor  behind  this  deceleration, 
but  increased  uncertainty  on  the  demand  outlook 
also  affected  firms’  hiring  intentions.  Wages 
continued to grow at a rate of close to 8%, broadly 
stable since late 2017. The unemployment rate has 
stabilised  at  around  3.5%,  a  multiannual  low  and 
amongst the lowest rates in the EU. 

Graph 1.4: 

Employment, wages and unemployment rate 

However,  part  of  the  apparent  increase  in  the 
contribution of total factor productivity to potential 
growth  may  be  explained  by  under-reporting  of 
migrant workers in official statistics. 

Given  the  negative  demographic  outlook,  the 
integration  of  migrant  workers  becomes  an 
increasingly  important  challenge.  The  working-
age population is projected to continue declining in 
the  decades  to  come.  Future growth potential  will 
be 
the  successful 
integration  of  foreign  workers,  who  already  play 
an  important  role.  Full  utilisation  of  migrants’ 
skills  and  competences  is  an  important  step  for 
future growth (Section 3.3). 

increasingly  dependent  on 

the 

increases 

incentives 

Capital  accumulation  could  contribute more  to 
potential  growth.  Difficult  access  to  skilled 
labour 
to  gradually 
replacing  workers  by  machines  in  certain  tasks  to 
improve labour productivity. New investment may 
also  be  needed 
towards  a  cleaner 
economy,  in  particular  in  the  energy  sector.  The 
investment  outlook 
remains  dependent  on 
perceptions of macroeconomic stability and quality 
of institutions, including the policy and regulatory 
environment (Section 3.4).  

to  move 

Graph 1.3: 

Labour productivity in market services 

Source: Eurostat 

Source: Eurostat 

There  is  room  for  faster  growth  of  labour 
productivity.  Starting  from  very 
levels 
compared  to  the  EU  average,  labour  productivity 
in  Poland  has  been  growing  at  one  of  the  fastest 
rates  in  the  EU  for  the  last  several  years.  This 

low 

Firms  still  face  significant  labour  shortages. 
While the share of firms indicating lack of skilled 
labour as a factor hampering their activity declined 
in 2019 from the highs reached in late 2018, it still 
remains  very  high  in  historical  terms.  Even  with 
the  expected  slowdown  in  economic  activity, 

8 

95100105110115120125130101112131415161718Index (2010=100)EU28CZDEPLSKLT-202468101214Q114Q315Q115Q316Q116Q317Q117Q318Q118Q319Q119Q3Employment growth (y-o-y)Nominal wage growth (y-o-y)Unemployment rate%   
     
1. Economic situation and outlook 

employers'  competition  for  talent  is  likely  to 
remain  strong  in  the  coming  years.  Employment 
rates  are  particularly  low  for  the  less  skilled  and 
for  women.  In  addition,  while  being  flexible 
overall,  some  institutional  settings  hinder  the 
functioning of the labour market (see Section 3.3). 

particular, solid income gains by households in the 
bottom half of the income distribution. The income 
of  the  poorest  40%  amounted  to  22.6%  of  the 
overall income in 2018, on the rise (from 22.1% in 
2017) and well above the EU average (21.1%) and 
the pre-crisis level in Poland (20.9% in 2009). 

from  outside 

the  EU  play  an 
Workers 
important  role  in  the  labour  market.  Existing 
data  enable  estimates  of  the  number  of  migrant 
workers to a limited extent only. This also implies 
that  employment  dynamics  based  on  the  labour 
force survey data do not account for changes in the 
foreign  workforce  in  Poland.  In  the  first  three 
quarters of 2019, the number of foreigners covered 
by  social  insurance  continued  to  rise,  although 
more slowly than in 2018. As of September 2019, 
over  4%  of  insured  were  foreigners.  In  2018,  for 
the  fourth  consecutive  year,  Poland  issued  the 
highest number of first residence permits for work-
related  reasons  in  the  EU.  During  2015-2018, 
Poland  accounted  for  more  than  half  of  such 
permits issued in the whole EU. The vast majority 
of these permits were for stays of below one year.  

Poverty and inequality 

Poverty continued to decline. The rate of people 
at  risk  of  poverty  or  social  exclusion  (AROPE) 
declined  from  19.5%  in  2017  to  18.9%  in  2018, 
well  below  the  EU  average  (21.9%),  especially 
driven by a decrease in severe material deprivation 
(from  5.9%  to  4.7%).  At  the  same  time,  the 
persistency  of  poverty,  which  measure 
the 
percentage  of  people  that  remained  at  risk  of 
poverty in at least two of the preceding three years, 
increased  slightly  (from  9.1%  to  10.5%).  Recent 
reforms focused on increasing social transfers, but 
social services remain underdeveloped, hampering 
effective social inclusion (see Section 3.3). 

Income  inequality  declined  further  in  2017 
before  stabilising  in  2018.  The  ratio  of  the  total 
income received by the 20% of the population with 
the highest incomes to that received by the 20% of 
the  population  with  the  lowest  income  (S80/S20 
income  quintile  share  ratio)  also  declined  in  2018 
to 4.25, below the EU average of 5.17. This placed 
Poland  in  the  middle  of  the  ranking  of  EU 
countries  in  terms  of  measured  inequality  levels 
(see also Graph 1.5). The improvement recorded in 
Poland  can  be  explained  by  a  combination  of 
in 
growth  of  employment  and  wages  and, 

Graph 1.5:  Gini coefficient of equivalised disposable 

income, 2008-2018 

*EU27, ex-Croatia due to unavailability of data. 
(1) SILC: Survey of Income and Living Conditions.  
(2) HBS: Household Budget Survey.  
(3) Data for year T refers to income situation in that year (as 
reported in EU-SILC survey carried in the year T+1 or HBS 
survey carried in year T). 
Source: Eurostat and Statistics Poland 

The  role  of  social  benefits 
in  reducing 
inequalities  likely  decreased  in  2019,  while 
progress  with  equality  of  opportunities 
is 
questionable.  The 
tax  and  benefit  system 
contributed to lowering income inequality in 2016-
2017,  in  particular  due  to  the  introduction  of  the 
partially means-tested child benefit, but changes to 
the  child  benefit  introduced  in  mid-2019  lowered 
its inequality-reducing impact (Myck et al., 2019). 
The additional pension lump-sum bonus paid to all 
pensioners  in  2019  strengthened  the  role  of 
pension  in  reducing  inequality.  At  the  same  time, 
future pensions, in relation to wages, are expected 
to  be  significantly  lower  than  the  ones  currently 
paid (see Section 3.1). Changes to the organisation 
of the school system introduced in 2017, whereby 
pupils  are  tracked  earlier  into  the  vocational  and 
general streams pose a challenge in ensuring equal 
opportunities, especially for children living in rural 
areas  (European  Commission,  2019b).  The  share 
of  pupils  in  non-public,  fee-paying  schools  has 

9 

2728293031323334350809101112131415161718EU* (SILC)PL (SILC)PL (HBS)   
 
1. Economic situation and outlook 

other  major  components  have  been  maintained. 
The primary income balance remained negative at 
around  3.7  of  GDP  in  2019,  while  the  surplus  in 
trade in services continued to rise to 4.7% of GDP 
in 2019 Q3.  

Graph 1.6: 

Index of concentration of goods exports, 2018 

Estimated country’s reliance on a limited vs. large number of 
products in total exports, ranging from 0 (perfect 
diversification) to 1 (export of a single product). Products are 
defined at 3-digit level of SITC, revision 3 classification (261 
products in total). 
Source: United Nations Conference on Trade and 
Development (UNCTAD) 

Poland's  negative  net  international  investment 
position  (NIIP)  continued  to  narrow  during 
2019. The NIIP was -51.3% of GDP at the end of 
the  third  quarter  of  2019,  compared  to  -69%  of 
GDP  in  2014.  Hence,  a  gradual  improvement  has 
continued since 2015 and even accelerated, mainly 
as a result of the accumulated stock of net foreign 
direct  investments,  which  has  stabilised  at  around 
36-37% of  GDP  since  2017.  The relative stability 
of  direct  investments  limits  the  risks  associated 
with a negative NIIP. In addition, the recent faster 
improvement  in  NIIP  was  associated  with  risk 
reduction:  the  NIIP  component  excluding  non-
defaultable  instruments  went  up  from  -19%  of 
GDP in mid-2018 to -14% of GDP in mid-2019. 

Inflation and monetary policy 

Wage  pressures  transmitted  into  higher  prices 
of services and a temporary food price hike led 
to an inflation spike in the second half of 2019. 

improvements, 

continued  to  rise.  Access  to  childcare  remains  a 
major  challenge.  Despite 
the 
enrolment  in  formal  childcare  (for  children  less 
than  3  years  old)  stood  at 10.9%  (EU:  35.1%).  In 
addition,  enrolment  in  early  childhood  education 
and  care  for  older  children  (from  3  years  to 
compulsory  school  age)  was  also  very  low  at 
59.4%,  below  the  EU  average  of  86.8%    (Section 
3.3).  Substantial  differences  to  healthcare  access 
also remain visible. 

External position 

Exports  increased  faster  than  global  demand. 
Poland  has  continued  to  gain  shares  in  global 
export  markets  for  both  goods  and  services.  The 
surplus  in  services  trade  has  continued  to  grow 
thanks to the solid performance in sectors such as 
transport,  computer,  information  services,  and 
other business services.  

limit 

High  diversification  of  exports  and  cost-
competitiveness  helped 
the  negative 
impact  of  weakening  global  trade.  Poland  is 
increasingly  integrated  into  global  value  chains, 
especially  in  the  manufacturing  sector.  In  2015, 
Poland  had  the  highest  share  of  domestic  value 
added  embodied  in  foreign manufacturing exports 
among  all  EU  Member  States (5).  Also,  a  long-
term  gradual  shift  towards  higher  value  added 
products continues. This is visible for instance in a 
faster  rise  in  the  unit  value  of  intermediate  and 
capital  goods  exports  than  in  Germany  (European 
Commission,  2019b).  At  the  same  time,  Poland 
remains cost-competitive and has a high degree of 
exports  diversification  relative  to  several  EU 
Member  States,  including  neighbouring  countries 
such  as  Slovakia  and  Czechia  (Graph  1.6).  This 
can  partly  explain  the  less  severe  impact  of 
negative trends in global trade and weaker growth 
in Germany, the key export destination of Poland.  

The  current  account  was  close  to  balance  in 
2019. The current account has fluctuated close to a 
balanced position since 2015. In 2019 there was a 
surplus of 0.6% of GDP, compared to the deficit of 
1%  in  2018  (based  on  12-month  moving  sums 
calculated  for  November  2019)..  The  balance  in 
trade of goods increased from -1% to 0.2% of GDP 
on  the  back  of  weakening  domestic  demand  and 
relatively  strong  export  performance.  Trends  in 

(5)  Based on OECD Trade in Value Added database. 

10 

00.10.20.30.4ITATPLHRPTNLLVFRBGDEBEESSEEEDKLUHUUKROLTCZFISISKIEMTELCYleast concentratedmostconcentrated                                                           
      
1. Economic situation and outlook 

The banking sector as a whole has remained in 
a good condition. The solid capital buffers, stable 
profitability  and  liquidity  and  sound  asset  quality 
of  Polish  banks  limit  risks  to  financial  stability. 
While  differences  between  banks  are  visible,  the 
sector's profitability remained stable and strong in 
2019.  The  uncertainty  concerning  the  remaining 
stock  of  foreign  currency-denominated  mortgage 
loans increased for banks after the European Court 
of Justice’s ruling in October 2019, which implied 
that 
foreign-currency  denominated  mortgages 
could require additional capital (see Section 3.2).  

The  housing  loan  market  is  expanding,  but 
currently it does not pose a significant systemic 
risk.  The  outstanding  stock  of  housing  loans  in 
relation  to  GDP  remains  one  of  the  lowest  in  the 
EU.  A  large  share  of  real  estate  transactions 
continues  to  be  paid  outright  rather  than  financed 
by mortgage loans, and such purchases may often 
be treated as investment given low deposit interest 
rates.  The  growth  in  the  value  of  housing  loans 
strengthened during 2019, to around 6.6%, mainly 
reflecting  a  weakening  of  the  zloty  exchange  rate 
relative  to  the  Swiss  franc,  a  currency  in  which 
some  23%  of  outstanding  loans  are  denominated. 
Mortgage  loans  in  zloty  have  been  rising  at  the 
steady pace of some 10-13% since 2015. Nearly all 
mortgages issued in Poland are subject to variable 
interest  rates,  which  could  place  substantial 
financial  pressure  to  households  in  the  event  of 
interest  rate  increases.  Nevertheless,  risks  are 
limited so far, as the share of new loans with high 
loan-to-value  has  been  reduced  and  the  share  of 
non-performing loans is limited (see Section 3.2).  

House prices continued to rise fast in 2019, but 
risks  of  overheating  are  limited.  According  to 
Statistics Poland data, prices of residential premises 
in  the  third  quarter  2019,  compared  to  the 
corresponding quarter of 2018, increased by 9.0% 
(of  which  on  the  primary  market  by  6.7%  and  on 
the  secondary  market  by  10.9%).  House  prices 
increased by around 6.5% annually (National Bank 
of  Poland  data)  in  the  secondary  market  in  the 
largest  cities  and  by  around  12%  if  the  index  is 
corrected  for  real  estate  quality  changes.  Despite 
dynamic  price  growth  in  recent  years,  there  is  no 
evidence  of  house  price  overvaluation.  In  2019, 
deflated house prices grew faster than real wages. 
However,  the  opposite  was  observed  for  several 
years  before  and,  hence,  real  estate  remains 
affordable  in  historical  and  EU-wide  comparison. 

in 

increased  gradually 

Inflation  measured  by  the  harmonised  index  of 
consumer  prices  (HICP)  rose  gradually  during 
2019,  with  divergent  trends  in  its  components. 
Unprocessed  food  price  inflation  spiked  in  the 
middle  of  the  year  to  above  10%.  Inflation 
pressures 
the  services 
sectors,  in  part  due  to  the  transmission  of  wage 
increases.  By  contrast,  energy  price  inflation 
declined  strongly  turning  negative  in  the  second 
half  of  2019  due  to  base  effects,  low  global  oil 
prices  and  administrative  controls  on  electricity 
prices for households. HICP inflation increased to 
2.1%  in  2019,  reaching  even  3.0%  in  December. 
Going forward, overall HICP inflation is expected 
to  temporarily  go  above  3%  in  early  2020  and  to 
subsequently  stay  close  to  2.5%  until  the  end  of 
2021.  Services  price  inflation  is  projected  to 
continue  rising  at  a  fast  pace,  given  wage 
pressures. 

The  National  Bank  of  Poland  has  kept  interest 
rates unchanged since March 2015. The forward 
guidance  from 
the  Monetary  Policy  Council 
indicates  unchanged  interest  rates  in  2020  and 
indicate  a 
beyond.  The  Council  statements 
prevailing view that the acceleration of inflation in 
the  second  half  of  2019  was  largely  driven  by 
temporary factors  beyond  the  control of  monetary 
policy  (especially  supply-side  induced  food  price 
hikes),  while  slowing  economic  growth  should 
help  keep  inflation  close  to  the  2.5%  target  over 
the coming quarters. The November 2019 inflation 
projection of the NBP expected inflation to peak at 
around  3.5%  in  early  2020,  subsequently  fall  to 
2.5% by mid-2020 and stay around this level until 
the end of 2021. This is broadly similar to the path 
implied by the Commission’s Winter forecast (see 
above). The Polish zloty exchange rate against the 
main currencies was stable in 2019. After a slight 
weakening  in  August  and  September  2019  (in 
particular  against  Swiss  franc),  the  zloty  returned 
to the levels seen in the first half of the year. 

Indebtedness, financial sector and markets 

indebtedness  remained 

low.  Polish 
Private 
households  and  non-financial  companies  are  still 
among the least indebted in the EU, with total debt 
stock  equivalent  to  about  three  quarters  of  GDP. 
Loans  to  the  private  sector  increased  by  5%  per 
year in the fourth quarter of 2019, in line with the 
long-term trend and nominal GDP growth. 

11 

1. Economic situation and outlook 

In  2018,  the  average  price  of  a  100  m2  dwelling 
was  equivalent  to  9.8  years  of  average  disposable 
income per capita, close to the EU average.  

Stock  market  performance  remained  subdued. 
The  main  index  of  the  Warsaw  Stock  Exchange 
stayed broadly stable during the first half of 2019, 
before declining  in  the  third quarter. During  2019 
as a whole the index declined by 6.4%, in contrast 
to the Stoxx Europe 600 Index’s 23% gain in 2019. 
The  Warsaw  Stock  Exchange  performance  was 
also weaker than in other markets in the region.  

likely to arise in certain areas, such as healthcare, 
human  capital  and  infrastructure  investment,  and 
areas  impacted  by  future  steps  to  support  the 
decarbonisation of the economy. 

The  general  government  debt  continues  to  fall. 
Fast  nominal  economic  growth  and  the  low 
headline  deficit  helped  to  lower  the  general 
government  debt-to-GDP  ratio  from  49%  at  the 
end  of  2018  to  an  estimated  47%  at  the  end  of 
2019. A further decline in public debt is projected, 
down to around 44% of GDP at the end of 2021. 

Public finances 

Progress towards sustainable development 

Poland made overall a significant progress with 
regard  to  the  United  Nations’  Sustainable 
Development Goals (SDGs). In the environmental 
dimension,  Poland’s  energy-intensive  economy 
faces various challenges to move closer to climate 
neutrality, as reflected long and increasing distance 
from  targets  of  SDG  13.  While  Poland  performs 
above 
import 
the  EU  average  on  energy 
dependency (despite an increase in short and long-
term),  primary  and  final  energy  consumptions  are 
above the EU average and are moving away from 
sustainable  development  objectives.  Poland  is 
lagging  behind 
the  EU  average  concerning 
affordable  and  clean  energy  (SDG  7).  Improving 
air quality in Polish cities remains a priority (SDG 
11).  In  turn,  concerning  the  labour  market  and 
social  dimension,  Poland has  improved  in  various 
areas and performs relatively well, however further 
steps 
sustainable 
to 
development  objectives.  Poland  stands  above  the 
EU  average  in  terms  of  indicators  related  to 
poverty  measures  (SDG  1),  quality  of  education 
(SDG 4) and reduced inequalities (SDG 10). Good 
health and well-being showed some progress over 
the long term. In turn, Poland is lagging behind the 
EU  average  in  SDG  5  (gender  equality)  both  in 
terms  of  education  and  employment,  and  the 
gender  pay  and  employment  gaps  are  hardly 
improving. 

are  needed 

achieve 

the 

Fiscal  expansion  in  2019  led  to  an  increased 
long-trend 
headline  deficit,  breaking 
declining trend. Fast economic growth with rising 
wages  and  the  ongoing  shift  of  employment 
towards  contracts  subject  to higher social  security 
the  strong  growth  of 
contributions  explain 
revenues  from  personal  and  corporate  income  tax 
and social security contributions in 2019. Personal 
income  tax  (PIT)  revenues  declined  at  the  end  of 
the  year  due  to  the  lowering  of  the  tax  burden 
(Section  3.1).  The  dynamics  of 
tax 
revenues  slowed  visibly  (Section  3.1).  The  key 
component  of  the  fiscal  stimulus  in  2019  was  on 
the  expenditure  side,  in  particular  new  social 
transfers.  A  combination  of  these  factors  explains 
an  increase  in  the  headline  fiscal  deficit  to  an 
estimated 1% of GDP, up from 0.2% in 2018. 

indirect 

The structural deficit also increased in 2019 and 
fiscal challenges are visible in the medium term. 
When  adjusting  for  the  effects  of  the  economic 
cycle  and  excluding  one-off  and 
temporary 
measures,  the  fiscal  balance  improved  until  2018 
though  much  more  gradually  than  in  the  case  of 
the headline balance. In 2018, Poland was close to 
reaching  the  medium-term  objective  of  -1%  of 
GDP (6).  According  to  the  Commission’s  Autumn 
2019 forecast, the structural balance is projected to 
have declined in 2019 and is not expected to reach 
the  medium-term  objective  until  2021.  The  rising 
share  of  public  expenditure  that  is  difficult  to 
adjust creates challenges in the medium- and long-
term  perspective  given  the  expenditure  pressures 

(6)  A medium-term budgetary objective is a budget deficit (or 
surplus)  target  defined  in  structural  terms.  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 

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. 
(4) Defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash 
benefits, expressed as a percentage of gross wage earnings. 
Source:  Eurostat and ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for 
real GDP and HICP, Autumn forecast 2019 otherwise) 

13 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)5.53.52.94.95.14.03.33.3Potential growth (y-o-y)3.53.93.13.33.73.93.94.0Private consumption (y-o-y)4.13.42.44.54.2...Public consumption (y-o-y)3.91.72.82.93.6...Gross fixed capital formation (y-o-y)12.32.51.54.08.9...Exports of goods and services (y-o-y)10.05.17.39.57.0...Imports of goods and services (y-o-y) 12.03.06.49.87.6...Contribution to GDP growth:Domestic demand (y-o-y)5.72.92.23.84.7...Inventories (y-o-y)0.7-0.30.10.80.4...Net exports (y-o-y)-1.00.80.50.30.0...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.10.30.3-0.1-0.1-0.2-0.10.0Capital accumulation (y-o-y)1.21.81.41.21.31.51.41.4Total factor productivity (y-o-y)2.21.71.42.22.52.62.62.6Output gap-1.41.2-1.11.02.42.51.91.2Unemployment rate15.18.98.34.93.93.53.63.5GDP deflator (y-o-y)3.23.00.51.91.12.93.13.1Harmonised index of consumer prices (HICP, y-o-y)2.43.70.01.61.22.12.72.5Nominal compensation per employee (y-o-y)3.15.92.65.88.28.18.27.6Labour productivity (real, person employed, y-o-y)2.63.01.93.64.6...Unit labour costs (ULC, whole economy, y-o-y)0.42.80.72.23.34.04.64.1Real unit labour costs (y-o-y)-2.7-0.20.20.32.11.11.41.0Real effective exchange rate (ULC, y-o-y)3.0-1.6-1.34.41.9-0.12.72.1Real effective exchange rate (HICP, y-o-y)3.6-1.2-1.22.81.0-0.90.90.6Net savings rate of households (net saving as percentage of net disposable income)2.20.70.20.3-1.0...Private credit flow, consolidated (% of GDP)6.56.84.12.93.4...Private sector debt, consolidated (% of GDP)46.370.378.576.576.1...of which household debt, consolidated (% of GDP)17.333.035.834.935.1...of which non-financial corporate debt, consolidated (% of GDP)29.037.342.741.640.9...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)3.95.75.34.74.6...Corporations, net lending (+) or net borrowing (-) (% of GDP)1.05.17.25.03.43.02.52.8Corporations, gross operating surplus (% of GDP)22.423.825.123.823.422.922.222.4Households, net lending (+) or net borrowing (-) (% of GDP)-1.8-2.7-2.5-2.5-2.3-0.6-0.9-0.4Deflated house price index (y-o-y).-5.51.01.85.0...Residential investment (% of GDP)3.43.32.72.22.0...Current account balance (% of GDP), balance of payments-4.6-5.0-1.10.1-1.0-0.9-0.9-0.6Trade balance (% of GDP), balance of payments-2.3-2.12.64.13.4...Terms of trade of goods and services (y-o-y)1.5-0.51.40.2-1.10.90.80.9Capital account balance (% of GDP)0.61.72.01.32.1...Net international investment position (% of GDP)-44.2-61.2-65.4-61.2-55.8...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-10.4-24.0-25.6-20.7-16.9...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)36.851.958.453.050.6...Export performance vs. advanced countries (% change over 5 years)69.237.011.124.423.2...Export market share, goods and services (y-o-y)8.90.34.95.94.03.51.31.1Net FDI flows (% of GDP)-3.5-1.9-1.6-1.4-2.5...General government balance (% of GDP)-3.6-5.4-3.2-1.5-0.2-1.0-0.2-0.9Structural budget balance (% of GDP)..-2.6-1.9-1.4-2.2-1.9-1.5General government gross debt (% of GDP)45.651.352.950.648.947.445.544.3Tax-to-GDP ratio (%) (3)34.233.033.435.036.136.037.236.6Tax rate for a single person earning the average wage (%) (4)28.224.624.925.125.2...Tax rate for a single person earning 50% of the average wage (%) (4)25.622.423.123.523.7...forecast 
 
 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

all 

42% 

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).  Substantial  progress  was  achieved  in  the 
fields  of  product  markets,  with  ambitious  reforms 
of  access  to  professional  services,  and  of  public 
finance,  with  the  introduction  and  successful 
functioning of the expenditure rule. Some progress 
was  achieved  concerning  labour  market  reforms 
thanks to the implementation of measures targeted 
at  increasing  labour  market  participation  and 
addressing  labour  market  segmentation.  Also, 
some  progress  was  observed  in  research  and 
innovation  thanks  to  tax  reliefs  and  measures  to 
facilitate the financing of R&D activities. Limited 
progress  was  observed  in  a  number  of  areas, 
including life-long learning, enforcing contracts or 
removing  obstacles  to  infrastructure  investment. 
No  progress  was  achieved  in  reforming  special 
pension  regimes,  in  establishing  an  independent 
fiscal  council,  limiting  the  use  of  reduced  value 
added  tax  (VAT)  rates,  as  well  as  improving  the 
regulatory  environment  by  safeguarding  effective 
consultations in the legislative process. 

in 

lowering 

In  the  area  of  public  finance  Poland  achieved 
noticeable  progress  mainly 
its 
headline  deficit  and  improving  tax  collection. 
Poland corrected its fiscal deficit and consequently 
the excessive deficit procedure was closed in 2015. 
Tax  compliance  has  markedly  improved  in  recent 
years. The recently implemented new VAT matrix 
has  limited  the  complexity  of  the  system  of 
reduced  VAT  rates.  However,  it  did  not  address 
the  issue  of  the  high  foregone  revenue  resulting 
from  the  extensive  use  of  reduced  VAT  rates. 
Poland continued the reform of the budget system. 
At the same time, it remains the only EU member 
state  without  a  fully-fledged  fiscal  council.  In 
addition,  recent  expenditure  was  implemented  in 
manner  that  circumvented  the  expenditure  rule. 
The  reversal  of  the  2012  reform  to  gradually 
increase  the  statutory  pension  age  will  reduce  the 
adequacy of pensions in the future and is a risk for 
the  sustainability  of  public  finances.  Some  of  the 
limited  measures 
reform  special  pension 
arrangements  for  the  uniformed  services  were 
reversed  in  2019.  No  effective  actions  to  reform 
the  special  pension  arrangements  for  miners  and 
farmers have been undertaken. 

to 

Graph 2.1:  Overall multiannual implementation of 2011-

2019 CSRs to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact 
** 2011 annual assessment: Different CSR assessment 
categories 
** The multiannual CSR assessment looks at the 
implementation until 2020 Country Report since the CSRs 
were first adopted. 
Source: European Commission 

labour  market 

Although 
participation 
increased  in  recent  years  it  remains,  however, 
below  the  EU  average  reflecting  insufficient 
policy measures. The low activity rate of specific 
groups such as older workers and women persists. 
Access  to  early  childhood  education  and  care  has 
improved,  but  still  constitutes  a  major  challenge 
for  children  below  3.  The  provision  of  long-term 
care  services  remain  very limited  as  well.  Several 
actions adopted during 2015-2017 helped to reduce 
labour market segmentation, but the share of open-
ended contracts in total employment remains low. 
The  intentions  of  the  recent  reforms  to  improve 
labour  market  relevance  of  vocational  education 
and 
the  quality  of  higher  education  are 
commendable, however, their scope is limited and 
the  full  effects  remain  to  be  seen.  The  Integrated 
Skills  Strategy  is  currently  being  prepared,  but  so 
far  coordination  of  adult  learning  policy  remains 
inefficient. 

the 

Poland  has  achieved  mixed  results  as  regards 
enhancing 
the 
economy  and  the  regulatory  environment.  The 
country has taken measures to support its research 
through  a  comprehensive  Higher 
institutions 

innovative  capacity  of 

14 

20%32%42%3%3%No ProgressLimited ProgressSome ProgressSubstantial ProgressFull Implementation 
 
 
2. Progress with country-specific recommendations 

fund 

have  been  taken  in  innovation  (via  dedicated 
measures  of  the  National  Strategy  of  Regional 
Development 2030), transport (via the Strategy of 
Sustainable Transport Development until 2030 and 
dedicated  measures  of  the  National  Strategy  of 
Regional Development 2030), digital infrastructure 
(a  new  broadband 
set  up),  energy 
infrastructure  transboundary  gas  and  electricity 
infrastructure 
(via 
dedicated  measures  of  the  National  Strategy  of 
Regional  Development  2030)  and  cleaner  energy 
(e.g. an auction schedule of 2.5 GW onshore wind 
in  total  and  new  subsidy  system  for  rooftop 
photovoltaics).  No  progress  was  observed  in 
improving  the  regulatory  environment,  as  some 
crucial  laws  are  still  being  fast  tracked  with 
insufficient social partner and public consultations. 

development),  healthcare 

and 

implement 

Upon Member State’s request, the Commission 
can  provide  tailor-made  expertise  via  the 
Structural Reform Support Programme to help 
design 
growth-enhancing 
reforms.  Since  2017,  such  support  has  been 
provided to Poland for 34 projects. In 2019 several 
projects  have  been  delivered  on  the  ground.  The 
Commission, for example, provided the authorities 
with  support  to  develop  a  plan  to  improve 
inclusive  education,  set  up  policies  for  energy 
poverty  reduction  that  will  contribute  to  the 
reduction of carbon emissions, and draft a Capital 
Market  Development  Strategy.  In  2019,  work 
started 
for 
estimating  excise  and  corporate  income  tax  gaps 
and for the digitalisation of construction planning. 

developing  methodologies 

on 

Education  reform  that  started  in  2018.  Some 
measures were taken with respect to strengthening 
science-business  links,  including  the  creation  of 
the  Łukasiewicz  Network,  the  introduction  of  the 
industrial doctorates programmes and the inclusion 
of  external  stakeholders  in  university  councils.  In 
2016-2019,  Poland  has  diversified  and  increased 
the  effectiveness  of  R&D  tax  incentives  by 
increasing  the  deducible  amounts.  Concerning  the 
regulatory  environment,  the  introduction  of  the 
2013-2015  reform  allowed  substantial  progress  to 
liberalisation  of 
be  made 
to 
contract 
services. 
professional 
enforcement,  most  of  the  provisions  of  the  late 
payments  regulation  enter  into  force  in 2020.  The 
new  Building  Code,  simplifying  the  requirements 
for construction permits, was adopted by the Sejm. 
Some  measures  have  been  taken  to  improve  the 
legislative  process  for  the  draft  laws  put  forward 
by  the  government,  but  the  insufficient  scope  of 
the  public  consultations  has  not  been  addressed 
(see Section 3.4). 

the  access 

Regarding 

in 

the 

in  2019,  but 

Overall, Poland has made limited (7) progress in 
addressing the 2019 CSRs. Limited progress was 
achieved  in  addressing  the  recommendation  on 
public  finance.  The  reform  of  the  budgetary 
process  continued 
full 
implementation is still to materialise. There was no 
progress in increasing the effective retirement age 
and  reforming  the  preferential  pension  schemes. 
Limited  progress  was  observed  in  increasing 
labour  force  participation,  as  access  to  childcare 
continued  to  improve,  but  no  major  actions  were 
taken  to  remove  remaining  obstacles  to  more 
permanent types of employment. Limited progress 
was  also  achieved  regarding 
the  quality  of 
education and skills as the higher education reform 
progresses,  but  the  school  system  reorganisation 
has  led  to  worse  working  and  learning  conditions 
in many schools. With a launch of the Łukasiewicz 
to  support 
Research  Network  and  measures 
research institutions through the implementation of 
the  Act  on  Higher  Education  some  progress  was 
registered 
the 
innovative  capacity  of  the  economy.  Overall, 
limited  progress  was  observed  in  strengthening 
investment-related  policies.  Various  measures 

the  field  of  strengthening 

in 

(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. 

15 

 
                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

Assessment of implementation of 2019 country-specific recommendations 

16 

  Poland Overall assessment of progress with 2019 CSRs:  Limited CSR 1:  Ensure that the nominal growth rate of net primary government expenditure does not exceed 4.4% in 2020, corresponding to an annual structural adjustment of 0.6% of GDP. Take further steps to improve the efficiency of public spending, including by improving the budgetary process. Limited progress*  Limited progress in the reform of the budgetary system. The full implementation is still to materialise.  CSR 2: Ensure the adequacy of future pension benefits and the sustainability 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 long-term care, and remove remaining obstacles to more permanent types of employment. Foster quality education and skills relevant to the labour market, especially through adult learning. Limited progress  No progress in increasing the effective retirement age and in reforming the preferential pension schemes.  Limited progress in increasing labour force participation, as access to childcare continued to improve.  Limited progress regarding the quality of education and skills due to the reorganisation of the school system.  CSR 3: Strengthen the innovative capacity of the economy, including by supporting research institutions and their closer collaboration with business. Focus investment-related economic policy on innovation, transport, notably on its sustainability, digital and energy infrastructure, healthcare and cleaner energy, taking into account regional disparities. Improve the regulatory environment, in particular by strengthening the role of consultations of social partners and public consultations in the legislative process. Limited progress*  Some progress in strengthening the innovative capacity of the economy with progressing implementation of the Act on Higher Education and launch of the Łukasiewicz Network  Overall limited progress in focusing investment-related economic policy on innovation with various measures in innovation, transport, digital and energy infrastructure, healthcare and cleaner energy.  No progress in improve the regulatory environment by strengthening the role of consultations of social partners and public consultations in the legislative process. * This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact. * The assessment of CSR 3 does not take into account the contribution of the EU 2021-2027 cohesion policy funds. The regulatory framework underpinning the programming of the 2021-2027 EU cohesion policy funds has not yet been adopted by the co-legislators, pending inter alia an agreement on the multiannual financial framework.   
 
 
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes to address structural challenges and to foster growth 
and competitiveness in Poland 

Poland is the country benefiting most from EU support in absolute numbers. The financial allocation 
from  the  EU  Cohesion  policy  funds  (1)  for  Poland  amounts  to  €90.6  billion  in  the  current  Multiannual 
Financial Framework, equivalent to around 2.7% of the GDP annually. By the end of 2019, some €84 billion 
(around  93%  of  the  total  amount  planned)  were  allocated  to  specific  projects  (2),  while  €37  billion  were 
reported by beneficiaries as spent, showing a level of project implementation in line with the EU average. 

EU Cohesion policy funding play a significant role in addressing structural challenges in Poland. The 
Cohesion  Policy  programmes  in  Poland  have  allocated  EU  funding  of  €18  billion  for  smart  growth  (i.e. 
investment  in  knowledge  and  innovation),  €40  billion  for  sustainable  growth  and  transport,  which 
encompasses  investments  in  a  more  resource  efficient,  greener  and  more  competitive  economy  and  €16 
billion  for  inclusive  growth  (i.e.  investments  in  high-employment  economy  and  social  and  territorial 
cohesion).  In  2019  following  a  performance  review  (3)  €5.4  billion  have  been  made  available  within 
performing priorities in Poland. 

EU  Cohesion  policy  funding  contributes  to  major  transformations  of  the  Polish  economy.  The 
European  Regional  Development  Fund,  the  Cohesion  Fund  and  the  European  Social  Fund  are  promoting 
growth  and  employment  via  investments.  By  the  end  of  2018,  482  km  of  roads  belonging  to  the  Trans-
European  Transport  Networks  (TEN-T)  were  built.  Over  10,000  enterprises,  including  278  start-ups, 
received support. Investments contributed to the estimated annual reduction of greenhouse gas emissions by 
over 100,000 tons of CO2 and over 120,000 people gained access to improved wastewater treatment. Almost 
800,000  unemployed  and  inactive  people  were  supported  with  activation  measures  and  nearly  70,000 
students  participated  in  vocational  traineeships  in  companies.  Over  44,000  new  places  in  childcare  and 
preschools were created and more than 200,000 people at risk of poverty or social exclusion benefitted from 
social or healthcare services. 

Agricultural and fisheries funds and other EU programmes also contribute to addressing investment 
needs. The European Agricultural Fund for Rural Development makes available in total €13.6 billion and 
the  European  Maritime  and  Fisheries  Fund  in  total  €710  million  (including  the  national  co-financing  for 
both).  Poland  benefits  also  from  other  EU  programmes,  such  as  the  Connecting  Europe  Facility,  which 
allocated EU funding of €3.9 billion to specific projects related on strategic transport networks and Horizon 
2020,  which  allocated  EU  funding  of  €478  million  (including  supporting  250  SMEs  with  about  €120 
million). 

EU  funding  contributes  to  mobilisation  of  important  private  investment.  By  the  end  of  2018, 
programmes  supported  by  the  European  Structural  and  Investment  Funds (4)  supported  programmes  alone 
mobilised additional capital by committing about €3.7 billion in the form of loans, guarantees and equity (5), 
which is 4.6% of all decided allocations of the European Structural and Investment Funds. 

EU  funds  already  invest  substantial  amounts  on  actions  in  line  with  the  Sustainable  Development 
Goals (SDGs). In Poland European Structural and Investment Funds support 13 out the 17 SDGs and up to 
95% of the expenditure is contributing to those.  

(1)  The  European  Regional  Development  Fund,  Cohesion  Fund,  European  Social  Fund,  Youth  Employment  Initiative 

(YEI), including national co-financing. 

(2)  https://cohesiondata.ec.europa.eu/countries/PL 
(3)  The  performance  review  is  regulated  by  Article  22  of  the  Regulation  (EU) No  1303/2013,  whereby 5-7%  of  overall 
resources  allocated  are  released  to  performing  priority  axes  of  the  operational  programmes,  the  amount  includes 
national co-financing.  

(4)  The  European  Regional  Development  Fund, Cohesion  Fund,  European Social  Fund,  European  Agricultural Fund for 

Rural Development and European Maritime and Fisheries Fund. 

(5)  Member  States’  reporting  on  financial  instruments  based  on  Article  46  of  Regulation  No  1303/2013,  cut-off  date 

31/12/2018. 

17 

 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

Tax system 

Tax  burden  in  Poland  continued  raising,  yet  it 
remained  lower  than  in  the  EU.  At  35.2%,  the 
2018  tax-to-GDP  ratio  in  Poland  was  higher  than 
34.1% observed in 2017. Still, it was below the EU 
average  of  39.2%.  This  difference  is  explained 
mainly by labour taxation.  

The gradual decline in the nominal fiscal deficit 
reversed  in  2019.  Poland  was  the  only  EU 
Member State that weathered the financial crisis of 
2008-2010 without a recession. This came at a cost 
of, inter alia, a high increase in the headline fiscal 
deficit.  Since  then,  between  2010  and  2018,  the 
country  has  carried  out  a  substantial  fiscal 
consolidation,  cutting 
its  deficit  by  over  7 
percentage  points  and  bringing  its  public  finances 
close to balance in 2018. This trend is estimated to 
have reversed in 2019, due to a set of new tax and 
social  policies  reducing  direct  tax  income  and 
increasing social spending (Graph 3.1.1). 

Graph 3.1.1:  General government revenue and 

expenditure change, fiscal deficit, 2010-2021 

2019-2021 numbers are based on the Autumn 2019 
economic forecast by the European Commission. For 
information on technical assumptions and uncertainties 
underlying the forecast, see European Commission (2019c). 
Source: European Commission 

Public expenditure is likely to increase. The ratio 
of  expenditure  to  GDP  has  constantly  declined 
over  recent  years,  from  44%  in  2011  to  41%  in 
2017. It grew slightly in 2018. Social spending was 
the  biggest  expenditure  item  that  –  as  a  share  of 
GDP  –  grew  from  some  14%  in  2011  to  15%  in 

2018, following the implementation of new social 
policies. It is estimated to have further increased in 
2019,  reflecting  the  removal  of  means  testing  in 
the  universal  child  allowance  scheme  and  the 
payment of an additional benefit to pensioners. On 
top  of  this,  the  wage  bill  of  a  part  of  public 
administration which had been frozen for a number 
of  years  until  2015  has  since  gradually  increased, 
with  a  significant  rise  in  2019  and,  especially, 
2020.  Also  teachers  –  representing  close  to  one 
fifth of the general government wage bill – will see 
their  remuneration  gradually  rise  between  2018 
and 2020. These developments, difficult to reverse, 
will  raise  the  ratio  of  public  spending  to  GDP  to 
some 42% in the near future. 

Poland  continued  its  efforts  to  increase  tax 
compliance  and  to  combat  fraud.  In  2019,  the 
split  payment  scheme  became  compulsory  for 
some types of transactions covering certain fraud-
prone goods and services, including the electronic, 
coal,  steel  and  building  industries.  In  addition,  a 
new  tool,  the  ‘white  list  of  taxpayers’,  was  put  in 
place  to  enforce  verification  of  potential  business 
partners and to diminish the risk of being involved 
in  fraudulent  transactions.  These  changes  were 
complemented  by  the  introduction  in  2020  of 
mandatory  online  cash 
for  certain 
taxpayers.  Moreover,  to  enforce  existing  and 
newly  introduced  tax  requirements,  a  series  of 
fines  were  implemented.  In  the  area  of  the 
corporate  income  tax,  several  changes  to  increase 
compliance  were 
an 
automatic exchange of information on cross-border 
tax schemes. 

introduced, 

including 

registers 

to 

tax  reforms  contributed 

Maintaining  the  recent  remarkable  pace  of 
revenue  growth  will  be  challenging.  In  recent 
years, public revenue growth was reaching double-
digit values. The strong economic environment but 
also  several 
this 
(European  Commission,  2019b).  Tax  collection 
has  systematically  improved,  initially  for  value 
added  tax  (VAT)  and  then  for  direct  taxes.  For 
instance,  the  2019  study on  the  VAT  gap,  i.e.  the 
difference  between  VAT  revenue  expected  and 
actually  collected,  showed  that  in  2017  Poland 
reduced its VAT gap by around one third, to below 
14% (CASE and IAS, 2019), approaching the EU 
average  of  11%.  This  may  indicate  that  further 

18 

012345678-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.5201020122014201620182020Revenue change (positive value lowers the deficit)Expenditure change (negative value lowers the deficit)Headline fiscal deficit (rhs)forecastp.p. GDP%GDP 
 
  
 
3.1. Public finances and taxation 

to 

includes  two  tax  rates  of  17%  and  32%.  In  most 
common situation, employed taxpayers are entitled 
to deduct one of four lump sums of tax-deductible 
costs.  They  can  also  benefit  from  a  tax-free 
allowance that declines as their revenue increases. 
High-income  earners  have  no  right 
this 
allowance,  while  since  2019  a  special  levy  of  4% 
applies  to  those  whose  taxable  income  is  over  1 
million  złoty.  Since  2019,  young  taxpayers  enjoy 
the right to a special exemption that ends abruptly 
when they reach 26 years of age. On top, some 0.6 
million  self-employed  use  their  right  to  pay  a  flat 
PIT rate of 19%, while farmers, in general, do not 
pay PIT. Some other solutions exist also in specific 
cases, such as the right to pay a flat tax amount set 
by the tax authorities independently of the income 
level.  

tax  wedge 

The  labour  tax  wedge  depends  strongly  on  the 
type  of  labour  contract.  In  2018,  the  labour  tax 
wedge  in  Poland  was  slightly  lower  than  the 
OECD  average  (OECD,  2019e),  with 
lower 
differences  between  low  and  high  income  earners 
than in the OECD. Considering the design of PIT, 
is  driven  by  social  security 
the 
contributions,  particularly  at  the  lower  end  of 
income  distribution.  In  Poland,  the  share  of  civil, 
i.e. non-standard, labour contracts is high. In 2018, 
some 1.1 million people concluded a civil contract 
without  having  a  standard 
labour  contract 
elsewhere  (Statistics  Poland,  2019b).  More  than 
90%  of  those  people  worked  on  the  ‘mandate 
contract’,  which  offers  the  possibility  not  to  pay 
social  security  contributions  for  revenue  higher 
than  the  minimum  wage.  The  remainder,  working 
on  a  ‘contract  of  specified  work’  did  not  need  to 
pay  social  security  contributions.  Simultaneously, 
self-employed  workers  benefit  from  a  significant 
discretion  in  determining  the  level  of  their  social 
security contributions.  This  is  likely  to  reduce  the 
adequacy of future pensions. 

to 

improve 

Several  measures  aimed 
the 
collection  of  social  security  contributions.  In 
2018, the payment of contributions was simplified 
and  the  collection  of  unpaid  contributions  was 
strengthened. In addition, the authorities have now 
more  tools  and  powers  to  control  social  security 
expenditure,  for  instance  for  sickness  allowances. 
However, these changes did not target the issue of 
differentiation in terms of contributions. 

large collection gains are less likely, as recent tax 
revenue  developments  suggest  (Graph  3.1.1).  In 
view of expected economic slowdown (Section 1), 
the  strong  procyclicality  of  VAT  revenue  in 
Poland  is  another  risk  factor  weighing  on  the 
medium-term  prospect  for  VAT  revenue  growth 
(European Commission, 2019b). 

Graph 3.1.2:  Tax revenue dynamics 

12-month moving average percentage change. Data show 
result for last month of 12-month period. Data on cash basis. 
Source: Ministry of Finance 

was 

implemented 

Measures  aimed  at  reducing  direct  taxes  will 
likely reduce revenue. In 2019, Poland decreased 
the  corporate  income  tax  (CIT)  rate for  small and 
medium enterprises (SMEs) and start-ups. In 2020, 
this  was  followed  by  a  significant  increase  in  an 
annual  turnover  threshold  to  qualify  as  a  ‘small’ 
taxpayer.  In  addition,  a  tax  incentive  to  support 
innovation 
(European 
Commission,  2019b).  Overall,  these  reforms  have 
a limited budgetary impact, while aiming to boost 
activity  and 
recently 
implemented  changes  to  the  PIT  come  at  a  high 
cost.  With  a  stated  objective  to  reduce  the  tax 
wedge,  in  2019,  the  first  PIT  rate  was  lowered 
from  18%  to  17%  and  tax-deductible  costs  were 
raised.  In  addition,  a  special  PIT  exemption  for 
introduced.  The  above 
young 
changes  will  have  a  negative  budgetary  impact  of 
some  0.5%  of  GDP  yearly.  It  will  be  only 
marginally  compensated  by  an  introduction  of  a 
special levy on high-income earners. 

taxpayers  was 

innovation. 

turn, 

In 

Labour  taxation  complexity  has 
increased. 
Following  recent  changes,  the  default  PIT  system 

19 

0%5%10%15%20%25%Jan 17Jul 17Jan 18Jul 18Jan 19Jul 19% y-o-yVATExciseCITPIT 
  
3.1. Public finances and taxation 

industries. 

for  energy-intensive 

instance 
In 
addition, in 2019 the excise duties on energy were 
lowered  and  energy  prices  administratively 
controlled,  with  the  state  compensating  energy 
producers for potential losses. Conversely, a tax on 
plastic  bags  was  modified  to  more  effectively 
reduce their use. 

The outgoing parliament did not modernise the 
tax  framework  law.  The  reform  was  prepared 
over several years by a dedicated experts’ tax force 
and was  subject  to  extensive  public consultations. 
It  was  intended  to  set  a  new,  more  taxpayer 
oriented,  tax  framework.  It  is  currently  unclear  if 
and when work will be resumed.  

Fiscal framework 

and 

expenditure 

framework  has 

that  covers  nearly 

The  fiscal  framework  has  been  weakened  as 
some expenditure increases circumvent existing 
rules.  In  recent  years,  the  design  of  the  Polish 
fiscal 
remained  unchanged. 
Numerical fiscal rules, defining allowable level of 
deficit,  debt 
at  various 
government  levels,  appear  to  be  its  strongest 
element.  Particularly  the  stabilising  expenditure 
rule 
the  entire  general 
government  sector  fulfils  an  important  role  in 
preventing  policymakers  from  overspending.  The 
rule defines a nominal expenditure level of a set of 
entities  and  funds  specified  in  the  law.  Though, 
several new expenditure items (e.g. the exceptional 
additional  pension  payment,  development  of  local 
bus 
adults  with 
support 
disabilities)  are  channelled  through  newly  created 
funds  that  do  not  fall  under  the  rule.  As  a  result, 
their  implementation  did  not  trigger  savings  in 
other  areas.  While  this  practice  strongly  weakens 
its role, the rule remains a crucial tool limiting an 
unsustainable increase in expenditure. 

connections, 

for 

Work  is  continuing  to  reform  the  budget 
system.  Poland  –  supported  by  EU  funds  and  in 
line  with  Council  recommendations  –  is  carrying 
out a  reform  to  address  several  weaknesses  in  the 
budget  system.  They  include  amongst  others: 
complex  and  outdated  budget  classifications; 
suboptimal  recording  of  information;  lack  of 
genuine  medium-term  planning,  and  a  lack  of 
direct leverage of spending reviews on the budget 
process,  all  of  which  hamper  the  efficient  and 
effective  management  of 
funds  and  clear 
accountability  for  them  (European  Commission, 

Poland  took  action  to  reduce  tax  uncertainty 
and complexity in the area of VAT, but the cost 
of  compliance  remains  high.  In  2019, 
the 
compound  and  error-prone  system  of  assigning 
VAT  rates  to  products  and  services  was  reviewed 
and simplified and will become fully applicable in 
the  first  half  of  2020.  A  number  of  ambiguities 
were  removed.  This  has  thus  the  potential  to 
reduce uncertainty and time needed to comply with 
tax obligations. In recent years, as estimated by the 
World  Bank  (2019a),  this  time  has  increased 
significantly  for  a  model  company  operating  in 
Poland  and  has  remained  significantly  above  the 
levels  observed  in  the  region  (Graph  3.1.3) (8). 
Nevertheless, the reform did not tackle the issue of 
high  foregone  revenue  due  to  the  application  of 
reduced  rates,  estimated  to  be  one  of  the  third 
highest in the EU in 2017 (CASE and IAS, 2019). 

Graph 3.1.3:  Time to comply with tax obligations for a 

medium-sized company, 2010-2019 

Source: World Bank 

Environmental  taxes  are  hardly  used  as  a  tool 
to  drive  environmentally  friendly  behaviour. 
Poland  collects  relatively  high  environmental 
to  other  EU  countries 
taxes,  as  compared 
(European  Commission,  2019e).  Yet,  they  do  not 
appear  to  encourage  environmentally  oriented 
behaviour.  Most  of  environmental 
taxes  are 
energy-related,  but  there  are  exemptions,  for 

(8)  Using the same model company to estimate time needed to 
comply  with  tax  regulations  in  different  tax  systems  runs 
the risk of not fitting actual specific features of companies 
operating in a market. Thus this might lead to unwarranted 
conclusions  for  a  given  year.  This  risk  is  mitigated,  when 
looking at  medium- and long-term  trends that give a clear 
indication on how a tax system evolution affects taxpayers.  

20 

15020025030035040010111213141516171819hoursEUPLDECZSKHU 
  
                                                           
3.1. Public finances and taxation 

weighing  on  public  finances.  Given  an  expected 
fast population ageing and relatively low statutory 
and  effective 
in  Poland,  a 
retirement  age 
significant  drop  in  pension  adequacy  is  expected. 
According to a scenario analysed by the Economic 
Policy  Committee  and  the  European  Commission 
(European Commission, 2018b), after 2060 around 
one  third  of  pensioners  are  projected  to  receive 
only  the  minimum  pension  benefit  that  would,  in 
turn,  fall  to  some  20%  of  the  then  average  wage. 
This  might  be  unsustainable  from  the  social  point 
of view. Also,  with  the  share of  pensioners  in  the 
population of voters expected to increase strongly, 
this  might  lead  to  political  pressure  to  increase 
pensions  and  thus  increase  fiscal  sustainability 
risks. 

Graph 3.1.4:  Medium-term public debt scenarios 

Source: European Commission 

to 

transferred 

A  change  to  the  pension  system  proposed 
recently does not tackle adequacy risks. In 2019, 
the government adopted a draft bill to overhaul the 
pension system. The current second pension pillar 
is set to be phased out. Assets managed there will 
be 
the  state-managed  general 
pension  system  (first  pillar),  or  to  the  privately 
managed  third  pillar.  Those  who  opt  for  the 
transfer to the third pension pillar will be subject to 
a  conversion  fee  of  15%  of  asset  value.  In  turn, 
these  assets  will  become  private  property  that  is 
inheritable,  in  contrast  to  assets  transferred  to  the 
first  pension  pillar.  Under  national  rules,  the 
conversion  fee  will  support  the  public  revenue. 
The  measure,  however,  may  not  address  the  risk 
related  to  future  pension  adequacy  or  pension 
system sustainability. 

2019b;  Wiczewski,  2020).  The  ambitious  goal  of 
the  reform  is  to  achieve  a  coherent  budgeting 
process  that  goes  beyond  one-year  planning.  The 
reform  appears  important  in  light  of  the  limited 
room  for  additional  major  revenue  increases, 
longer-term 
and 
inefficiencies in spending management. Given the 
complexity  of  the  reform,  its  implementation  will 
take several years. Its final completion date has not 
been announced. 

expenditure 

pressures 

Debt sustainability analysis and fiscal risks 

In  the  short  term,  fiscal  sustainability  analysis 
indicates  low  risk.  Following  strong  nominal 
GDP growth and relatively low fiscal deficits over 
recent years, the general government debt-to-GDP 
ratio  continued  to  decline  to  around  an  estimated 
47%  in  2019.  Following  the  Commission  autumn 
2019  forecast,  it  is  expected  to  continue  to 
gradually decline to some 44% in 2021. The 2019 
(European 
debt 
sustainability 
Commission,  2020a)  points 
low  fiscal 
sustainability  risk  in  the  short  run.  The  structural 
balance  had  been  gradually  improving  until 2018, 
but  did  not  reach  the  MTO  of  -1%  of  GDP.  It  is 
estimated to have worsened in 2019, following the 
implementation of a social and tax package. 

analysis 

to  a 

to 

risks 

identified.  In 

fiscal 
No  major  medium-term 
sustainability  have  been 
the 
medium  run,  the  S1  fiscal  sustainability  indicator 
points  to  a  low  risk  given  that  the  debt-to-GDP 
ratio  is  expected  to  gradually  decline  in  the 
different scenarios (see Annex B and Graph 3.1.4). 
Consequently,  no  fiscal  adjustment  relative  to  the 
baseline  ‘no-policy  change’  fiscal  scenario  is 
warranted to keep the debt-to-GDP ratio below the 
reference value of 60% by 2030.  

Fiscal sustainability risks are likely to emerge in 
the pension system. By design, the Polish pension 
system  based  on  a  defined  contribution 
is 
balanced.  It  assumes  that  the  accumulated  capital 
will  be  paid  over  the  whole  expected  period  of 
retirement.  Those  fulfilling  certain  criteria  will 
qualify  for  a  minimum  pension  benefit,  currently 
about €260. In theory, the system does not require 
public  funds’  support,  except  for  topping  up 
minimum pension payments for those who did not 
accumulate sufficient capital. However, since 2019 
all  pensioners  are  receiving  an  extra  monthly 
benefit equivalent to one month minimum pension, 

21 

35404550201920212023202520272029% GDPBaseline no-policy change scenarioInterest rate lower by 1 pp than baseline scenarioInterest rate higher by 1 pp than baseline scenario 
  
3.2.  FINANCIAL SECTOR 

The  banking  sector  remains  resilient  to  shocks 
with safe levels of accumulated capital and low 
leverage.  In  recent  years,  the  consolidation in  the 
sector has continued and the share of the state has 
increased. Solvency levels remained high in 2019, 
while  total  assets  kept  growing  at  8.7%  per  year. 
The sector’s aggregate profitability was also robust 
due  to  moderate  lending  growth  and  decreasing 
costs.  Risks  related  to  the  legacy  portfolio  of 
foreign-currency  mortgages,  following  the  ruling 
of  the  European  Court  of  Justice(9),  could  imply 
the need to provide additional capital.  

Table 3.2.1:  Banking sector financial stability indicators 

Source: European Central Bank 

The  solvency  of  most  banks  remains  strong 
amid  prudent  regulatory  measures.  Capital 
endowment of most banks enabled them to comply 
with  existing  prudential  requirements  as  well  as 
requirements on capital buffers. At the end of June 
2019,  four  banks  did  not  meet  capital  ratios 
standards,  including  two  small  commercial  banks 
and  two  cooperative  banks  (with  aggregate  share 
in  banking  sector  assets  of  1.5%).  Compared  to 
regional  peers  capital  adequacy  ratios  were 
affected  by  higher  risk  weights  imposed  by  the 
Polish  regulator  and  more  stringent  regulatory 
minimum  capital  requirements (10).  Moreover,  a 
further capital requirement on the banks’ exposure 
to foreign-currency mortgages has been applied.   

Preventive  policies (11)  applied  to  residential 
property  financing  contribute  to  low  risks. 
is 
debt 
mortgage-related 
Households’ 
predominantly  denominated 
in  Polish  złoty. 
Virtually all mortgage loans are based on variable 
interest  rates  implying  risks  if  interest  rates 
increase.  According  to  the  central  bank’s  stress 
tests,  these  risks  are  nevertheless  manageable 

(9)   Judgement 

in  Case  C-260/18,  which  confirmed 

the 

possibility to annul a mortgage contract in specific cases. 
(10)  The  supervisor  enforces  a  2.5%  Capital  Conservation 
Buffer,  a  3%  systemic  risk  buffer  for  all  lenders  and  an 
additional capital buffer for the largest banks. 

(11)  2018 revision of one of the supervisor’s recommendations.  

(NBP,  2019a).  The  ratio  of  non-performing  loans 
in  the  housing  loan  segment  is  low,  at  2.4%  and 
3% on average, in the case of discontinued legacy 
mortgages  denominated  in  foreign  currencies. 
These  loans  represent  about  5.5%  of  the  sector’s 
balance sheet and amortise at 8% each year. With 
an  overall  non-performing  loans  ratio  of  6.2%  in 
mid-2019 credit risks remain contained. 

Foreign-currency 
denominated  mortgages 
could  require  additional  capital.  In  2019  the 
authorities dropped plans to set up a relief fund for 
loan  borrowers  or  apply  a 
foreign-currency 
systemic conversion of the loan book denominated 
in  Swiss  francs.  Instead,  efforts  focused  on 
assisting  struggling  borrowers,  including  those 
with  loans  in  national  currency.  This  has  eased 
pressure  on  banks.  However,  risks  of  legal  action 
by  borrowers  have 
increased 
following the ruling of the Court of Justice of the 
EU. According to the supervisor, the ruling did not 
mean  an  automatic  reconversion  into  złoty  of  all 
Swiss  franc  denominated  and  indexed  loans. 
However,  the  question  of  whether  additional 
reserves need to be created remains open.  

considerably 

The  profitability  of  most  banks  remained 
strong. Business growth and improving quality of 
loan  books  have  helped  banks  to  achieve  a  stable 
return  on  investment  (Table  3.2.1).  However, 
differences between lenders are  visible  with  some 
credit institutions recording losses. Banks continue 
to  struggle  with  persistently  low  interest  rates, 
intense  competition  and  costly  contributions 
towards the deposit guarantee fund, the resolution 
fund,  as  well  as  the  special  levy  on  financial 
institutions.  As  in  previous  years,  to  preserve 
profitability, banks aim to provide higher yielding 
consumer loans segment and for further decreasing 
interest  rates  on  term  deposits.  As  in  most  EU 
member  states,  Polish  banks  continue  to  cut  costs 
by  decreasing  the  number  of  employees  and 
branches. Despite the cost burden, the banks' cost-
to-income  ratio  was  57.5%  as  of  June  2019, 
unchanged from the year before and comparable to 
regional  peers.  Going  forward,  the  main  risk  are 
possible court cases by Swiss franc borrowers (see 
above). 

funding 

remains 
The  banks’ 
unchanged.  The  banking  system  is  primarily 
funded  by  stable  –  mainly  households  –  deposits. 
Non-financial  sector  deposits  grew  by  10.2%  per 

structure 

22 

2016201720182019q12019q2Non-performing loans6.46.66.26.36.2NFC sector8.98.98.48.18.0HH sector6.16.05.85.95.8Coverage ratio55.856.254.855.655.9Return on equity7.56.97.05.46.7Return on assets0.80.80.80.50.7Total capital ratio16.918.017.917.717.6CET 1 ratio15.416.316.115.915.8Tier 1 ratio15.416.316.115.915.8Loan to deposit ratio93.393.793.291.891.7 
 
 
  
 
                                                           
3.2. Financial sector 

year  and  funded  over  60%  of  banks  assets. 
Notwithstanding the fact that Poland has one of the 
most  developed  capital  markets  in  the  region, 
banks  reliance  on  the  wholesale  market  remains 
limited. Market funding is slowly rising driven by 
increased  issuances  of  covered  bonds.  Going 
forward,  the  share  of  debt  issuance  aiming  to 
satisfy  requirements  for  ‘bail-in-able  liabilities’ 
(minimum  required  eligible  liabilities,  MREL)  is 
bound  to  rise.  However,  meeting  these  targets  is 
likely  to  be  challenging  for  the  Polish  banking 
sector. 

lucrative  consumer-lending  segment 
remained 
dynamic  with  annual  growth  of  9.1%,  exceeding 
GDP  growth.  Small  and  medium  enterprises 
remain cash rich and reluctant to borrow from the 
banking system. This loan segment grew by 3.9% 
per  year  (June  2019),  whereas  bigger  corporates 
increased 
loans  by  11%.  Low  private 
indebtedness  and  a  housing  market  without  major 
imbalances  (see  Section  1)  combined  with  banks’ 
own funds levels and ample liquidity well beyond 
the  required  regulatory  minimum  allow  for  future 
loan growth.  

their 

The  ownership  structure  of  the  Polish  banking 
sector  continues  to  change.  For  a  number  of 
foreign parent banks the main factor in considering 
selling  their  Polish  business  were  challenges  in 
their  own  core  business  profitability  and  equity 
position.  In  addition,  declining  returns  of  Polish 
subsidiaries,  uncertainty 
foreign-
currency  mortgages,  the  increasing  role  of  state-
controlled  banks  and  concerns  about  the  rule  of 
law  situation  may  have  negatively  impacted  the 
investment climate. Therefore, the consolidation in 
the sector is bound to continue, possibly leading to 
the emergence of a market with a small number of 
universal players and some specialised lenders.  

related 

to 

tight 

The  state’s  share  in  the  system  is  increasing, 
underlining  the  role  of  strong and  independent 
supervision.  State  ownership  (direct  and  indirect) 
until recently  was  limited  to  the  biggest bank  and 
some  smaller  players.  It  now  accounts  for  about 
40%  of  total  assets  including  the  two  major 
systemically important banks on top of the biggest 
insurance  group.  The 
interconnection 
between  the  sovereign  and  the  financial  system 
poses  particular  supervisory  challenges,  such  as: 
paying close attention to the governance structure, 
and ensuring that politics are kept at arms’ length 
from  commercial decisions.  In  addition, given  the 
weight of state control in the system and the size of 
the 
supervision 
authority  also  needs 
to  focus  on  preserving 
competition  and  a  level  playing  field.  Lastly,  it 
remains  essential  that  the  rights  of  minority 
shareholders be preserved. 

state-controlled  banks, 

the 

Bank  lending  segments  developed  in  line  with 
sound 
underlying 
fundamentals 
growth. 
Mortgages, representing some 70% of households’ 
debt,  grew  by  7.5%  per  year  in  June  2019.  The 

fundamentals, 
indicating 

with 
further 

savings, 

supporting 

The new employee’ capital plans might support 
the  development  of  the  capital  market.  So  far, 
the capital market lacks traction in both equity and 
fixed  income  segments.  These  plans  are  private 
long-term saving plans aimed at increasing current 
households’ 
incomes  at 
retirement,  and  boosting  the  capital  markets,  by 
increasing  invested  capital  by  planned  0.7%  of 
GDP  each  year.  The  implementation  started  mid-
the  biggest  employers  and  will 
2019  with 
involve  smaller  firms.  Once  fully 
gradually 
the 
in  2021,  authorities  expect 
implemented 
scheme  to  cover  around  8.6  million  employees 
(with an assumption of a participation rate of 75%; 
however, at the end of 2019 it reached only around 
44%  in  large  companies).  These  plans  are  to  be 
funded  by  employees,  employers  and  the  state 
budget  in  the  form  of  a  subsidy.  Each  participant 
may withdraw its funds at any time or opt out from 
making further contributions.  

A  new  strategy  aims  at  developing  the  Polish 
capital  market.  The  main  goal  of  the  recently 
adopted strategy is to improve access to finance for 
companies  (especially  SMEs)  by  increasing  the 
attractiveness  of  the  Polish  capital  market.  To 
achieve  this  goal,  the  strategy  aims  to  overcome 
about  20  barriers  preventing  access  to  finance  to 
to  further  develop  a  competitive 
firms  and 
infrastructure  that  allows  for  a  more  agile  market 
development  and  innovation.  The  document  –  for 
which 
the  European  Commission  provided 
technical  support  –  lists  90  proposals.  In  addition 
to access to finance, it looks at improving financial 
literacy,  creating  a  savings  culture  and  improving 
trust  and  governance  at  Polish  firms,  including 
state-owned enterprises.  

23 

 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

Labour market 

than 

The labour market performs well on the back of 
strong  economic  growth,  but  some  challenges 
remain.  The  employment  rate of people  aged  20-
64  has  continued  to  rise  reaching  around  73%  in 
the  third  quarter  of  2019,  an  all-time  high. 
However,  regional  differences  are  significant. 
Warsaw has an employment rate (20-64) of 82.5%, 
much  higher 
in  Warmińsko-Mazurskie 
Voivodship (66.7%). The shrinking pool of people 
being  able  to  meet  labour  market  demand  weighs 
on employment growth, which is estimated to have 
practically come to a halt in 2019. The activity rate 
has  been  steadily  rising,  while  the  unemployment 
rate  stabilised  below  3.5%  in  2019,  among  the 
lowest  in  the  EU.  Both  long-term  and  youth 
unemployment  rates  have  declined  to  record  lows 
in  2019  to  below  1%  and  10.1%,  respectively.  At 
the  same 
time,  significant  differences  across 
regions remain. 

Graph 3.3.1:  Employment rate in Poland, 2018 

(1) Percentage of population aged 20-64 
(2) NUTS 2 statistical regions 
Source: Eurostat 

Labour shortages in Poland persist. Almost half 
of  the  firms  in  the  industry  and  construction 
sectors  reported  labour  shortages  as  a  factor 
limiting  production  in  2019  according  to  the 
Business  and  Consumer  Surveys  of  the  European 
Commission (12),  among  the  highest  shares  in  the 

(12)  https://ec.europa.eu/info/business-economy-

euro/indicators-statistics/economic-databases/business-and-
consumer-surveys_en 

EU. Reported labour shortages were also relatively 
high in services (28.5%), a sector that accounts for 
close  to  60%  of  total  employment.  The  shortages 
would  be  significantly  higher  without  substantial 
inflows  of  migrant  workers,  mainly  from  Ukraine 
(see  Section  1).  An  important  long-term  trend  is 
the  changing  characteristics  of  jobs  in  Poland  in-
line  with  ongoing  technological  development.  An 
increasing  share  involves  non-routine  cognitive 
tasks,  requiring  high  skills  (Hardy  et  al.,  2018), 
which may lead to some mismatches in the labour 
market in the future.  

those 

low,  but 

In  2018,  60.6%  of 

Employees  with  permanent  contracts  account 
increasing  share  of  total 
for  a 
employment. 
in 
employment  had  a  permanent  contract,  1.5 
percentage  points  more  than  in  the  previous  year. 
Among  employees, 
temporary 
contracts  has  continued  to  fall,  yet  remained  at 
20.8%  in  Q3  2019,  among  the  highest  in  the  EU. 
Self-employment,  at  a  share  of  17.6%  of  total 
employment,  remains  also  significant  (Q3-2019, 
age group 20-64).  

the  share  of 

experience 

substantially 

Employment  rates  differ  between  population 
groups.  Employment  rates  for  young  men  and 
high-skilled  people  are  well  above 
the  EU 
averages.  In  contrast,  older  people  and  women  in 
particular 
lower 
employment  rates  than  their  peers  in  most  other 
EU Member States (Graph 3.3.2). The share of the 
low  skilled  in  the  population  is  low  but  their 
employment rate at 42% is the third lowest in the 
EU.  The  employment 
rate  of  people  with 
disabilities also remained low, hardly improving in 
recent  years (13).  Measures  to  increase  labour 
market  participation  of  under-represented  groups 
would  contribute  to  advancing  towards  SDGs  5 
and 10. 

(13)  Based on a labour force survey. EU-SILC data also suggest 
that the employment rate of people with disabilities stayed 
significantly  below 
in  2017,  at 
respectively, 42.5% and 50.6%. 

the  EU  average 

24 

 
 
 
                                                           
                                                           
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 a compass for a renewed process of upward convergence towards 
better working and living conditions in the European Union. 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.  

The  Social  Scoreboard  supporting  the 
European  Pillar  of  Social  Rights  points 
to  a  number  of  employment  and  social 
challenges  in  Poland,  but  also  positive 
outcomes.  The  good  performance  of  the 
labour  market  is  reflected  in  a  continued 
increase  in  the  employment  rate,  though 
remaining  slightly  below  the  EU  average, 
and the decrease in the unemployment and 
long-term unemployment rates over recent 
years. 
steadily 
has 
decreasing,  however  the  share  of  people 
experiencing  persistent  poverty  increased. 
However,  the  gender  employment  gap 
in 
remains  high  and 
childcare (age 0-3) is still very low. 

the  enrolment 

Poverty 

been 

Despite  some  improvement,  Poland  still 
scores  below  the  EU  average  on  digital 
skills.  Nearly  half  of  the  adult  population 
aged 16-74 lacks basic digital skills. Polish 
enterprises  show  low  investments  when  it 
comes  to  up-skilling  the  workforce:  in 
2018,  only  13%  provided  training  to  their 
personnel  to  develop  their  ICT  skills 
(compared  to  an  EU  average  of  23%).  To 
address 
the  Ministry  of 
Digital  Affairs  is  working  on  the  Digital 
Competence  Development  Program  2030, 
with sets of actions and targets for further 
enhancing and developing digital skills. 

issues, 

those 

Poland  made  positive  steps  towards 
improving  the  social  and  economic 
inclusion  of  persons  with  disabilities.  In 
programme 
2018, 
governmental 
Accessibility+  was  adopted  and 
the 
developments  so  far  have  been  very 
positive. Thanks to this programme, actions are being implemented aiming at the permanent inclusion of the 
accessibility issue  into  all  public  policies.  In  September  2019,  a  law on  accessibility entered  into force. It 
obliges public entities to ensure accessibility standards and foresees sanctions for not respecting them. Also, 
in the framework of the programme direct investments are made in the existing public utility buildings and 
multi‑ family housing stock, space, modes of transport, internet websites and universal services with a view 
to ensuring their accessibility.  

a 

25 

Social Scoreboard for POLAND SOCIAL SCOREBOARD SDGs Equal opportunities and access to the labour market  Early leavers from  education and training  (% of population aged 18-24)      Youth NEET  (% of population aged 15-24) Gender employment gap Income quintile ratio (S80/S20) At risk of poverty or social exclusion (in %) Dynamic labour markets and fair working conditions   Employment rate (% of population aged 20-64)  Unemployment rate  (% active population aged 15-74) Long-term unemployment rate  (% active population aged 15-74) GDHI per capita growth  Net earnings of a full-time single worker earning AW Social protection and inclusion  Impact of social transfers (other than pensions) on poverty reduction    Children aged less than 3 years in formal childcare Self-reported unmet need for medical care  Individuals' level of digital skills Critical situation To watch Weak but improving Good but to monitor On average Better than average Best performers Members States are classified on the Social Scoreboard according to a statistical methodology agreed with the EMCO and SPC Committees. It looks jointly at levels and changes of the indicators in comparison with the respective EU averages and classifies Member States in seven categories. For methodological details, please consult the proposal for a Joint Employment Report 2020, COM(2019) 653 final; NEET: neither in employment nor in education and training; GDHI: gross disposable household income. Update of January 2020.    
 
 
 
3.3. Labour market, education and social policies 

Graph 3.3.2:  Differences in employment rates between 
Poland and EU, 2019 (p.p.) 

Graph 3.3.3:  Working time flexibility for care and inactivity 

due to family or caring responsibilities, 2018 

Plotted difference between average employment rates in 
Poland and EU in the first three quarters of 2019. 
Source: Eurostat 

to 

in 

social 

in  2018 

Poland  has  a  low,  albeit  improving  women’s 
employment  rate.  Although 
the 
employment  rate  increased  more  for  women  than 
for  men,  the  gender  employment  gap  remained 
high at 14.4 percentage points, and is indicated as 
to be watched by the Social Scoreboard. The gap is 
particularly high for older workers (55-64), at 20.7 
percentage  points  (above  the  EU  average  of  13). 
The  lower  women’s  employment  rate  is  linked  to 
their  lower  retirement  age,  care  responsibilities  in 
relation to children, to persons with disabilities and 
the  context  of 
to  other  family  members 
services.  Women’s 
underdeveloped 
inactivity  due 
looking  after  children  and 
incapacitated  adults  has  been  growing  since  2015 
and reached 6.7% of all women aged 15-64  in 2018, 
2 percentage points above the EU average, and the 
employment  impact  of  parenthood  for  women 
doubled  since  2015,  reaching  12.5  percentage 
points. Rates of enrolment in formal childcare (for 
children less than 3 years old) remained very low, 
at 10.9% in 2018, below the EU average of 35.1%. 
In  addition,  enrolment 
in  early  childhood 
education and care for older children (from 3 years 
to  compulsory  school  age)  was  also  very  low  at 
59.4%,  below  the  EU  average  of  86.8%.  Due  to 
existing  shortages,  investment  needs  in  childcare 
are  still  significant.  Working  arrangements  are 
perceived as highly rigid by employees with caring 
responsibilities and flexibility is rarely used, which 
also 
labour  market 
participation (Graph 3.3.3). 

constrains  women’s 

Each dot represents an EU Member State. The vertical axis 
shows the ratio between inactive females aged 25-49 
indicating family/caring responsibilities as primary reason for 
inactivity to respective total population. The horizontal axis 
shows the percentage of all employees aged 15-64 with 
caring responsibilities indicating that it is working time 
flexibility was ‘generally possible’. 
Source: Eurostat 

Certain  factors  hinder  the  functioning  of  the 
labour  market.  In  2018,  part-time  employment 
was  only  used  by  6.2%  of  employed  persons  in 
Poland,  compared with  the EU  average  of 18.5%. 
The  underdeveloped  rental  housing  market  and 
public transport, particularly in the rural areas, also 
have  a  negative  impact  on  the  functioning  of  the 
labour market (Section 3.4.4). The social insurance 
implications  of  a  transition  from  the  farmers' 
special  pension  regime  to  the  general  social 
security  regime  can  discourage  to  leave  the 
agricultural sector. 

The  minimum  wage  increased  significantly  in 
2020. The minimum wage was raised by 15.6% for 
2020,  far  exceeding  predicted  growth  of  average 
wages and the proposals by social partners. This is 
affecting a significant share of workers – in 2018, 
around  10%  of  employees  were  earning  between 
80 and 105% of the minimum wage(14). The higher 
for 
minimum  wage  might  create  a  barrier 
employment  of  some  low-skilled  people,  due  to 
their low productivity. 

Active  labour  market  policies  do  not  reach 
groups  that  could  be  activated.  Despite  a 

(14)  Commission calculations based on EU-SILC 2017 data.  

26 

-20-15-10-50565-6960-6455-5950-5445-4940-4435-3930-3425-2920-24FemalesMales024681012141618010203040506070PL% employees indicating working time flexibility% female populationinactive due to caring obligations 
  
   
                                                           
3.3. Labour market, education and social policies 

increased  to  levels  above  the  EU  average.  The 
results  became  also  more  equitable.  Skill 
development  has 
support 
productivity  and  labour  market  participation  and 
further contribute towards advancing towards SDG 
4. 

the  potential 

to 

Gaps remain in the provision of early childhood 
education and care, in particular in rural areas, 
contributing to regional disparities. Participation 
in  pre-school  education  of  children  aged  four  and 
above  is  close  to  the  EU  average,  while  the  rate 
continues  to  be  low  for  younger  children,  in 
particular  for  3  year-olds..  Despite  a 
legal 
entitlement  for  children  aged  3-5,  not  all  of  them 
could  get  a  place  (NIK,  2019b).  The  problem 
concerns  mainly  rural  areas,  where  the  coverage 
for this age group was only 67% in 2018 (Statistics 
Poland,  2018b).  The  lowest  participation  rates  in 
rural  areas  were  in  Zachodniopomorskie  (46%), 
Warmińsko-Mazurskie  (49%),  Podlaskie  (51%) 
and  Lubuskie  (52%)  (Statistics  Poland,  2018b). 
The  same  regions  were  affected  by  a  relatively 
high  rate  of  early  leavers  from  education  and 
training  (Eurostat).  In  2018,  the  average  rate  for 
Poland was at 4.8%, one of the lowest in the EU, 
while 
Warmińsko-
Mazurskie  and  Lubuskie  were  close  to  the  EU 
average of 10.6%. 

Zachodniopomorskie, 

of 

the 

schools 

in  available  places 

The  changes  in  the  school  system  absorb 
substantial  resources  and  affect  working  and 
lower 
learning  conditions.  The  closure  of 
secondary  schools  led  to  a  double  cohort  of 
students entering upper secondary schools in 2019 
(European  Commission,  2017).  Large  cities 
experienced  shortages 
in 
general secondary schools. Learning conditions in 
34% 
have 
controlled 
worsened (NIK,  2019c).  Primary  and  secondary 
schools  often  operate  to  a  shift  schedule.  The 
proportion  of  teachers  working  in  more  than  one 
school  increased  significantly  between  2016  and 
2018 (NIK, 2019c). Local governments claim that 
the  actual  costs  incurred  in  the  period  when  the 
reform  was  implemented  significantly  exceed  the 
allocated ministerial subvention, which affected in 
particular  cities  with  powiat  rights  (cities  with  a 
status  of  a  county)  and  urban  communes  (NIK, 
2019c).  Overall,  the  expenditure  on  education 
incurred by local governments has been increasing 
faster 
corresponding  ministerial 
subventions received (Statistics Poland, 2018b).   

than 

the 

significant  reduction  in  the  unemployment  rate  in 
the  last  years,  the  active  labour  market  policies 
(ALMPs) have changed little and  fail to reach the 
unemployed  who  are  not registered  with  the  local 
labour offices. This is broadly due to a lack of trust 
in the offices’ support and efficiency, and because 
of  legal  constraints,  as  various  groups  are  not 
eligible for assistance, including full-time students, 
people  receiving  disability  or  old-age  pensions, 
even  if  they  retired  early,  farmers  and  their 
household  members.  There  are  also  questions 
concerning  the  effectiveness  of  the  process  of 
matching potential workers with work places. The 
Labour Fund, financed mainly by payroll taxes, is 
increasingly  spent  on  actions  not  targeted  at 
jobseekers.  Consequently,  ALMPs’  financing  is 
heavily  dependent  on  the  European  Social  Fund 
(22% of the total expenditure in 2018). ALMPs are 
integrated  with  social  policies, 
also  weakly 
conducted 
regional 
lower 
administration (gmina), and with health policies.  

level  of 

at 

a 

The quality of social dialogue has deteriorated, 
in  particular  in  relation  to  legislative  processes 
with  no  or  short  consultations.  Social  partners 
report that the quality of consultations in the Social 
Dialogue  Council  has  been  deteriorating  in  recent 
years,  in  particular  due  to  government  eschewing 
consultation  of  some  key  laws  and  providing 
excessively short deadlines for comments (Section 
3.4). Social partners lack the necessary capacity to 
fully  play  their  role  in  social  dialogue  processes. 
The number of trade union members remains low. 
In  addition,  Poland  has  a  very  low  coverage  of 
collective bargaining, which takes place mainly at 
the company level, while collective agreements at 
sectoral level are rare.  

Education and skills 

Basic skills of 15-year old students were among 
the best in the EU in 2018. The results of Polish 
students in the OECD Programme for International 
Student  Assessment  (PISA)  2018  improved  in  all 
three  testing  areas  (reading,  mathematics  and 
to  2015  (OECD,  2019d). 
science)  compared 
Poland’s  lower  secondary  school  pupils  ranked 
third  in  the EU  in students'  proficiency  in science 
and  mathematics,  and  scored  significantly  above 
the EU average in reading. The proportion of low-
achievers 
three  areas  combined  has 
decreased to only 7% (EU average was 13%). The 
proportion of top performers in all areas tested has 

in  all 

27 

 
3.3. Labour market, education and social policies 

The vocational education and training reform is 
being implemented, but its impact on improving 
labour market relevance cannot be assessed yet. 
The  structure  and  scope  of  the  core  curricula  for 
initial  vocational  education  were  modified. 
Teachers  are  now  obliged  to  follow  compulsory 
periodical  practical  training  in  enterprises.  Some 
in 
incentives  for  employers 
to  get 
vocational  education  and 
training  have  been 
proposed  but  they  are  limited  in  scope  and  scale. 
Work-based  learning  opportunities  for  students 
remain  insufficient.  Only  15%  of  students  were 
enrolled  in  combined  school  and  work-based 
programmes in 2017-2018. In 2018, 78% of recent 
graduates  of 
initial  vocational  education  and 
training  were  employed,  in  line  with  the  EU 
average  of  79%,  while  the  situation  on  the  labour 
market was particularly favourable.  

involved 

modifying 

introducing  changes 

The 2018 higher education reform is now being 
evaluation, 
implemented, 
management and financing models. New quality 
assurance institutions have been set up, such as the 
Council  of  Scientific  Excellence  and  the  Science 
education 
Committee.  Higher 
Evaluation 
institutions  are 
their 
in 
organisation,  including  implementation  of  new 
statutes,  staff 
reorganisation  and  setting  up 
scientific  councils.  The  first  full  assessment  will 
only  be  possible  after  the  first  full  cycle  of 
scientific  evaluation  and  after  the  first  students  to 
follow  the  new  higher  education  curriculum  have 
there  are  preliminary 
graduated.  However, 
indications  that  the  2018  reform  may  not  be  fully 
effective in improving the quality of teaching. The 
new law is unclear about requirements for lecturers 
as  for  initial  pedagogical  training  and  the  support 
development. 
for 
Academic  staff  underperforming 
in  scientific 
publishing can be moved to didactic posts, created 
in  accordance  with  the  new  legislation  (Żylicz, 
2019).  Due  to  lack  of  specific  guidance  on  the 
evaluation of doctoral schools, the effectiveness of 
the  process  of  establishing 
is  also 
internationalisation  of 
questionable  (id.).  The 
in  Poland 
higher  education  remains 
(European  Commission,  2019b).  Although  the 
proportion  of  international  or  foreign  students 
increased  to  4%  in  2017,  it  is  still  below  OECD 
average  (OECD,  2019a).  Experts  argue  that  the 
current  measures  are  not  sufficient  to  boost 
international staff mobility (Kosmalska, 2019). 

professional 

continuing 

limited 

them 

to 

Changes  in  the  school  system  may  increase 
inequality  of  opportunities.  Some  key  issues 
include an earlier channelling of pupils into either 
the  general  or  the  vocational  stream  and  large 
swings  in  the  size  of  school  cohorts  making  it 
more  difficult  to  find  a  place  at  a  school  of  first 
choice. The share  of  pupils in  non-public primary 
increase.  Increased 
schools  has  continued 
household expenditure on private tutoring has been 
also  observed  (CBOS,  2018).  Experts  argue  that 
the new core curriculum is outdated and too heavy 
(Marczewski,  2019b).  The  homework  burden  on 
pupils  is  judged  excessive  (RPO,  2019).  All  this 
deepens  the  challenges  in  terms  of  equality  of 
opportunities,  support  for  the  development  of 
transversal  skills  and  educational  performance  of 
socio-economic 
disadvantaged 
pupils 
background.  In  addition,  the  school  system  is  not 
fully  adapted  to  meet  the  needs  of  an  increasing 
number  of  students  born  abroad.  The  additional 
educational support for them is limited and there is 
no  relevant  methodological  guidance  at  national 
level,  including  for  preparatory  classes  organised 
by  schools.  The  focus  on  improving  inclusive 
education  has  been  upheld,  as  reflected  in  2019 
National  Reform  Programme  but  stakeholders’ 
concerns over individualised teaching persist. .  

from 

teachers.  Shortages  of 

Shortages  of  teachers  have  increased  recently 
and the attractiveness of the profession remains 
low. Teachers' salaries are low in comparison with 
average  wages  of  tertiary  graduates,  in  particular 
for  new  and  kindergarten  teachers.  The  pay  rises 
introduced  in  2019  failed  to  put  a  definite  end  to 
teachers’  strikes  launched  in  April  2019.  Large 
urban areas face difficulties in ensuring a sufficient 
number  of 
teachers 
increased  in  particular  in  subjects  such  as  foreign 
languages,  mathematics,  ICT  and  science,  as  well 
as  in  early  childhood  education  and  care.  The 
organisational  implications  of  the  school  system 
the 
change 
attractiveness  of  the  profession.  PISA  results 
showed  that  the  proportion  of  students  agreeing 
that  their  teacher  shows  enjoyment  in  teaching  is 
among  the  lowest  in  the  OECD  (59%  vs  74% 
average),  while  students  scored  higher  when  they 
perceived 
teacher  as  more  enthusiastic 
(OECD,  2019d).  Some  measures  have  been  taken 
to improve the quality of initial teacher education, 
and  opportunities  for  continuing  professional 
development.  Their  effectiveness  and  impact  on 
teachers’ skills will need to be monitored.  

(see  above)  did  not 

increase 

their 

28 

 
3.3. Labour market, education and social policies 

affects 

expectations 

The  proportion  of  young  people  choosing 
tertiary  education  remains  high,  while  higher 
education  funding  remains  low.  The  proportion 
of  people  choosing  higher  education  has  declined 
slightly  over  the  past  few  years.  According  to 
(OECD,  2019d),  socioeconomic  status 
PISA 
strongly 
of 
students’ 
completing  tertiary  education.  Still,  as  of  2018, 
46%  of  the  population  aged  30-34  had  tertiary 
education,  well  above  the  EU  average  of  41%. 
Women  choose  and  complete  higher  education 
more  often  than  men.  The  19  percentage  points 
difference  between  women  and  men  in  higher 
educational attainment in that age group is one of 
the  highest  in  the  EU.  The  expenditure  per  full 
time student is still well below the EU average (in 
PPS): €7,000 vs €10,817. 

Participation  in  adult  learning  has  slightly 
improved,  but  its  up-take  remains  limited.  In 
2018, only 5.7% of adults aged 25-64 had a formal 
or  non-formal  learning  experience  in  the  last  four 
weeks  (EU  average:  11.1%).  Only  1%  of  those 
with 
low  educational  attainment  were  adult 
learners,  compared  to  the  EU  average  of  4.3%. 
Progress in coordination of adult learning policies 
has been limited so far. The implementation of the 
National  Qualification  Framework  has  been 
delayed  and  hence  its  take-up  by  employers  and 
employees  remains  limited.  In  January  2019,  the 
government  adopted  the  general  part  of  the 
Integrated Skills Strategy. Its implementation plan 
is  to  be  developed  based  on  cooperation  with  the 
OECD. In parallel, the line ministries are working 
on  development  plans  for  specific  skills,  such  as 
the  Digital  Competence  Development  Program 
2030. 

Social policy and inclusion 

The  share  of  the  population  at  risk  of  poverty 
was  declining  until  2017,  with  signs  of 
stabilisation  or  increase  in  2018.  The  share  of 
population  at  risk  of  poverty  or  social  exclusion 
rate (AROPE) has been decreasing continuously in 
Poland  since  EU  accession  and  was  at  18.9%  in 
2017-2018, well below the EU average. However, 
quite  large  differences  exist  between  regions.  In 
eastern  Poland  the  AROPE  rate  is  high  at  27%. 
This is almost twice as high as the best performing 
region  in  Poland,  which  is  the  Mazowieckie 
Voivodship  with  14.3%.  The  share  of 
the 
population  facing  material  and  social  deprivation 

also  declined  in  2018,  in  line  with  the  EU-wide 
trend (15). The persistent poverty rate (16) increased 
slightly from 9.1% in 2017 to 10.5% in 2018. This 
indicates an increased share of people experiencing 
poverty 
long  periods  with  no 
improvements  in  their  status.  Household  budget 
survey data indicate an increase in incidence of all 
material poverty indicators in 2018. 

risks 

for 

the  household  budget 

Targeting  of  social  transfers  is  weak.  The 
minimum income support adequacy was below the 
EU  average  in  2017  and  coverage  just  above  (17). 
The  biggest  increase  in  extreme  poverty  reported 
by 
survey  concerns 
people/families  living  on  allowances  (other  than 
pensions  and  disability  pensions)  signalling  the 
weaknesses  in  the  social  security  system.  The 
benefit  under  500+  Programme  was  made 
universal  in  mid-2019  while  its  nominal  value 
remained  unchanged 
for  4  years.  Ensuring 
universal  access  to  social  protection  remains  a 
challenge. Workers on some civil law contracts do 
not have formal access to unemployment benefits, 
maternity benefits, old age/survivors pensions and 
invalidity benefits. 

Social  services  remain  underdeveloped.  Recent 
main  government 
in  social  policy 
initiatives 
focused  on  increasing  social  transfers  with  less 
focus  on  enabling  social  services(18),  despite 
growing needs. Poland lacks a strategy on how to 
ensure  equal  access  to  quality,  affordable  and 
sustainable  community-based  social  services  with 
measurable  objectives  and  underlying  national 
funding.  The  law  on  Centres  for  Social  Services 
adopted in 2019 aims at creating integrated social 
services, but its impact is uncertain due to the lack 
of national financing and possible over-reliance on 

(15)  The  Material  and  Social  Deprivation  indicator  (MSD)  is 
the result of a revision of the material deprivation indicator 
(MD).  It  takes  into  consideration  a  broader  concept  of 
deprivation  as  it  also  includes  items  related  to  social 
activities,  whereas 
the  MD  measured  only  material 
deprivation.  It  is  based  on  13  items  (of  which  some  are 
common  to  MD).  The  MSD  rate  is  the  share  of  people  in 
the  total  population  lacking  (because  of  an  enforced  lack) 
at least 5 items out of the 13 MSD items (as opposed to 3 
or more out of 9 items for MD).  

(16)  The share of people who are currently poor and were poor 

also during 2 out of the 3 previous years. 

(17)  According  to  the  benchmarking  exercise  on  minimum 
income in the SPC (see European Commission, 2020c). 
(18)  Aimed  at  addressing  barriers  to  social  and  labour  market 
inclusion  of  people  in  vulnerable  situations  (e.g.  caring 
obligations,  disability,  family  breakdown,  debt,  drug 
addiction, homelessness). 

29 

 
                                                           
3.3. Labour market, education and social policies 

European  funds,  which  cannot  guarantee  the 
sustainability of the reform. In addition, the model 
adopted in the law allows municipalities to decide, 
while not infringing the rules of provision of social 
services  resulting  from  other  acts,    what  set  of 
services the centres will offer, and for whom and at 
what  price,  exacerbating 
the  risk  of  further 
service  provision  between 
fragmentation  of 
municipalities. It remains to be seen if the potential 
of  NGOs  –  important  provider  of  social  services 
until  now  –  can  be  developed  in  this  model.  No 
progress  is  observed  in  implementing  effective 
coordination between social and health services. In 
addition,  cooperation  between  local  employment 
services  and  social  services  remains  limited.  This 
hampers  synchronised  interventions  for  the  long-
term  unemployed  and  inactive. A new  model  will 
be  difficult  to  implement  without  ensuring  decent 
working  conditions,  including  pay,  for  social 
workers and other staff of the system.  

The  situation  of  persons  with  disabilities  and 
their carers has not improved. The cash benefits 
were slightly increased but no steps were taken to 
encourage persons with disabilities and their carers 
to take up work. The provision of care and special 
care services remains insufficient (MRPiPS, 2019). 
The  Polish  law  on  social  assistance  does  not 
include  personal  assistance  or  respite  care  among 
the  benefits  it  lays  down  provisions  on.  The 
Solidarity  Fund  for  Support  of  Persons  with 
Disabilities,  which  was  established  in  2018  to 
remedy  the  situation,  is  being  reformed  and  the 
funding  could  potentially  be  spent  for  other 
purposes.  

Long-term care continues to be provided mostly 
by  informal  carers,  often  family  members  who 
lack adequate institutional support. Residents of 
long-term  care  facilities  in  Poland  face  a  higher 
risk for patient safety events, including healthcare-
associated  infections  (HAIs)  and  pressure  ulcers 
than on average in the OECD (OECD, 2019c). The 
number  of 
long-term  care  workers  per  100 
individuals  aged  65  and  over  is  very  low  (one  in 
Poland  against  five  on  average  in  OECD28; 
OECD,  2019b).  Similarly,  public  expenditure  on 
long-term care at 0.5% of GDP in 2016 is very low 
comparing  to  the  EU  average  (1.6%)  (European 
Commission,  2018b).  A  comprehensive  strategic 
approach based on the analysis of needs of persons 
requiring long-term care and their carers as well as 
the definition of financing sources would be a first 

step in addressing current and future demographic 
challenges. 

Health 

Health  outcomes  improved  over  the  last  10 
years,  but  areas  for  improvement  exist.  Life 
expectancy  at  birth  remains  3.3  years  below  the 
EU  average,  with  a  gap  between  the  highest  and 
the  lowest  educated  by  9.2  years  and  differences 
between  regions  reaching  3.5  years  for  men  and 
2.5  years  for  women  (Eurostat  2018  data).  The 
preventable mortality rate decreased by about 10% 
between  2011  and  2016,  which  however  still 
exceeds the EU average by more than one third. At 
the same time, preventive care spending in Poland 
amounts  to  less  than  half  the  EU  average  in 
nominal terms  (€34  compared  to €89 per person). 
individuals  can 
Behavioural  risk  factors 
modify,  such  as  diet, 
tobacco  smoking  and 
drinking  alcohol  account  for  almost  half  of  all 
deaths  in  Poland.  Mortality  rates  from  prostate, 
breast  and  colorectal  cancers  have  all  increased 
over  the  same  period,  highlighting  challenges  in 
the  provision  of  screening  services.  Although  the 
introduction  in  2015  of  a  fast-track  pathway  for 
cancer  patients  has  improved  access  to  earlier 
detection  and  care,  late  stage  diagnosis  and  long 
waiting times for diagnostic examinations are still 
a  concern.  Through 
the  National  Oncology 
Strategy,  2020-30  cancer  care  quality  should  be 
improved; however the impact remains to be seen. 

that 

Access  to  health  care  remains  a  challenge.  In 
2018,  the  share  of  the  Polish  population reporting 
unmet  needs  for  medical  examinations  due  to 
either  costs,  distance  or  waiting  times  increased 
slightly to 4.2%, well above the EU average of 2%. 
This rate is much higher for low-income groups. In 
2018,  the  average  waiting  time  for  specialist 
services  was  3.4  months  with  the  longest  average 
waiting  times  reported  for  endocrinology  (11 
months) and dental services (8.5 months). Towards 
the end of 2019, Poland has been implementing e-
health  projects  to  improve  access  to  healthcare, 
such as Patient Internet Account (PIA), ), national 
e-prescription  service  and  e-referrals  pilot.  E-
prescriptions  are  expected  to  be  mandatory  from 
January 2020 and e-referrals as of 2021.  

The  health  system  is  underfunded  and  lacks  a 
long-term  strategic  framework.  The  lack  of  a 
long-term development vision adversely affects the 

30 

 
3.3. Labour market, education and social policies 

the  health 

introducing  changes 
system. 
to 
Community  Centres  for  Mental  Health  have  been 
piloted  since  2018  with  a  view  to  ensuring 
availability of services all across the country. It is 
important  that  lessons  learnt  from  these  pilots  are 
used  to  develop  the  services  and  roll  them  out  to 
the rest of the country. 

Poland  faces  a  significant  shortage  of  medical 
practitioners  and  staff.  In  order  to  reach  the  EU 
average  almost  50,000  additional  doctors  and 
100,000 nurses more are needed (from the current 
levels  of  approximately  90,000  doctors  and 
225,000 nurses, according to calculations based on 
Eurostat  data).  There  is  a  significant  number  of 
Polish  trained  doctors  working  in  other  countries 
and  the  number  of  physicians  increased  by  less 
than  one  thousand  on  average  per  year,  although 
the  number  of  certificates  that  allow  doctors  to 
take  up  employment  abroad  is  diminishing.  The 
nursing  staff  is  ageing  fast.  Nurses  aged  50  and 
older  accounted  for  60%  of  the  overall  number, 
including 27% who were 60+. Conversely, nurses 
aged up to 31 accounted for only 7%. The average 
age of nurses increased is approximately 52 years 
(19).  This  poses  prospective  risks  to  the  access  to 
and  quality  of  care.  In  addition,  an  uneven 
distribution  of  healthcare  workforce  across  the 
country exacerbates the challenge posed by gaps in 
coverage and access to healthcare. 

(19) According to the Chief Chamber of Nurses and Midwives. 

functioning  of  the  system,  investment  decisions 
and  allocations  of  resources.  In  2017,  total  health 
expenditure  per  person  amounted 
to  €1,507 
(adjusted  for  differences  in  purchasing  power), 
among the lowest in the EU. On average over the 
last  15  years,  public  health  expenditure  (4.6%  of 
GDP)  accounted  for  around  70%  of  total  health 
expenditure. Out-of-pocket spending accounted for 
23% of all health spending, a share higher than the 
EU  average  (16%),  with  the  bulk  of  it  on 
outpatient 
(OECD/European 
Observatory  on  Health  Systems  and  Policies, 
2019; NIK, 2019a). In 2017, approximately 9% of 
households  reported  that  on  some  occasions,  they 
prescribed 
were 
or 
recommended  medicines 
(Statistics  Poland, 
2018a). 

medicines 

purchase 

unable 

to 

There 
is  scope  for  more  efficient  use  of 
resources  in  the  hospital  sector.  In  2017,  over 
one third (34%) of health expenditure was spent on 
inpatient  care,  representing  one  of  the    highest 
shares  in  the  EU.  The  number  of  hospital  beds  is 
high,  with  6.6  beds  per  1,000  population  in  2017 
compared  to  an  EU  average  of  5.0,  but  they  are 
unevenly  distributed  across  the  country  and  have 
low  occupancy  rates  (66%  compared  to  77.5%  in 
the  EU,  Eurostat  data).  The  hospital  network, 
introduced in October 2017, encompassed 600 out 
of over 900 hospitals and was supposed to shorten 
waiting 
comprehensive 
and  provide 
treatment.  This  has  not  been  achieved  and  the 
financial  situation  of  hospitals  has  worsened.  The 
debt  carried  by  hospitals  was  PLN  14  billion  in 
June 2019. 

times 

Many medical procedures currently performed 
in  hospitals  could  be  done  outside  hospitals  at 
lower  costs.  Certain  diagnostics,  specialist  care 
and  rehabilitation  procedures  are  unnecessarily 
carried  out  in  hospitals  for  reasons  related  to 
financial  incentives  built  into  the  health  system. 
Factors limiting accessibility, such as long waiting 
times,  make  some  patients  use  the  emergency 
wards, even if not strictly needed, thus overloading 
them.  Numerous  programmes  to  improve  care 
coordination  are  being  piloted, 
including  for 
oncology  patients  and  new  programmes.  Poland 
started the procedure of including Daily Homes of 
Medical Care services in the National Health Fund 
contracting.  New  primary  healthcare  solutions 
have  been  tested  since  July  2018,  within  a  pilot 
Primary Health Care PLUS project with a view to 

31 

 
                                                           
3.4. COMPETITIVENESS, REFORMS AND INVESTMENTS 

3.4.1.  INVESTMENT AND PRODUCTIVITY 

CHALLENGES 

Investment and productivity developments 

Investment  remains  relatively  weak  in  Poland. 
The investment recovery observed in 2018 helped 
lift the investment to GDP ratio from around 17% 
in  2017  to  just  above  18%  in  2018  and  the  first 
three quarters of 2019. This is well below the EU 
average (Graph 3.4.1). Public expenditure were the 
key  driver  of  the  investment  recovery  in  2018, 
while  in  early  2019  private  investment  recorded 
stronger  gains.  However,  given  the  projected 
economic  slow-down  (see  Section  1)  and  the 
upcoming  changes 
the  ongoing 
negotiations  for  EU  Funds  between  2021  and 
2027,  the  outlook  for  the  investment  recovery  is 
uncertain.  

light  of 

in 

Graph 3.4.1:  Investment rates 

4-quarter moving average of values in current prices, not 
seasonally adjusted. 
Source: Eurostat 

investment  scored  a 

long-awaited 
Private 
recovery  in  2018  and  early  2019.  The  private 
investment-to-GDP  ratio  has  been  relatively  low 
for  many  years,  especially  in  comparison  with 
other  catching-up  EU  countries  (see  European 
Commission,  2017,  2018a,  2019b).  It  fell  from 
15.6% in 2015 to 13.5% of GDP in 2018. Since the 
beginning  of  2019,  private  investment  started  to 
recover with a year-on-year increase of 14.1% (Q3 
2019). Its revival in early 2019 can be interpreted 
as the realisation of previously delayed investment 
decisions  given  a  prolonged  period  of  high 

capacity  utilisation.  Against  the  background  of 
remaining 
investment  barriers  (see  European 
Commission,  2018a,  2019b,  Box  3.5.1)  and  the 
worsened  forecast  for  international  demand  the 
outlook  for  private  investment  remains  uncertain. 
This  has  been  confirmed  by  some  recent  surveys, 
indicating  that  only  16%  of  entrepreneurs  plan  to 
increase  investment  in  the  near  future  (NBP, 
2019b). 

investment 

Swings  in  public  investment  trends,  mainly 
related  to  EU  funds  utilisation,  have  a  large 
impact  on  overall  investment  activity.  Public 
investment has been relatively large in Poland as a 
share  of  GDP.  In  2018,  the  ratio  of  public 
investment to GDP amounted to 4.7%, which was 
markedly  above  the  EU  average  (2.9%)  and  most 
regional  peers,  thanks  to  a  substantial  degree 
contribution  of  the  EU  funds.  This  implies  that 
public 
trends  have  a  bearing  on 
Poland’s  overall  investment  performance.  Since 
2016,  EU  funds  for  the  2014-2020  budget  period 
have  increasingly  supported  public  investment, 
expected  to  reach  a  peak  in  2019-2020.  In  the 
medium term, however, the role of the EU funds in 
public  investment  is  set  to  diminish,  as  the  funds 
allocated  to  Poland  will  likely  be  lower  when 
compared  to  previous  period.  This  implies  that  in 
order  to  maintain  or  increase  investment  rates 
additional  private  or  public  means  would  need  to 
be mobilised. 

The  European  Fund  for  Strategic  Investments 
and  the  national  development  bank  support 
investment in Poland. Since 2015, total financing 
under this instrument in Poland has reached around 
€3.9  billion  and  is  set  to  trigger  €21  billion  in 
additional  investments.  €3.7  billion  has  gone  to 
infrastructure  and 
innovation  projects.  More 
specifically,  the  rail  operator  has  received  EU 
funding  under  the  Investment  Plan  for  Europe 
worth  around  €47.5  million.  In  addition,  €212 
million  were  allocated  to  financing  small  and 
medium  enterprises  (SMEs).  In 
total,  almost 
75,200 SMEs and mid-cap companies are expected 
to benefit from improved access to finance. By the 
end of 2020, all EU financial instruments are set to 
come  under 
the  new  InvestEU 
programme. InvestEU will focus on areas relevant 
to  Poland:  sustainable  infrastructure,  research  and 
innovation,  digitalisation,  social  investment  and 
skills. The Bank Gospodarstwa Krajowego (BGK), 
the  national  promotional  and  development  bank, 

the  roof  of 

32 

17.017.518.018.519.019.520.020.521.021.510Q411Q211Q412Q212Q413Q213Q414Q214Q415Q215Q416Q216Q417Q217Q418Q218Q419Q2% GDPEUPL 
 
  
3.4. Competitiveness, reforms and investments 

supports  economic  growth  by  providing  finance 
for infrastructure projects. It also aims to promote 
entrepreneurship  and  develop  micro  companies 
and  SMEs  by  offering  guarantees  and  surety 
instruments.  BGK  is  also  active  in  stimulating 
cooperation between enterprises, the public sector, 
and financial institutions. 

increasing 
Labour  productivity  has  been 
strongly,  but  underlying  weaknesses 
in 
productivity drivers remain. Labour productivity 
growth  has  been  among  the  fastest  in  the  EU  for 
several  years  (Section  1).  It  was  accompanied  by 
strong  wage  growth,  gradually  closing  the  still 
considerable  gap  in  wage  levels  with  the  EU 
average. Poland has one of the largest productivity 
gaps between large and small firms. Coupled with 
the  relatively  high  share  of  small  firms,  this 
contributed  to  still-lagging  productivity  levels 
compared  to  the  EU  average  (see  Bauer  et  al., 
2020).  Thus,  in  addition  to  capital  investment 
needs  (Section  1),  productivity  gains  can  be 
achieved  by  unleashing  the  firms’  potential  to 
grow.  This  involves  addressing  challenges  in  the 
business  regulatory  environment  (see  Box  3.5.1), 
the  availability  of  skilled  workforce,  and  the 
effective  diffusion  of 
the 
economy. 

innovations  across 

Innovation 

Poland  is  taking  measures  to  enhance  the 
economy’s innovative capacity, but a significant 
rise  in  innovative outputs  is  still  to  materialise. 
Poland continues to be a moderate innovator in the 
2019  European  Innovation  Scoreboard  (European 
Commission,  2019d).  The  total  R&D  expenditure 
remains  low  1.2%  of  GDP  vs  the  EU  average  of 
2.1%  in  2018,  with  regional  disparities  persisting. 
Although  business  expenditure on  R&D  has  more 
than  quadrupled  in  the  past  ten  years,  it  remains 
below  the  EU  average (20).  In  terms  of  output,  no 
significant  results  can  yet  be  observed.  This  is 
reflected  in  a  sluggish  increase  in  patenting 
activity  and  in  the  share  of  high-tech  exports  in 
recent  years,  as  shown  in  statistics  from  the 
European  Patent  Office (21).  However, 
the 
extended R&D tax relief, whose uptake has rapidly 

(20)  Poland's intensity went from 0.2% of GDP in 2008 to 0.8% 
in 2018, with an EU average of 1.4% in 2018 (Eurostat). 

(21)  https://www.epo.org/about-us/annual-reports-

statistics/statistics.html#applications 

(22)  and 

the 

‘Innovation  Box’ 

the 
grown, 
introduction  of  a  new  simplified 
joint-stock 
company  have  the  potential  to  support  innovative 
enterprises.  The  development  of  venture  capital 
markets remains crucial to facilitate the growth of 
innovative 
the 
economy’s  innovative  capacity  would  lead  to 
further progress towards SDG 9.  

firms.  Measures 

to  enhance 

Polish companies, particularly small ones, show 
a  slow  uptake  of  digital  technologies.  Less  than 
8%  of  small  enterprises  are  highly  digitalised 
compared  to  50%  of  large  companies  (European 
Commission,  2020b).  The  use  of  robots  is  rather 
limited,  with,  on  average,  7.5%  of  enterprises 
using them in 2019. To a certain extent, the limited 
take-up  of  digital  technologies  may  be  driven  by 
firms’  difficulties  in  hiring  specialists,  despite  a 
high share of graduates in science, engineering and 
computing  (see  section  3.3).  Micro  and  small 
companies  also  have  limited  access  to  specialised 
ICT training due to personnel availability and cost 
and  wage-related  concerns.  Under  the  national 
Industry  4.0  strategy,  the  government  launched 
the 
workshops 
practical  use  of  digital  solutions,  like  artificial 
intelligence,  high  performance  computing  and  3D 
printing. 

to  help  acquaint  SMEs  with 

and 

Poland  is  introducing  measures  to  improve  its 
scientific  performance.  The  2018  Act  on  Higher 
Education  and  Science  is  under  implementation, 
with  implementing  legal  acts  being  prepared  and 
adopted. The new evaluation criteria for scientific 
importance  of 
the 
organisations  emphasise 
international 
the 
cooperation 
internationalisation of science. The first edition of 
the  'Excellence  Initiative  –  Research  University' 
programme  was  completed  in  October  2019,  with 
the selection of 10 universities to be reinforced in 
their  research  activities.  A  new  configuration  of 
external 
the  university 
stakeholders,  may  positively  affect  universities' 
social and economic impact. Doctoral training has 
been  re-organised  with  the  creation  of  a  single 
education 
doctoral 
institutions.  In  2019,  the  Ministry  of  Science  and 
Higher  Education  initiated  a  reform  of  the  Polish 
Academy  of  Science,  envisaging,  among  others, 

school  within 

including 

councils, 

higher 

(22)  The  ‘Innovation  Box’  was  introduced  in  2019  and  allows 
for  a  preferential  5%  tax  rate  of  the  income  generated  by 
intellectual property rights. 

33 

 
                                                           
                                                           
3.4. Competitiveness, reforms and investments 

for 

and 

2020 World Bank Doing Business Report, Poland 
fell seven places, broadly due to more burdensome 
procedures 
registering 
transferring 
property and paying taxes (World Bank, 2019b). In 
turn, the Global Competitiveness Index results are 
pointing to weaknesses in the general institutional 
set-up,  with 
regarding 
governmental regulation and the efficiency of legal 
framework,  as  well  as  policy  stability  by  the 
government (WEF, 2019). 

scores 

some 

low 

is 

at 

the 

improving 

On  top  of  the  regulatory  overhaul  of  2018,  the 
government  has  put  forward  new  measures 
aimed 
regulatory 
environment. The impact of the 2018 law, the so-
called  ‘Constitution  for  Business’  (see  European 
Commission,  2019b),  can  so  far  be  assessed  as 
mixed.  The  government 
introducing  new 
changes,  including  some  relief  in  social  security 
contributions,  reduction  of  the  required  minimum 
period  for  storing  employee  files,  as  well  as 
lengthening  payment  deadlines  for  VAT  on 
imports.  Additionally,  in  2020  the  late  payments 
regulation  entered  into  force,  introducing  legally 
binding  deadlines  for  payments,  which  is  set  to 
help  address  arrears  and  support  enterprises’ 
financial 
these 
In 
improvements  for  existing  companies,  there  are 
other  measures  to  incentivise  the  creation  of  new 
businesses,  such  as  introduction  of  a  new  simple 
public  limited  liability  company  with  a  minimum 
capital of 1 złoty (circa €0.2). 

liquidity. 

addition 

to 

in 

these 

challenges. 

The  new  procurement  law aims  to  address  key 
weaknesses  in  public  procurement  in  Poland. 
The public procurement system suffers from a low 
number  of  companies  competing 
tender 
procedures, resulting in a high share of sole offers. 
The  new  public  procurement  law  adopted  in 
autumn  2019,  to  enter  into  force  as  of  2021 
addresses 
facilitates 
companies’  participation  in  public  procurement 
and  it  generally  regulates  much  broader  part  of 
purchasing  cycle  than  the  choice  of  contractors. 
The  law  introduces  public  procurement  policy 
implementation  mechanisms.  Among  others,  it 
imposes  a  price  revision  mechanism  in  long-term 
contracts,  introduces  partial  payments  for  longer 
contracts  and  precludes  abusive  clauses.  These 
changes were long-awaited by  market participants 
and  are  to  serve  creating  better  conditions  for 
public 
increasing 

companies’ 

interest 

in 

It 

increased  prerogatives  for  the  President  of  the 
Academy  on  the  supervision  of  the  Academy’s 
institutes,  an  external  review  of  the  Academy’s 
Institutes  and  the  introduction  of  minimum  wage 
levels for researchers. 

business 

The  potential  of  cooperation  between  science 
underexploited. 
remains 
and 
Cooperation  between  enterprises  and  scientific 
institutes  is  hardly  improving,  as  confirmed  by 
recent  data  on  joint  publications  by  business, 
science and public research financed by the private 
sector  (European  Commission,  2019a).  In  2019, 
the Łukasiewicz Research Network, comprising 38 
research  institutes  and  the  Łukasiewicz  Centre, 
was  established  with  the  main  goal  of  ensuring 
excellence  of  research  and  development  and 
transfer  of  knowledge  to  the  economy.  It  aims  to 
support 
the 
commercialisation  of  research  activities.  The 
Centre  acts  as  an  umbrella  unit  for  the  Network, 
ensuring coherence between the institutes' research 
agendas  and  State-level  strategies.    The  role  of 
technology  transfer  centres  in  the  process  of 
innovation  diffusion  remains  limited  (European 
Commission, 2017b; Łobacz, 2018).  

excellence 

scientific 

and 

3.4.2.  REGULATORY AND INSTITUTIONAL 

ENVIRONMENT 

Business regulatory environment 

of 

the 

the 

from 

perception 

benefitting 

Despite  the  overall  favourable  conditions  for 
doing  business  in  Poland,  uncertainty  drags  on 
the business sentiment. Polish entrepreneurs have 
been 
demand-driven 
supportive  economic  cycle,  broadly  unrestricted 
access to labour market and finance. However, the 
companies’ 
business 
environment  has  been  deteriorating,  as  indicated 
surveys 
by  various  business  organisations’ 
(Konfederacja  Lewiatan,  2019).  One  of 
the 
identified  key  factors  weighing  on  business 
sentiment 
the 
institutional 
the  regulatory  and 
instability  of 
setting,  including  the  ease  of  paying  taxes  (NBP, 
2019c).  For  instance,  the  retail  sector  has  been 
facing  significant 
regulatory  changes,  either 
already introduced (ban on Sunday trade) or being 
pending  (the  retail  turnover  tax).  The  regulatory 
burden  is  also  reflected  in  Poland’s  score  in  the 
recent international doing business rankings. In the 

is  uncertainty  stemming  from 

34 

 
3.4. Competitiveness, reforms and investments 

procurement  contracts, 
medium companies. 

including 

small  and 

impeding decarbonisation of the economy and the 
future role of renewable gases in Poland. 

Market functioning 

from 

Poland’s  integration  in  the  European  Single 
Market is a key element for its growth success. 
Poland continues gaining world market shares and 
is  profiting  significantly 
foreign-direct 
investment,  being  well  integrated  in  the  European 
supply  chains.  While  Poland  continues  improving 
the timely transposition of the EU law, the number 
of  incorrectly  transposed  directives  and  ongoing 
infringements  have  both  increased  during  2019. 
(see European Commission, 2020d). An improved 
application of related rules and standards offers the 
opportunity to strengthen further the benefits of the 
Single  Market  for  Poland  and  the  other  Member 
States. 

of 

the 

advantage 

Electricity  market  regulations  contribute  to 
market  distortions.  Despite  increasing  imports 
from Germany, Czechia and Slovakia, the internal 
electricity grid is not sufficiently developed to take 
interconnectivity. 
full 
Furthermore, through regulatory measures, Poland 
restricts  full  use  of  the  interconnectors  with 
Lithuania  and  Sweden.  Regulatory  changes 
introduced  on  the  verge  of  2018  and  2019 
implementing government’s intention to freeze the 
electricity  prices  (see  European  Commission, 
2019b)  affected  energy market  fundamentals  such 
as  profitability,  revenues  and  growth  potential  of 
suppliers.  The  resulting  energy  prices  distortions 
may  also  reduce  the  effectiveness  of  energy 
efficiency  policies,  reduce 
incentives  for 
renewables  and  may  negatively  affect  public 
finances,  especially  if  potentially  accumulated 
losses concern state-controlled energy incumbents.  

the 

On the gas market, the dominant position of the 
state-owned  company  disturbs  the  market.  In 
2018,  the  market  share  of  PGNIG  continued  to 
grow  from  80%  to  more  than  82%.  This  change 
was due to a significant drop in gas purchases from 
other  EU  Member  States  by  the  large  (industrial) 
final  customers  (ERO,  2019)  and  the  increase  in 
long-term  contracts  between  PGNIG  and  energy-
intensive 
industries  (PGNIG,  2019).  Limiting 
competition  in  the  gas  market  and  dominance  of 
long-term contracts may lead to an increase in gas 
prices  for  households  and  industrial  consumers, 
reduction  in  the  gas  sector  investments,  and 

following 

law,  when 

arrangements 

Yet  another  major  change  in  the  governance 
framework for state-owned enterprises is taking 
place  in  Poland.  With  the  government  formed 
after  the  2019  elections,  a  new  States  Assets 
Ministry  was  created.  This  Ministry  is  set  to 
supervise  all  state-owned  and  state-controlled 
enterprises,  including  financial  and  energy  sector 
companies. This marks a significant change to the 
previous 
the  2017 
supervision 
governance 
responsibilities  were  delegated  to  line  ministries 
(e.g.  the  Ministry  of  Energy)  and  the  former 
Ministry  of  Treasury  was  liquidated  (European 
Commission,  2018a).  The  creation  of  the  new 
ministry  with  centralised  supervision  is  a  step 
towards  compliance  with  OECD  guidelines. 
However, it remains to be seen if this will help to 
improve compliance with other crucial guidelines, 
including 
accountable 
introduction 
ownership 
review  procedures,  or 
standardised board appointment procedures.  

the 
rationale 

key 

of 

The  increased  role  of  state  ownership  in  the 
economy  reinforces  the  need  to  strengthen 
independent  oversight  and  regulators.  The  role 
of  state-owned  enterprises  in  the  economy  and  in 
particular  in  key  sectors  like  finance  and  energy 
has  increased  in  recent  years  (Section  3.2  and 
European  Commission,  2019b).  This  underlines 
the  importance  of  a  strong  and  independent 
supervision  for  the  financial  sector  (see  Section 
3.2)  as  well  as  strong  and  independent  regulators 
e.g. for the energy sector (see Section 3.4.2). 

Quality of institutions 

The 
insufficient  scope  of  consultations  of 
legislative  proposals  remains  a  key  concern. 
Since 2019, the head of the government’s standing 
committee  has  the  power  to  block  a  government 
legislative  proposal  in  the  event  that  public 
consultations have not been conducted. In addition, 
the Centre for Strategic Analyses (Centrum Analiz 
Strategicznych),  a new body in  the  chancellery  of 
the  prime  minister,  was  created  to,  inter  alia, 
improve  the  quality  of  government’s  draft  laws. 
This  is  likely  to  improve  the  legislative  process, 
but as part of the chancellery, the independence of 
the  centre  raises  concerns.  By  contrast,  public 
consultations  are  still  not  required  for  draft  laws 

35 

 
3.4. Competitiveness, reforms and investments 

(27). The procedure under Article 7(1) TEU is still 
on-going (28).  

3.4.3.  INFRASTRUCTURE DEVELOPMENT 

investment 

Domestic  energy  generation  infrastructure  is 
ageing, while demand is increasing. In 2018, the 
gross  domestic  electricity  production  dropped 
while  consumption  increased  (ERO,  2019).  With 
the  average  age  of  the  coal-fired  power  plants  of 
around  30-40  years 
(Euracoal,  2019)  and 
increasing  demand,  Poland  is  confronted  with 
considerable 
regards 
electricity  generation  capacity.  About  25%  of  the 
current national energy electricity capacity is to be 
withdrawn  in  the  next  decade,  with  the  largest 
share (94%) being hard coal and lignite-fired units 
(ERO,  2019).  In  2018,  the  share  of  natural  gas  in 
Gross Inland Consumption (without electricity and 
derived heat) was 15,2 %, lower than EU average 
of  23,6  %.  Gas  distribution  network 
is 
underdeveloped in some areas. 

needs 

as 

in 

electricity 
cross-border  gas  and 
Crucial 
projects are progressing well. Poland is engaged 
in  several  gas  projects 
the  region.  The 
development of gas interconnectors with Lithuania 
and  Slovakia  is  advancing,  although  with  delays. 
Moreover,  Poland  has  decided  to  expand  the 
capacity  of  the  liquefied  natural  gas  (LNG) 
terminal in Świnoujście and to construct a second 
LNG terminal in Gdansk, which could allow serve 
gas  demand  from  neighbouring  countries.  Poland 
is  committed  to  achieving  the  synchronisation  of 
the  electricity  grids  of  the  Baltic  States  with  the 
continental European grid by the end of 2025. This 
entails  building  a  high-voltage  submarine  cable 
with  Lithuania  and  internal  grid  reinforcement  to 
ensure its full functionality. The implementation of 
the synchronisation project is progressing. 

Developing  nuclear  power  generation  has  been 
chosen  as  one  of  the  strategies  to  cater  for 
growing  electricity  demand.  According  to  the 

(27)  CDL-PI(2020)002-e  Poland-  Urgent  Joint  Opinion  on  the 
amendments  to  the  Law  on  organisation  on  the  Common 
Courts, the Law on the Supreme Court and other Laws. 
(28)  See  Reasoned  Proposal  under  Article  7(1)  TEU 
(COM(2017)835 final), which was discussed most recently 
in the General Affairs Council of 10 December 2019. 

tabled  by  members  of  parliament,  affecting  the 
overall  quality  of  laws  (European  Commission, 
2018a, 2019b). While this path was less frequently 
used  in  2018  and  2019,  it  remains  a  source  of 
uncertainty for citizens and businesses, which can 
be illustrated by the proposal to remove the cap on 
the payment of social security contributions (23). 

The risk of a serious breach of the rule of law in 
Poland  continues  to  exist  with  potentially 
negative  consequences  for  investors’  trust.  As 
stressed  by  international  stakeholders  (see  e.g. 
ECB,  2019;  OECD,  2019f),  a  persistent  threat  to 
the rule of law puts at risk the effective functioning 
of  the  justice  system  and  overall  institutional 
stability,  distorts  mutual  trust  and  subsequently 
impairs  the  investment  climate  and  sustainability 
of long-term growth. Over the course of 2019, the 
Court of Justice of the European Union issued final 
rulings confirming that the initial Polish legislation 
concerning  the  lowering  of  the  retirement  age  of 
judges  was  in  violation  of  EU  law  regarding 
judicial independence (24), and a preliminary ruling 
as  regards  the  independence  of  the  Disciplinary 
Chamber  of  the  Polish  Supreme  Court  (25).  The 
Commission  also  decided  to  refer  Poland  to  the 
Court  of  Justice  concerning  the  new  disciplinary 
regime  for  judges,  which  introduced  the  risk  of 
The 
undermining 
Commission  further  decided  to  ask  the  Court  of 
Justice  to  impose  interim  measures  by  ordering 
Poland 
the 
the 
Disciplinary  Chamber  of  the  Supreme  Court  (26). 
On  23  January  2020,  the  Sejm  adopted  a  law 
concerning the functioning of the judiciary, which 
according 
the  European  Commission  for 
Democracy  through  Law  (‘Venice  Commission’), 
raises  concerns  as  regards  judicial  independence 

functioning  of 

independence. 

to  suspend 

judicial 

to 

(23)  The proposal was to  make the high-income employed pay 
social contributions based on their total yearly income and 
not  only  on  their  income  up  to  30  average  salaries,  as 
currently  is  the  case.  This  idea  was  discussed  publicly  by 
the  government  in  late  2019,  but  the  draft  law  was  tabled 
by  members  of  parliament.  It  was  sent  to  a  parliamentary 
committee  and  subsequently  withdrawn  due  to  lack  of 
support.  As  the  law  would  have  a  significant  impact  on 
businesses  and  employed,  social  partners  requested  those 
laws to be subjected to relevant public consultation. 

(24)  Cases C-619/18 and C-192/18. 
(25)  Joined Cases C-585/18, C-624/18 and C-625/1  
(26)  Case C-719/19. 

36 

 
                                                           
                                                           
3.4. Competitiveness, reforms and investments 

National  Energy  and  Climate  Plan  (NECP) (29), 
nuclear power is to enhance energy diversification 
and  help  reduce  the  share  of  coal  in  electricity 
production  in  the  long  term.  Compliance  of  the 
future  updates  of  the  Polish  Nuclear  Power 
Programme  with  the  EURATOM  and  EU  legal 
framework is vital in the context of nuclear power 
capacity development in Poland.  

Graph 3.4.2:  Freight transport performance in billion tonne-

kilometers (tkm) 

in 

High growth in road transport affects the share 
of  rail 
transport  of  both  goods  and 
passengers. The modernisation of railway lines is 
lagging  behind  the  development  of  high-speed 
roads. The unsatisfactory technical condition of the 
rail infrastructure, capacity bottlenecks and lengthy 
track  works  result  in  frequent  traffic  disturbances 
and operational limitations in terms of speed, train 
length  and  maximum  axle  load  (30).  This  has  an 
adverse  impact  on  rail  freight  competitiveness. 
(UTK,  2019;  Pieriegud,  2019).  As  a  result, 
between  2005  and  2018,  rail  freight  transport  in 
Poland increased only by 19% compared to 215% 
growth 
transport  (see  Graph  3.4.2) 
(Statistics  Poland,  2019c).  In  most  connections, 
passenger  rail  is  not  an  attractive  alternative  to 
private cars due to the low frequency of operations 
and  insufficient  integration  with  other  transport 
modes  (Rosa,  2018;  Moskwik  and  Krupa,  2019; 
Komornicki, 2019; Gadziński and Goras, 2019). 

in  road 

(29)  The  Commission  will  assess,  in  the  course  of  2020,  the 
final  national  energy  and  climate  plans  submitted  by  the 
Member States. 

(30)  For  example,  the  length  of  lines  with  speeds  above  160 
km/h  is  around  1%  of  total  line  length,  and,  respectively: 
120-160 km/h – 15%; 80-120 km/h – 43%; up to 80 km/h – 
41%.  Source:  government’s  Strategy  of  Sustainable 
Transport Development until 2030. 

Source: European Commission, Statistics Poland 

first, 

from 

stem, 

Underdeveloped  inland  connections  inhibit  the 
development  of  Polish  seaports.  The  main 
barriers 
uncompleted 
modernisation of the Baltic-Adriatic Core Network 
Corridor and Rail Freight Corridor. The upgrade of 
railway  access  to  the  Gdańsk,  Gdynia,  Szczecin 
and  Świnoujście  seaports  is  critical  for  increasing 
the volume of goods transported from seaports by 
rail.  Relevant  investments  are  to  be  completed  by 
2022. Second, existing road connections to Gdynia 
and Szczecin ports do not correspond to the heavy 
goods  vehicle  standards  (NIK,  2018;  Pieriegud, 
2019).  The  lack  of  comprehensive  planning  for 
intermodal  and  maritime  transport  reduces  the 
efficiency of investment in these sectors. Third, the 
capacity  and  number  of  intermodal  terminals  for 
the 
cargo 
is  not 
digitalisation  of 
progressing  at  a  satisfactory  pace  (Bocheński, 
2018; Pieriegud, 2019). 

transhipment  appears 

intermodal  services 

limited,  and 

substantial 

investments 

in  urban 
Despite 
mobility,  nearly  half  of  the  inhabitants  of 
urbanised areas have no direct access to public 
transport.  The 
fast  development  of  areas 
surrounding towns and cities in the past years has 
boosted  the  commuting  demand  to  levels  that  are 
not met  by  existing public transportation. A  2-km 
average  distance  to  the  nearest  public  transport 
hampers  its  use  and  lowers  the  mobility  of  those 
inhabitants  that  cannot  use  cars  (Gadziński  and 
Goras,  2019).  Heavy  reliance  on 
individual 
and  non-carbon 
transport 

increases 

carbon 

37 

0501001502002503003504004505002005201020152018TotalRailRoad 
                                                           
  
3.4. Competitiveness, reforms and investments 

the  country 

is  developing 

deployment, 
the 
conditions  to  auction  5G-pioneer  spectrum  bands 
(700  MHz,  3.6  GHz  and  26  GHz),  although 
effective  implementation  of  5G  will  require  close 
monitoring by all relevant parties. 

3.4.4.  REGIONAL DISPARITIES  

in 

Polish  regions  are  catching  up  quickly  with 
more  developed  regions 
the  EU,  but 
disparities  remain.  Since  Poland’s  accession  to 
the  EU  in  2004,  all  the  Polish  regions  have 
developed faster than the EU as a whole. Still, the 
pace of observed convergence with the EU average 
was  unequal,  with  wealthier  Polish 
regions 
catching  up  faster  than  the  less  developed  ones. 
Even more pronounced disparities, not only in the 
catch-up  process  but  also  in  other  spheres,  are 
visible  at  sub-regional  level  and  between  urban 
rural  areas,  creating  policy  challenges 
and 
(European Commission, 2019b). 

and 

turn, 

activity 

improved 

facilitated 

The  transport  infrastructure  has  a  bearing  on 
local  development  and  disparities.  The  road 
infrastructure in Poland has improved significantly 
since  the  EU  accession  (European  Commission, 
2018a,  2019b).  This, 
the 
in 
connectivity  of  many  areas  with  centres  of 
economic 
their 
development.  At  the  same  time,  there  remain 
poorly  connected  peripheral  areas,  in  particular  at 
the  borders  between  regions  or  close  to  the 
country’s borders. This is partly due to the fact that 
road  investment  does  not  necessarily  prioritise 
territories  that  are  not  easily  accessible  by  road. 
Moreover, the connections of the newly developed 
motorways  and  expressways  with  the  secondary 
road network are not always sufficient to eliminate 
the  isolation  of  peripheral  areas  (Komornicki, 
2019).  

Public 
transport  demonstrates  noticeable 
weaknesses.  Between  2008  and  2018,  the  length 
of  regional  and  sub-urban  bus  lines  in  Poland 
decreased  by  more  than  50%  (Statistics  Poland, 
2010,  2019c).  Moreover,  bus  frequency  is  often 
inadequate,  fares  are  perceived  as  high  and 
coordination  between  authorities  organising  rural 
public  transport  is  suboptimal  (Gadziński  and 
Goras,  2019).  At  the  same  time,  the  number  of 
kilometres of railways has also shrunk, though to a 

emissions,  worsens 
road  safety  and  creates 
congestions,  which,  together  with  underdeveloped 
infrastructure  for  cycling  and  walking,  degrades 
the  quality  of  life  in  cities  (Gadziński  and  Goras, 
2019; Komornicki, 2019). Most Polish cities have 
adopted  sustainable  urban  mobility  plans,  but 
implementation  is  lacking  (Gadziński  and  Goras, 
2019).  Urban  transport  investment  projects  often 
produce  conflicting  results  and  are  not  aligned 
with 
as 
environmental,  health  and 
land  use  planning 
policies.  Nor  are 
they  complemented  with 
operational measures to reduce motorised traffic. 

certain  municipal  policies, 

such 

Poland  has  improved  its  road  safety  in  recent 
years,  but  progress  has  stalled.  In  2018,  Poland 
reported  75  road  fatalities  per  million  inhabitants 
against the EU average of 49. At 29%, the share of 
pedestrians  killed  is  also  significantly  higher  than 
the  EU  average  of  21%.  Although  between  2010 
and  2016  Poland  reduced  road  deaths  by  23%,  in 
the  following  two  years  it  only  fell  by  5%  and 
preliminary  figures  for  2019  show  even  a  slight 
year-on-year  increase  (POBR,  2020).  The  key 
factors behind these adverse developments in road 
lack  of  protection  of 
safety  are  speeding, 
vulnerable 
infrastructure 
users 
shortcomings. To enhance road safety, Poland has 
focused  on  education  campaigns,  while  speed 
limits  are  poorly  enforced  and  the  infrastructure 
protecting 
remains 
underdeveloped.  Since  October  2019,  Poland  has 
been  one  of  six  beneficiary  countries  of  the  new 
EU  Road  Safety  Exchange  programme,  held  in 
twinning arrangements with France and Austria. 

vulnerable 

users 

road 

road 

and 

targets 

Poland  has  made  considerable  progress  in 
ultrafast and mobile broadband take-up, but is 
still  far  from  its  connectivity  targets.  Poland 
committed  to  providing  connectivity  of  30  Mbps 
or more for all citizens by 2020, as well as access 
to  a  gigabit  range  of  internet  speeds  under  the 
for  2025.  While 
Gigabit  Society 
progressing,  Poland 
these 
from 
commitments,  as  currently  only  66%  of  Polish 
households  have  access  to  at  least  30  Mbps  and 
less  than  30%  are  covered  by  gigabit  speed 
network  (European  Commission,  2020b).  The 
main  progress  obstacles  are 
the 
geographical conditions raising the cost of network 
deployment.  The  Polish  authorities  have  also  set 
up  a  new  broadband  fund 
the 
development  of  fast  networks.  Regarding  5G 

to  support 

is  still 

related 

far 

to 

38 

 
3.4. Competitiveness, reforms and investments 

in  the  Świętokrzyskie  region  to  17  in  the  Śląskie 
region  and  is  not  sufficient  to  cover  the  needs  of 
the ageing society.  

for 

is  key 

Developing  the  administrative  capacity  of  local 
governments 
efficiently  and 
effectively  delivering  public  investment.  Local 
governments  manage  around  half  of  the  total 
public  investment  expenditure  in  Poland.  The 
ultimate  outcomes  of  public  investment  correlate 
strongly with the quality of governance. This holds 
particularly  at  local  government  level  (OECD, 
2013).  Considering  the  current  labour  market 
situation and an expected decrease in EU cohesion 
funds  for  Poland  over  the  next  years,  developing 
and preserving the relevant administrative capacity 
of  local governments  is vital  for  the  effective  and 
efficient  implementation  of  public  investment 
projects. 

The  coal  sector  plays  an  important  socio-
economic  role  in  some Polish  regions. Poland  is 
the second largest producer of coal (hard coal and 
lignite  combined)  in  the  EU.  Six  out  of  forty-one 
coal-mining  regions  in  the  EU  are  located  in 
Poland and over 112,000 people remain employed 
in  coal  mining  and  the  coal-based  energy  sectors 
(Dias  et  al.,  2018).  These  regions  face  region-
specific challenges resulting from a transition from 
coal-based  economy  (see  section  3.5  and  Box 
3.5.1).

smaller  extent (31).  While  in  recent  years  the 
number  of  rail  passengers  has  increased,  this 
growth was contained by delays to several railway 
investment  projects.  All  these  factors  reduce  the 
availability and quality of public transport services 
and may restrict access to jobs and public services 
for  those  who  cannot  use  individual  transport 
(World Bank, 2019c).  

Disparities  in  access  to  public  services,  in 
particular  healthcare,  are  becoming  a  pressing 
concern.  The  number  of  medical  staff  and 
availability  of  health  services  and  infrastructure 
differs  between  regions,  influencing  access  to 
health  care.  For  instance,  in  2018,  the  number  of 
doctors  per  10,000  inhabitants  ranged  from  15  in 
the  Wielkopolskie  region  to  27  in  the  Zachodnio-
pomorskie  and  the  Mazowieckie  regions.  Mental 
health  services  are  insufficient  and  are  mainly 
available in the big cities; for example out of five 
clinics  in  the  Zachodniopomorskie  region,  three 
are  located  in  the  city  of  Szczecin.  Similar 
in  other  health-related 
challenges  are  visible 
domains, 
the 
number  of  specialists  has  increased  somewhat  in 
recent  years  and  geriatric  centres  have  been 
created  in  all  regions,  their  number  varies  from  2 

including  geriatrics.  Although 

(31)  One  should  note  that  investment  in  railways  has  been 
reduced  and  many  routes  have  been  closed  since  1980s. 
The process intensified further in 1990s. 

39 

 
                                                           
3.4. Competitiveness, reforms and investments 

Box 3.4.1: Investment challenges and reforms in Poland 

Macroeconomic perspective 

Following the 2018 recovery, investment continued to rise in 2019. While public investment growth slowed 
in comparison to 2018, the growth in private investment strengthened in 2019. Still, investment in Poland 
relative to GDP is significantly lower that observed in regional peer countries. EU funds are a major factor 
supporting  investment  in  Poland.  Thus,  the  outlook  for  investment  performance  is affected  by  uncertainty 
over the outcome of the ongoing negotiations of the new EU budget period and the forecast economic slow-
down. 

Assessment of barriers to investment and ongoing reforms 

While the business environment in Poland is in general favourable, several factors hold back investment and 
productivity  growth.  Burdensome  compliance  with  certain  legal  and  administrative  requirements  and 
uncertainty  regarding  the  frequently  changing  regulatory  environment  hamper  private  investment. 
Insufficient  administrative  capacity  can  have  negative  impact  on  public  investment  spending.  In  terms  of 
human  capital, investment  barriers  include  labour  shortages,  in  particularly  of  skilled  labour, and still-low 
labour force participation. 

The major barriers to investment that impact Poland’s investment climate include: 

1.  An  unstable  regulatory  environment.  Frequent  changes  to  key  laws  including  those  related  to  taxation, 
social security contributions, energy policies and other economic areas increase the cost of compliance and 
add  uncertainty  for  businesses  (Section  3.1).  The  use  of  fast-track  legislative  process  and  insufficient 
consultations concerning draft laws have an impact on the quality of certain regulations (Section 3.4.2). 

2. Labour supply shortages. The unavailability of adequately skilled labour affects several sectors. While in 
the longer term it may provide a stimulus to increase capital intensity, in the short term it is more likely to 
act as a barrier to investments enhancing production capacity. Demographic trends and uncertainty around 
future labour migration policy aggravate the outlook (Section 3.3).  

40 

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 
 
 
 
 
3.5. ENVIRONMENTAL SUSTAINABILITY 

Climate and energy transition 

Curbing  greenhouse  gas  emissions  through 
decarbonising  power  generation  and  reducing 
energy  intensity  are  key  challenges  for  Poland. 
Developing  a  coherent 
long-term  vision  for 
improving  the  environmental  sustainability  of 
Poland’s  development  model 
is  of  crucial 
importance  given  the  difficult  starting  point (32). 
Greenhouse  gas  emissions  have  increased  slightly 
in  recent  years,  especially  in  the  transport  sector. 
This  puts  Poland  in  the  group  of  EU  Member 
States with the highest emissions per capita (Graph 
3.5.1).  Energy  supply  and  use  are 
jointly 
responsible  for  the  highest  share  of  national 
greenhouse  gas  emissions.  Around  90%  of 
electricity is still generated in conventional power 
plants,  mainly  using  domestic  hard  coal  and 
lignite.  Solid  fossil  fuels  also  play  a  large  role  in 
household  energy  consumption,  especially 
in 
heating,  while  the  energy  efficiency  of  buildings 
remains  poor.  Due  to  a  surge  in  passenger  and 
freight road traffic in recent years, emissions from 
the 
growing 
continuously. 

transport 

sector 

have 

been 

Graph 3.5.1:  Greenhouse gas emissions per capita in ten EU 

countries with the highest emissions in 2017 

Source: Eurostat 

Growing  emissions  push  up  the  magnitude  of 
decarbonisation  to  be  achieved  in  the  future. 

(32)  Poland is the fifth-largest CO2 emitter in the EU. However, 
it has greatly reduced its GHG emissions between 1988 and 
2010,  cutting  them  by  28%,  while  the  Kyoto  targets 
foresaw  a  reduction  of  only  6%  by  2012.  Poland  also 
reduced its emissions per capita between 1990 and 2010 by 
8%. 

The total emissions have been increasing gradually 
since 2014 contrary to the general downward trend 
in  the  EU.  In  recent  years,  emissions  have  grown 
substantially  in  the  building  and  transport sectors, 
in  contrast  to  declining  emissions  in  the  energy 
sector.  The  implementation  of  the  low-carbon 
mobility  measures  has  been  progressing  slowly, 
while  a  strategic  approach  to  reducing  emissions 
and  improving  efficiency  of  the  manufacturing 
industry in line with the circular economy model is 
missing in the National Energy and Climate Plan.  

the 

Poland’s 

environmental 
Improving 
sustainability  will  require  a  broad  political 
consensus  around  a  coherent  set  of  decisive 
policy  measures.  Given 
growing 
understanding  of  environmental  externalities  and 
the  urgency  of  resolute  action  to  slow  down 
climate  change,  the  price  of  greenhouse  gas 
emissions  and  environmental  pollutions  are 
expected to continue rising. This will challenge the 
future competitiveness of the Polish economy. The 
require 
necessary 
low-carbon 
substantial  public  and  private 
in 
various  sectors  to  improve  their  environmental 
sustainability,  but  this  may  present  a  chance  to 
boost growth, competitiveness and innovation. 

transition  will 

investment 

Tackling  the  social  implications  of  the  low-
carbon transition by targeted policy measures is 
key. In recent years, poverty and inequality levels 
have  gone  down  in  Poland,  including  energy 
poverty.  Efforts  to  decarbonise  the  Polish  energy 
sector may temporarily raise electricity and heating 
costs and thus increasing the risk of inequality and 
poverty,  unless  complemented  by  effective  and 
targeted policy  responses.  In  addition,  the gradual 
disappearance of certain jobs (e.g. in coal mining) 
and the creation of jobs in other sectors, as well as 
the divergence in capacity across the population to 
withstand  severe  weather  events  (e.g.  droughts, 
heatwaves  or  water  shortages),  all  call  for  a 
rethinking  of  social  assistance,  education  and 
training  and  other  climate  change  adaptation 
policies (see Section 3.3). The lessons learnt from 
implications  and  policy  measures 
the  social 
adopted to respond to the major downsizing of the 
hard  coalmining  industry  in  the  1990s  (entailing 
the  disappearance  of  some  60%  of  jobs)  can  be 
valuable  in  this  context  (Witajewski-Baltvilks  et 
al. 2018; see Graph 3.5.2). This also highlights the 
importance  of  re-prioritising  public  expenditure 
(see Section 3.1). 

41 

1012141618202224262830LUEEIECZNLCYDEPLBEFItonnes per capita20072017 
 
   
                                                           
3.5. Environmental sustainability 

Graph 3.5.2:  Indigenous production of hard coal 

Energy sector 

A  clear  energy  decarbonisation  strategy  to 
foster  investment  and  the  energy  transition  in 
Poland  is  lacking.  The  economic  viability  of 
recently built and still envisaged coal-based power 
plants is jeopardised by the rapidly falling cost of 
generating  electricity  from  renewable  resources 
together  with  the  growing  cost  associated  with 
maintaining a fossil fuel-based power sector. Most 
of  the  new  electricity  power  plants  built  in  2019-
2020 is based on coal (33). The sunk costs of these 
undertakings,  mostly  carried  out  by  state-owned 
enterprises, add up to the costs of achieving a low-
carbon energy generation. In addition, a number of 
measures introduced and subsequently modified in 
the course of 2018 to control electricity prices have 
dented market signals. This adds to the uncertainty 
about  the  long-term  vision  for  the  electricity 
generation sector, particularly in the light of rising 
demand for electricity.  

Past  regulatory  changes  have  negatively 
affected  the  development  of  wind  projects,  but 
the situation has recently improved. The share of 
renewables  in  gross  final  energy  consumption 
stood  at  11.3%  in  2018  and is below  the 2017-18 
trajectory  towards  the  2020  target  of  15%.  In  its 
National  Energy  and  Climate  Plan,  Poland  has 
proposed  a  level  of  21-23% for  the  corresponding 
2030 target, below the level of 25% recommended 
by  the  Commission.  (34).  The  recent  regulatory 
changes related to on-shore wind farms can give a 
new impetus to this segment, especially following 
the  successful  auctions  for  supply  of  renewable 
energy  in  2018  and  2019.  The  new  support 
schemes  for  consumers  who  produce  renewable 
energy  also  improves  the  outlook  for  renewables, 
including  solar  energy,  hardly  existing  until 
recently.  Still,  the  time  needed  to  construct  wind 
farms  makes  achieving  the  2020  renewable  target 
difficult.  Also,  strict  rules  on  minimal  distance 
between wind farms and buildings will continue to 
limit  the  development  of  new  onshore  wind 
capacities. 

The  modernisation  of  the  energy  sector  in  the 
next  decade  warrants  substantial  investment 

(33)  Opole  block  5  &  6,  Jaworzno  and  Turów  power  plants: 

around 3GW of new capacity. 

(34)  This  is  2-4  pps  below  the  Commission’s  recommendation 
indicative  formula  under  Regulation  (EU) 

based  on 
2018/1999. 

Source: Eurostat 

for 

the 

transition 

Support from local, national and EU budgets is 
to  be 
low-carbon 
key 
successful  and  socially  just.  Based  on 
the 
experience  of  EU  Cohesion  Policy  Funds,  Smart 
Specialisation Strategies and the EU Coal Regions 
in Transition Initiative, formulating comprehensive 
territorial transformation strategies by the affected 
territories  is  needed  to  foster  a  far-reaching 
change.  Close  partnership  of  central  authorities 
with  regional  and 
is  essential, 
including  also  citizens’  associations,  NGOs,  trade 
unions  as  well  as  representatives  of  business  and 
science to ensure that the public support addresses 
specific  territorial  challenges  and  local  citizens’ 
needs (see Annex D and Box 3.5.1). 

local  actors 

Reaching  the  Europe  2020  targets  related  to 
energy  and  climate  will  be  very  challenging. 
Substantial developments within a short timeframe 
would  be  required  within  the  areas  of  greenhouse 
gas  emissions  reductions,  renewable  energy  and 
energy  efficiency  given  that  Poland  is  below  its 
indicative  trajectory  for  the  corresponding  targets 
under 
the  EU’s  2020  energy  and  climate 
framework.  Emissions  from  the  sectors  outside  of 
the  EU  Emissions  Trading  System  have  already 
increased  by  21%  from  2005  levels,  overshooting 
Poland’s commitment to limit the increase of these 
emissions  to  14%  by  2020.  This  growth  in 
emissions  offsets  any  emissions 
reductions 
achieved  in  the  sectors  in  the  EU  Emissions 
Trading System. 

42 

020406080100120140160909294969800020406081012141618millions of tonnesPLCZDEUKES 
  
                                                           
from  2016 

needs.  In  the  2040  outlook,  the  National  Energy 
and Climate Plan estimates the investment needs in 
the domestic fuel and energy sector at around €246 
to  2040.  Energy-related 
billion 
investment  needs  in  non-energy  sectors  (industry, 
households, services, transport and agriculture) are 
estimated  at  €206  billion  from  2016  to  2040. 
Projected  capital  expenditure  on  generation  and 
network  projects  varies  depending  on  future 
demand  scenarios.  Part  of  the  funding  can  come 
from the auctioning of emissions allowances in the 
EU’s emission trading system as well as from the 
to  supporting 
Modernisation  Fund  dedicated 
modernisation  of  the  energy  sector  in  lower-
income Member States. On the back of the higher 
carbon  price,  auction  revenues  distributed  to 
Member  States  doubled  in  2018  to  around  €1.2 
billion.  However,  in  recent  years,  only  slightly 
more  than  50%  of  this  amount  was  used  for 
climate- and energy-related purposes. 

of 

from 

towards 

electricity 

Well-functioning  electricity  and  gas  markets 
lower  the  costs  and  burdens  of  the 
can 
transition 
energy.  Key 
cleaner 
ingredients  are  a  stable  and  sound  regulatory 
framework  as  well  as  sufficiently  developed 
infrastructure, including interconnectors with other 
EU Member States. Some progress has been made 
recently, and Poland has been importing increasing 
amounts 
neighbouring 
countries,  where  prices  are  on  average  lower  due 
to  a  less  carbon-intensive  electricity  mix.  Still, 
there  remain  certain  obstacles  to  more  extensive 
utilisation  of  electricity 
interconnectors  with 
Germany,  Lithuania  and  Sweden.  The  regulatory 
intervention  to  stabilise  electricity  prices  during 
2019  had 
energy  market 
impact  on 
fundamentals  such  as  profitability,  revenues  and 
growth potential of suppliers. Such a distortion of 
price signals may limit the effectiveness of energy 
efficiency  policies  and  market  competition  and 
discourage  investments.  Indeed,  on  the  wholesale 
electricity  market,  the  market  share  of  the  three 
largest  entities  continued  to  rise  in  2018.  Certain 
regulatory  measures,  e.g.  related  to  gas  storage 
obligation  for  importers,  have  strengthened  the 
dominant  position  of  the  state-owned  company  in 
the  gas  market,  crowding  out  competitors  and 
decreasing the transparency of gas prices. 

an 

3.5. Environmental sustainability 

Other sectors 

increasing  since  2014,  and 

The  reliance  on  solid  fossil  fuels  for  domestic 
heating  weighs  on  air  quality,  translating  into 
energy 
health  problems  and  costs.  The 
consumption 
the 
highest  share  of  solid  fossil  fuels  in  residential 
energy  consumption  in  the  EU  (Graph  3.5.3)  not 
only  make  reaching  the  2020  energy  efficiency 
targets  challenging  (Annex  A),  but  also  further 
exacerbate the problem. In 2016, approximately 45 
thousand premature deaths were attributable to air 
pollution  exposure,  among  highest  values  in  the 
EU (EEAa, 2019).  Emissions of air pollutants can 
be curbed by switching to cleaner energy sources. 
Several  local  governments  have  already  taken 
action  to  ban  the  use  of  most  polluting  fuels  for 
heating,  the  measure  with  the  largest  potential  to 
improve the situation in the short term (Ministry of 
Environment,  2019).  In  the  longer  term,  thermal 
modernisation of  buildings  as  well  as  investments 
in  district  heating  play  a  key  role.  Public  support 
schemes for this face the challenge of ensuring that 
substantial  investments  done  by  households  in 
single-  or  multifamily  buildings  and  by  heat 
them  at  a 
distribution  sector  do  not  put 
disadvantage  in  the  future,  when  the  heating  of 
buildings  will  have  to  be  fully  decarbonised.  The 
volume  of  investments  required,  including  the 
public  support,  and  associated  social  implications 
call  for  a  careful  policy  design  in  this  area. 
Launched in 2018, a 10-year Clean Air Programme 
is still strongly underused. 

is  also 

the  second 

improvements 

The low-carbon transition is also a challenge for 
sectors  such  as  transport  or  energy-intensive 
industries. The transport sector remains a growing 
source of concern as sectoral emissions and energy 
consumption  have  increased  in  recent  years.  The 
transport  sector 
largest 
contributor to the air pollution problem in Poland. 
The  transport  policy  thus  faces  the  challenge  of 
ensuring 
in 
particular  green  public  transport  options,  while 
lowering  greenhouse  gas  emissions  and 
the 
associated  pollution  (see  Section  3.4.3).  At  the 
same 
the 
the  uncertainty 
technologies  and  regulations  on  low-emissions 
vehicles  already  seems  to  have  had  an  impact  on 
the  demand  for  new  cars  in  Europe  and  on  the 
automotive industry, an important sector in Poland. 
The industrial emissions of greenhouse gases have 
been  broadly  stable  over  the  last  decade  despite 

connectivity, 

regarding 

time, 

in 

43 

 
3.5. Environmental sustainability 

environmental  inspectorates  will  be  able  to  carry 
out  ad-hoc  inspections  without  prior  notice  and 
impose financial penalties. 

Poland’s  freshwater  resources  are  limited,  and 
they  are  intensely  used.  Water  use  intensity  in 
Poland is roughly twice the OECD average, while 
at  around  1,600  m3  the  aggregated  average  fresh 
water availability is low compared to the  EU as a 
whole (35). Industry is a  major user of freshwater, 
and  electricity  production  alone  accounts  for  over 
half  of  freshwater  use.  As  of  2017,  energy 
production  and  agriculture  is  no  longer  exempted 
from  water  use  fees.  Inadequate  treatment  of 
municipal 
and 
agricultural  production  are  the  major  sources  of 
water  pollution.  In  addition,  river  ecosystems  are 
under increasing pressure from the development of 
infrastructure  serving  navigation  and  energy 
production. 
of  major 
infrastructure  plans  related  to  the  construction  of 
cascades  of  dams  serving  navigation  purposes  on 
the Oder and Vistula rivers risk compromising the 
natural  capacities  of  aquatic  ecosystems  and 
further degradation of water resources. 

industrial  wastewater 

continuation 

The 

and 

risks 

related 

River  basis  management  of  has  not  yet 
incorporated  the  projected  impacts  of  climate 
change. The entire territory of Poland is subject to 
flood 
to  climate  change  and 
anthropogenic  influence.  These  risks  are  expected 
to increase in the future due to climate change. In 
particular,  flash  flooding  events  are  likely  to 
increase  (EEA,  2019b).  Innovative  approaches  to 
managing  flood  risks  related  to  spatial  planning, 
use  of  economic 
instruments  and  systematic 
consideration  of  nature-based  solutions  would 
in 
to 
contribute 
conventional infrastructure. 

investment  needs 

reducing 

(35)  The  intensity  of  use  of  freshwater  resources  (or  water 
stress) refers to gross abstractions of freshwater taken from 
ground  or  surface  waters  expressed  as  a  %  of  total 
available renewable freshwater resources. 

fast growth in industrial output, which was driven 
mainly  by  an  intensified  exploitation  of  the 
installed  capacities  (Błocka  and  Śniegocki,  2019). 
The  continued  growth  of  the  industry  will  thus 
increasingly  depend  on  the  ability  to  deploy 
innovative  and  clean 
technologies,  spanning 
production efficiency, product design and material 
recovery (Bukowski, 2019). 

Graph 3.5.3:  Share of solid fossil fuels in final residential 

energy consumption (%) 

The percentage shown does not account for solid fuels used 
to produce electricity consumed by households. 
Source: Eurostat 

for 

and 

of  waste 

Recent  legislative  changes  aim  at  increasing 
recycling 
strengthening 
enforcement  of  waste  management  rules.  The 
market  of  residual  waste  has  been  opened  up  to 
competition  by  abandoning  the  strict  rules  on 
installations 
treating  and  disposing  of 
municipal  waste.  Moreover,  starting  in  2021, 
mixed waste from the municipalities that have not 
set  up  separate  collection  schemes  will  not  be 
accepted  for 
law  has  also 
incineration.  The 
introduced  powerful  incentives  for  households  to 
separate  recyclable  waste  as  the  cost  of  mixed 
waste  disposal  is  to  be  two  to  four  times  higher 
separated  waste.  Lastly, 
than 

that 

for 

44 

05101520253035PLCZBGIELTHUSKUKBEDELVESROATEEHRHLFRLUNLSIDKITCYMTPTFISE 
   
                                                           
3.5. Environmental sustainability 

Box 3.5.1: Coal Regions in Transition 

Polish  coal  regions  face  various  transformation  challenges.  While  the  transition  from  coal  to  other 
sectors has progressed substantially over the last years (see graph 3.5.2), it will keep directly affecting coal 
regions communities in the coming years. This applies particularly, but not only, to Silesia, Wielkopolskie 
(the  Konin  sub-region),  Lower  Silesia  (the  Bogatynia/Turoszów  mines  and  Walbrzych  former  mine  area) 
and  the  Bełchatów  area.  Transition  challenges  faced  by  these  regions  depend  on  the  specific  local 
circumstances and on the stage of the transformation from a coal-based economy. These challenges mainly 
relate to the creation of new jobs, reskilling and upskilling and new business opportunities, as well as to the 
rehabilitation  of  former  mining  sites  and  land  restauration.  Further  support  to  affected  territories  from 
national  and  EU  budgets based  on  integrated  national  and  local strategies  will  be  required  for  the  smooth 
transition to a climate neutral economy. Therefore, measures aimed at building the administrative capacity 
of local governments are decisive for the successful delivery of related public policies and investments. 

Konin, a sub region starting the transition, has to deal with strong dependence on the coal sector and 
related environmental challenges. Although the proportion of workers directly employed in coal mining is 
low (some 2,000 jobs), the coal-related activities are crucial for the local community. Lignite extraction and 
coal  power  generation  account  for  almost  6,000  direct  jobs.  This  represents  8.5%  of  all  employees  in  the 
sub-region, which is already facing a high unemployment rate (11.4% in Konin powiat versus 3.7% in the 
Wielkopolskie  Region).  Power  generation  and  coal  extraction  are  one  of  the  biggest  tax  sources  for  local 
communes. However, open-pit lignite mines cause environmental problems, such as prolonged drought and 
lowering of the groundwater level. Moreover, lignite electricity generation is the source of energy with the 
greatest  climate  impact  (Szpor  and  Kiewra,  2018).  Lignite  resources  in  this  area  are  expected  to  be  fully 
used up in the next decade. This may add to an economic slowdown of the region. Some projects are being 
prepared by local stakeholders and supported by the Coal Regions in Transition Initiative, aiming at offering 
alternative job opportunities in renewable energy production and hydrogen technologies. Successful energy 
transition of the region also depends on attracting new investors. 

The Silesia region, currently in transition, is challenged by the impact of coal mine closures on jobs, 
depopulation and post-industrial area degradation. Silesia is the biggest mining region in the EU, with 
the highest coal production and the greatest coal sector employment (around 78,000 direct jobs). Since the 
early 90s, the region has been going through restructuring. Of 70 mines in the early 1990s, only 18 remain 
and the share of the sector’s gross value added in the region dropped from nearly 25% in 2000 to 13% in 
2016.  The  region,  however,  remains  strongly  dependent  on  coal.  Mining  remunerations  are  on  average 
significantly higher than for comparable positions in other industries (Szpor and Kiewra, 2018) and has the 
highest rates of employment in coal-based power generation in the EU (over 1,500 jobs). Around 18% of the 
territory in Silesia is degraded due to the coal sector’s activities. In the context of the transition, 4.6% of its 
inhabitants  left  Silesia  between  2000  and  2017.  These  challenges  are  being  addressed  and  wide  range  of 
projects  to  support  business,  revitalisation  and  air  quality  improvement  has  been  designed.  Examples  of 
projects  aiming  to  create  start-ups  and  the  internationalisation  of  SMEs  are  the  “Ksennon-business 
accelerator” and “Inter Silesia”, set up with the help of the Coal Regions in Transition Initiative. 

The Wałbrzych sub-region, impacted by an unfinished transition, suffers from low levels of economic 
development, social issues and degradation of infrastructure. The coal-mining sector dominated in the 
Wałbrzych sub-region until the end of coal extraction in 1998. Since then, the unemployment, poverty and 
depopulation  (number  of  inhabitants  declining  by  4%  since  2005  overall  and  by  10%  in  the  city  of 
Walbrzych) have been above the averages for the Lower Silesia region (Wrocław University of Economics, 
2018). The GDP per capita in the sub-region reaches only 50% of the EU-28 average, while the average for 
Lower  Silesia  was  77%  in  2017  (Eurostat).  The  level  of  investment  is  low  and  the  region  seems  rather 
unattractive  to  foreign  investors.  The  transport  infrastructure  is  underdeveloped.  Another  significant 
problem  is  land  reclamation  and  revitalization  of  degraded  areas.  The  Wałbrzych  sub-region  also  faces 
degradation of existing infrastructure due to geological problems stemming from dense underground mining 
structures.  This  sub-region  has  started  preparation  of  projects  within  the  Coal  Regions  in  Transition 
Initiative, such as the construction of a water production plant for the Wałbrzych agglomeration, using post-
mining water intake and the construction of a plant for the use of geothermal heat from these waters.  

45 

 
ANNEX A: OVERVIEW TABLE 

Commitments  

Summary assessment (36)  

2019 country-specific recommendations (CSRs)  

CSR  1:  Ensure  that  the  nominal  growth  rate  of  net 
primary  government  expenditure  does  not  exceed 
4.4%  in  2020,  corresponding  to  an  annual  structural 
adjustment  of  0.6%  of  GDP.  Take  further  steps  to 
improve the efficiency of public spending, including 
by improving the budgetary system.  

Poland  has  made  limited  progress  in  addressing 
CSR1  (this  overall  assessment  of  CSR  1  does  not 
include  an  assessment  of  compliance  with  the 
Stability and Growth Pact): 

Ensure  that  the  nominal  growth  rate  of  net  primary 
government  expenditure  does  not  exceed  4.4%  in 
2020,  corresponding 
structural 
adjustment of 0.6% of GDP.  

to  an  annual 

The  compliance  assessment  with  the  Stability  and 
Growth  Pact  will  be  included  in  spring  when  final 
data for 2019 will be available. 

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

Limited  progress  has  been  made  in  improving  the 
efficiency  of  public  spending:  works  to  reform  the 
budget  system  initiated  in  2016  were  continued  in 
2019.  The  main  effort 
focuses  currently  on 
multiannual  budget  planning,  modernisation  of  the 
Standard  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:  Ensure  the  adequacy  of  future  pension 
benefits and the sustainability of the pension system 

Poland  has  made  Limited  Progress  in  addressing 

(36)  The following categories are used to assess progress in implementing the 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 fully 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. 

46 

 
 
                                                           
 
 
 
 
 
A. Overview Table 

CSR 2 

increase 

taking  measures 

by 
the  effective 
to 
retirement  age  and  by  reforming  the  preferential 
pension  schemes.  Take  steps  to  increase  labour 
market  participation,  including  by  improving  access 
to  childcare  and 
long-term  care,  and  remove 
remaining  obstacles  to  more  permanent  types  of 
employment.  Foster  quality  education  and  skills 
relevant  to  the  labour  market,  especially  through 
adult learning.  

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

No Progress. Preferential pension schemes were not 
reformed.  Poland  did  not  take  any  new  targeted 
action  aiming  at  the  increase  of  the  effective 
retirement age. 

Take  steps  to  increase  labour  market  participation, 
including by improving access to childcare and long-
term  care,  and  remove  remaining  obstacles  to  more 
permanent types of employment.  

Limited  Progress.  Labour  market  participation 
increased, although for certain groups it is still below 
EU  average.  Access  to  childcare  increased  but  still 
constitutes  a  major  challenge  for  the  age  group  0-3. 
Access  to  long-term  care  still  remains  very  limited, 
as this is mainly provided within families. Poland did 
not undertake major actions removing the remaining 
obstacles to more permanent types of employment. 

Foster  quality  education  and  skills  relevant  to  the 
labour market, especially through adult learning.  

Limited Progress. Overall, Poland has made limited 
progress  regarding  the  quality  of  education.  The 
latest  school  system  reorganisation  has  led  to  worse 
working  and  learning  conditions  in  many  schools, 
which  were  aggravated  due  to  the  double  cohort  of 
students  who  entered  secondary  schools  in  2019. 
Although  the  2018  PISA  results  showed  Polish  15 
year-olds  performing  very  well  in  basic  skills,  the 
latest reorganisation of school education has changed 
the previous system, including the phase-out of lower 
secondary  schools  (gymnasia).  Shorter  common 
general  education  period  and  earlier  channelling  of 
pupils  is  likely  to  increase  the  risk  of  educational 
inequalities,  in  particular  between  urban  and  rural 
areas. Since school resources remain limited, all this 
is  very  likely  to  affect  the  quality  of  educational 
outcomes  and  students'  performance  in  basic  skills. 
The  new  law  of  25/07/2019  on  teacher  education 
aims  to  improve  the  quality  of  initial  teacher 
education. No measures have been taken to improve 
the  quality  and  relevance  of  continued  professional 
development  opportunities.  Despite  increases  by 
almost  15%  in  2019,  teachers'  salaries  are  low  in 
comparison  with  those  of  other  tertiary  educated 
workers  in  Poland,  which  makes  teaching  careers 
less attractive, contributing to shortages and negative 
selection. The level of enthusiasm of teaching staff is 
among the lowest in the EU, as reflected in the 2018 

47 

A. Overview Table 

PISA  results.  The  2018  reform  of  higher  education 
progresses  steadily.  The  reform  has  changed  the 
funding mode, management and evaluation of higher 
institutions.  New  quality  assurance 
education 
institutions  focusing  on  scientific  outputs  have  been 
created.  It  is  uncertain  whether  the  reform  will 
contribute  to  improving  the  quality  of  teaching,  the 
continued 
pedagogical 
professional development of lecturers.  

preparation 

and 

the 

Poland  has  made  Limited  Progress  in  addressing 
CSR 3  

including 

CSR  3:  Strengthen  the  innovative  capacity  of  the 
research 
by 
economy, 
supporting 
institutions  and 
their  closer  collaboration  with 
business.  Focus  investment-related  economic  policy 
on  innovation  [Focus  investment-related  economic 
policy  on]  transport,  notably  on  its  sustainability 
investment-related  economic  policy  on] 
[Focus 
digital  [infrastructure]  [Focus 
investment-related 
economic  policy  on]  energy  infrastructure  [Focus 
investment-related  economic  policy  on]  healthcare 
investment-related  economic  policy  on] 
[Focus 
cleaner  energy, 
regional 
disparities  Improve  the  regulatory  environment,  in 
particular  by  strengthening  the  role  of  consultations 
of  social  partners  and  public  consultations  in  the 
legislative process.  

into  account 

taking 

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

its 

through 

research 

institutions 

Some  Progress.  Poland  has  taken  measures  to 
the 
support 
implementation  of  the  Act  on  Higher  Education, 
encompassing,  among  others, 
the  selection  of 
research-intensive  universities  and  their  increased 
funding,  the  reform  of  the  evaluation  criteria  for 
research  organisations  in  a  way  that  encourages 
international cooperation, a new system for doctoral 
schools  and  a  re-configuration  of  the  university 
council  which,  through  the  inclusion  of  external 
stakeholders,  places  more  emphasis  on  universities' 
socio-economic  impact.  Polish  research  institutions 
can  be  further  strengthened  through  the  current 
reform  of  the  Polish  Academy  of  Science,  the 
consolidation  of  the  Łukasiewicz  Research  Network 
and the setting up of the Virtual Research Institute in 
the  area  of  medical  biotechnology  -  oncology. 
Science-business  links  can  be  enhanced  through  the 
the 
research 
Łukasiewicz Network, as well as through the ‘School 
for  Innovators’  pilot-project  run  by  the  Centre  for 
Citizenship  Education  with  the  aim  of  developing 
students'  entrepreneurial  skills  and  the  continuation 
of  the  industrial  doctorate  programme.  Poland  is 
supporting the business sector in its transition to the 

commercialisation 

potential 

of 

48 

A. Overview Table 

industry  4.0  through  the  'Industry  for  the  Future' 
platform,  which  is  organising  a  series  of  workshops 
for entrepreneurs. 

investment-related  economic  policy  on 

Focus 
innovation  

Limited  Progress.  The  National  Strategy  of 
Regional  Development  2030  adopted  in  September 
2019  includes  investment  activities  in  the  field  of 
innovation.  This  is  a  significant,  albeit  insufficient 
measure  as  it  mostly  focuses  on  strengthening 
cohesion  and  reducing  inter-regional  disparities, 
including  in  innovation.  Innovation  diffusion  and 
reducing  regional  disparities  are  important  policy 
goals,  but  supporting  the  advanced  regions  is  also 
equally  important,  given  that  they  have  the  greatest 
potential  for  creating  breakthrough  innovations.  The 
regional  approach  outlined  in  the  National  Strategy 
of Regional Development 2030 needs to be balanced 
by a national investment strategy in innovation. The 
diversification  and  increased  attractiveness  of  R&D 
tax incentives can strengthen the innovative potential 
of the Polish economy. 

[Focus 
transport, notably on its sustainability  

investment-related  economic  policy  on] 

Limited  Progress.  The  information  provided  so  far 
is  lacking  in  sufficient  level  of  detail.  Some  key 
documents  have  been  referred  to.  However,  there  is 
no  description  of  the  ongoing  or  planned  activities. 
In  particular,  it  has  not  been  explained  how  the 
investments  undertaken  and 
the  accompanying 
regulatory,  operational,  financial  or  fiscal  actions 
will increase the role and share of sustainable modes 
of transport. This concerns in particular:  

in 

to 

road 

from 

traffic 

freight 

transport 

rail;  
-  shifting 
-  boosting  the  competitiveness  of  railways  against 
road 
traffic; 
-  reconstruction  of  the  public  transport  services  in 
rural 
areas; 
-  transfer  of  passenger  traffic  in  urban  areas  from 
individual  to  public  transport  and  sustainable  forms 
of mobility.  

passenger 

[Focus 
digital [infrastructure]  

investment-related  economic  policy  on] 

Some  Progress.  In  2019,  Poland  adopted  a  set  of 
measures to support demand and supply for fast and 
ultrafast  networks,  mainly  by  amending  broadband 
legislation  (Ustawa  o  wspieraniu  rozwoju  usług  i 
the 
telekomunikacyjnych 
sieci 
Telecommunications  Networks 
Services 
Development  Support  Act)  which  includes,  among 
others,  setting  up  a  new  broadband  fund.  These 
country-specific 
measures 
recommendation  for  2019.  However,  a  fair  amount 
of work on their practical implementation in order to 

address 

and 

the 

– 

49 

A. Overview Table 

fully address the country-specific recommendation is 
not scheduled until 2020 and 2021. 

[Focus 
energy infrastructure  

investment-related  economic  policy  on] 

Some  progress.  Crucial  transboundary  gas  and 
electricity infrastructure investments are progressing 
well with small delays registered in the development 
of 
interconnectors  with  Lithuania  and 
Slovakia.  The  internal  electricity  network  requires 
significant  investments  for  it  to  be  sufficiently 
developed. 

the  gas 

[Focus 
healthcare  

investment-related  economic  policy  on] 

Limited  Progress.  The  National  Strategy  of 
in 
Regional  Development  2030  was  adopted 
September  2019.  It  includes  investment  activities 
related  to  the  health  care  system.  The  Partnership 
Agreement  and  the  Operational  Programmes  for 
2021-2027 Programming Period are being drafted.  

[Focus 
cleaner  energy, 
disparities  

investment-related  economic  policy  on] 
regional 

into  account 

taking 

Limited  progress.  Regarding  electricity  generation, 
the  recent  regulatory  changes  and  support  schemes 
to  on-shore  wind 
impetus 
have  given  a  new 
investments  and  stronger  role  of  prosumers  in  the 
years  to  come.  However,  most  of  the  new  and 
planned  investments  in  electricity  generation  in 
2019-2020  are  based  on  coal  and  gas  sources. 
Consequently, achieving the 2020 renewable target is 
likely to be difficult.  Following the upward trend in 
energy  consumption  since  2014,  Poland  was  not  on 
track  in  2018  to  reach  the  2020  energy  efficiency 
targets. There is a limited progress in decarbonisation 
of heating sources in buildings and improvements of 
buildings  energy  efficiency  to  enable  their  cleaner 
operation,  especially  during  winter.  Additional 
efforts  in  this  respect  will  have  positive  impact  on 
the air quality, as well. 

Improve the regulatory environment, in particular by 
strengthening  the  role  of  consultations  of  social 
partners  and  public  consultations  in  the  legislative 
process.  

No Progress. The lack of public consultation on the 
alternative legislative tracks (e.g. draft law proposals 
submitted  by  the  Members  of  Parliament)  has  not 
been  addressed.  These  alternative  legislative  paths 
allow  de  facto  omission  of  public  consultations, 
affect the overall quality of laws and remain a source 
of substantial uncertainty for citizens and businesses. 

Europe 2020 (national targets and progress) 

Employment rate target set in the NRP: 71% 

In  2018,  the  employment  rate  in  Poland  reached 
72.2%, thereby achieving the national target. 

50 

 
A. Overview Table 

R&D target set in the NRP: 1.7% of GDP for 2020  Poland  has  not  reached  its  R&D  target.  In  2018, 
R&D  was  1.21  %  of  GDP,  a  24.6%  increase  in 
relation  to  the  previous  year  (1.03  %  of  GDP).  The 
intensity  of  business  expenditure  on  R&D  (0.8%  of 
GDP)  grew  by  19.6%  annually  in  the  period  2010-
2018  and  is  double  the  intensity  of  the  public 
expenditure on R&D (0.4%). In spite of this growth, 
BERD  in  Poland  continues  to  be  below  the  EU 
average (1.4% of GDP). 

National  greenhouse  gas  (GHG)  emissions  target:  
+14%  in  2020  compared  with  2005  (in  sectors  not 
included in the EU Emissions Trading System) 

According to estimates, greenhouse gas emissions in 
sectors  not  covered  by  the  EU  Emissions  Trading 
System  increased  by  21  %  between  2005  and  2018 
overshooting the ceiling of +12%.  

2020 renewable energy target: 15% 

In 2020, the emissions’ increase is projected to level 
at  +14%  from  2005  levels; however,  this implies  an 
intensified effort to reduce emissions in the next two 
years to meet this target. 

Poland  is  at  risk  of  missing  its  2020  target.  With 
11.16% (provisional Eurostat 2018 data), it is below 
the  indicative  trajectory  (12.3%)  leading  to  the  15% 
target. 

Energy efficiency, 2020 energy consumption targets:  

Poland's  2020  energy  efficiency  target  is set  at  96.4 
Mtoe of primary energy consumption (corresponding 
to 71.6 Mtoe of final energy consumption) 

In  2018  primary  energy  consumption  reached  100.9 
Mtoe  and  final  energy  consumption  71.8  Mtoe,  i.e. 
both  exceeded  the  2020  target  levels.  This  is  a 
in  energy 
consequence  of  an  upward 
consumption  since  2014.  If  the  trend  continues, 
Poland risks not meeting its energy efficiency target. 

trend 

Early school/training leaving target: 4.5%. 

The  rate  at  each  students  leave  school/training  early 
reached  4.8%  (a  decrease  of  0.2  pp  compared  to 
2017), well below the EU average. 

Tertiary  education  target:  45%  of  population  aged 
30-34. 

Poland  is among  the  EU  countries  with  a high  level 
of  tertiary  educational  attainment.  The  share  of  the 
population  aged  30-34  who  have  successfully 
completed  tertiary  studies  have  been  increasing  for 
the past few years. The rate was 45.7 % in 2018 (the 
same  as  in  2017);  therefore  the  national  target  was 
met. 

Target  for  reducing  the  number  of  people  at  risk  of 
poverty or social exclusion, expressed as an absolute 
number of people: 1,500,000. 

Poland  has  achieved  the  target  since  2012.  By  2018 
the  number  of  people  at  risk  of  poverty  or  social 
exclusion declined by 4.5 million. 

51 

ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

52 

General government debt projections under baseline, alternative scenarios and sensitivity tests2018201920202021202220232024202520262027202820292030Gross debt ratio48.947.445.544.342.841.841.340.640.139.639.138.638.3Changes in the ratio (-1+2+3)-1.7-1.5-2.0-1.2-1.5-1.0-0.6-0.6-0.5-0.5-0.5-0.5-0.3of which(1) Primary balance (1.1+1.2+1.3)1.20.31.00.30.0-0.3-0.6-0.6-0.7-0.7-0.7-0.7-0.7(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)0.0-0.9-0.7-0.3-0.4-0.5-0.6-0.6-0.7-0.7-0.7-0.7-0.7(1.1.1) Structural primary balance (bef. CoA)0.0-0.9-0.7-0.3-0.3-0.3-0.3-0.3-0.3-0.3-0.3-0.3-0.3(1.1.2) Cost of ageing0.00.10.20.30.30.30.30.40.4(1.1.3) Others (taxes and property incomes)0.00.00.00.00.00.00.00.00.0(1.2) Cyclical component1.21.21.00.60.40.20.00.00.00.00.00.00.0(1.3) One-off and other temporary measures0.00.00.70.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-1.6-1.9-1.7-1.6-1.5-1.2-1.1-1.3-1.2-1.2-1.2-1.2-1.0(2.1) Interest expenditure1.41.31.21.21.11.11.01.01.00.90.90.90.9(2.2) Growth effect-2.4-1.9-1.5-1.4-1.3-1.2-1.1-1.2-1.2-1.2-1.2-1.2-1.0(2.3) Inflation effect-0.6-1.4-1.4-1.3-1.2-1.1-1.0-1.0-1.0-1.0-1.0-1.0-0.9(3) Stock-flow adjustments1.10.70.70.70.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Debt Sustainability Monitor (DSM) 2019. 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 after that) to bring the debt-to-GDP ratio to 60 % by 2034. The critical values used are 0 and 2.5 pps of GDP. The DSA classification is based on the results of five 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 and the DSM 2019.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. 3035404550556020172018201920202021202220232024202520262027202820292030Debt as % of GDP -PLBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario3040506020172018201920202021202220232024(% of GDP)Stochastic debt projections 2020-2024 -PLp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline3035404550556020172018201920202021202220232024202520262027202820292030Debt as % of GDP -PLBaselineHistorical SPB scenarioSGP scenario3035404550556020172018201920202021202220232024202520262027202820292030Debt 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 (2030)38.345.940.240.240.7Debt peak year20192019201920192019Percentile rank65.0%75.0%Probability debt higher19.5%Dif. between percentiles16.3LOWLong termLOW(S2 = 1.9)S1S2Short termLOW(S0 = 0.3)DSALOWDebt sustainability analysis (detail)Medium termLOWLOW(S1 = -2.2) 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2019. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2019. 
(3) Quarterly values are annualized. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

53 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)92.391.795.195.292.991.7Share of assets of the five largest banks (% of total assets)48.348.647.747.549.5-Foreign ownership of banking system (% of total assets)(2)59.158.956.545.246.745.8Financial soundness indicators:(2)              - non-performing loans (% of total loans)7.26.66.46.66.26.2              - capital adequacy ratio (%)14.915.816.918.017.917.6              - return on equity (%)(3)9.47.77.56.97.06.7Bank loans to the private sector (year-on-year % change)(1)5.45.83.87.36.16.7Lending for house purchase (year-on-year % change)(1)3.54.52.92.65.36.2Loan-to-deposit ratio(2)94.995.193.393.793.291.7Central bank liquidity as % of liabilities(1)0.00.00.00.00.40.0Private debt (% of GDP)78.178.981.676.576.1-Gross external debt (% of GDP)(2) - public29.329.228.426.122.920.7    - private29.028.830.829.728.527.6Long-term interest rate spread versus Bund (basis points)*235.3220.6294.6310.3280.2262.5Credit default swap spreads for sovereign securities (5-year)*60.861.175.958.754.258.3 
 
 
   
 
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 and/or living in households with zero or very low work intensity.       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Gross disposable household income is defined in unadjusted terms, according to the draft 2019 joint employment report.       
(4) Reduction in percentage of the risk-of-poverty rate, due to social transfers (calculated comparing at-risk-of-poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(5) Average of first three quarters of 2019 for the employment rate, unemployment rate and gender employment gap.       
Source: Eurostat 

54 

201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)5.45.35.25.04.8:Gender employment gap (pps)14.213.814.214.614.415.1Income inequality, measured as quintile share ratio (S80/S20)4.94.94.84.64.3:At-risk-of-poverty or social exclusion rate(1) (AROPE)24.723.421.919.518.9:Young people neither in employment nor in education and training (% of population aged 15-24)12.011.010.59.58.7:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)66.567.869.370.972.272.9Unemployment rate(2) (15-74 years)9.07.56.24.93.93.4Long-term unemployment rate (as % of active population)3.83.02.21.51.00.8Gross disposable income of households in real terms per capita(3) (Index 2008=100) 113.4117.7124.7128.6132.3:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)126061322113757:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)3.114.514.85:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)26.423.124.537.540.3:Children aged less than 3 years in formal childcare5.55.37.911.610.9:Self-reported unmet need for medical care7.87.36.63.34.2:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):40.044.046.0:: 
 
   
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Long-term unemployed are people who have been unemployed for at least 12 months.       
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with 10 or more employees, without restrictions for age and hours worked, are included.       
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(4)  Impact of socio-economic and cultural status on PISA (OECD) scores. Value for 2018 refers to reading.  
(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted.      
Source: Eurostat, OECD 

55 

Labour market indicators201420152016201720182019 5Activity rate (15-64)67.968.168.869.670.170.6Employment in current job by durationFrom 0 to 11 months11.711.111.511.311.2:From 12 to 23 months9.39.610.010.110.0:From 24 to 59 months15.815.615.916.317.4:60 months or over62.562.361.160.859.7:Employment growth* (% change from previous year)1.71.50.81.30.5-0.4Employment rate of women(% of female population aged 20-64)59.460.962.263.665.065.4Employment rate of men (% of male population aged 20-64)73.674.776.478.279.480.5Employment rate of older workers* (% of population aged 55-64)42.544.346.248.348.949.4Part-time employment* (% of total employment, aged 15-64)7.16.86.46.66.46.3Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)28.328.027.526.124.322.0Transition rate from temporary to permanent employment(3-year average)18.418.822.025.730.0:Youth unemployment rate (% active population aged 15-24)23.920.817.714.811.710.3Gender gap in part-time employment6.15.96.06.35.95.6Gender pay gap(2) (in undadjusted form)7.77.47.27.2::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)4.03.53.74.05.7:Underachievement in education(3):17.2::14.7:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)42.143.444.645.745.7:Variation in performance explained by students' socio-economic status(4)::::11.6: 
 
   
 
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 

56 

201320142015201620172018Expenditure on social protection benefits* (% of GDP)Sickness/healthcare4.44.34.54.84.5:Disability1.61.51.51.51.4:Old age and survivors11.311.211.111.110.6:Family/children1.41.41.52.52.6:Unemployment0.30.20.20.20.3:Housing0.10.10.00.00.0:Social exclusion n.e.c.0.10.10.10.10.1:Total19.118.919.020.319.6:of which: means-tested benefits0.80.70.70.91.0:General government expenditure by function (% of GDP)Social protection16.015.915.716.616.4:Health4.64.64.74.64.7:Education5.35.35.35.04.9:Out-of-pocket expenditure on healthcare23.723.123.322.9::Children at risk of poverty or social exclusion (% of people aged 0-17)*29.828.226.624.217.917.2At-risk-of-poverty  rate(1) (% of total population)17.317.017.617.315.014.8In-work at-risk-of-poverty rate (% of persons employed)10.710.611.210.89.99.7Severe material deprivation rate(2)  (% of total population)11.910.48.16.75.94.7Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan3.42.53.02.83.43.7Tenant, rent at market price18.414.219.819.515.914.4Proportion of people living in low work intensity households(4) (% of people aged 0-59)7.27.36.96.45.75.6Poverty thresholds, expressed in national currency at constant prices*105491084711247119941266313445Healthy life yearsFemales7.88.18.48.98.6:Males7.27.57.68.28.3:Aggregate replacement ratio for pensions(5)0.60.60.60.60.60.6Connectivity dimension of the Digital Economy and Society Index (DESI)(6):41.740.145.952.4:GINI coefficient before taxes and transfers*47.747.847.946.647.3:GINI coefficient after taxes and transfers*30.730.830.629.829.2: 
 
   
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

*While the indicator values from 2003 to 2013 are comparable, the methodology has considerably changed in 2018. As a 
result, past vintages cannot be compared with the 2018 PMR 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) Simple average of the indicators of regulation for lawyers, accountants, architects and engineers.       
(9) 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). 

57 

Performance indicators201320142015201620172018Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry-1.472.052.19-0.39-0.173.91Labour productivity growth in construction0.539.954.37-9.647.009.51Labour productivity growth in market services3.41-0.942.683.535.155.67Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry0.161.12-1.153.425.724.37ULC growth in construction1.48-6.81-2.1914.53-0.58-2.58ULC growth in market services0.482.980.452.712.722.67Business environment201320142015201620172018Time needed to enforce contracts3 (days)685685685685685685Time needed to start a business3 (days)37.037.037.037.037.037.0Outcome of applications by SMEs for bank loans40.590.750.460.530.400.47Research and innovation201320142015201620172018R&D intensity0.870.941.000.961.031.21General government expenditure on education as % of GDP5.305.305.305.004.90:Employed people with tertiary education and/or people employed in S&T as % of total employment404142434445Population having completed tertiary education5232424252627Young people with upper secondary education6909091919191Trade balance of high technology products as % of GDP-1.68-1.44-1.67-1.60-1.61-1.60Product and service markets and competition2003200820132018*OECD product market regulation (PMR)7, overall2.422.041.651.45OECD PMR7, retail2.522.432.551.30OECD PMR7, professional services83.293.333.242.00OECD PMR7, network industries93.202.702.341.63 
 
  
 
C. Standard Tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR) 
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR) 
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR) 
          Waste intensity: waste (in kg) divided by GDP (in EUR) 
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP.  
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP. 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change). 
Real unit energy cost: real energy costs as % of total value added for the economy. 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 
EUR). 
Real unit energy costs for manufacturing industry excluding refining: real costs as % of value added for manufacturing sectors. 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP. 
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000 -100 000 GJ; figures 
excl. VAT. 
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste. 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP. 
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions. 
(excl. land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy consumption of transport activity including international aviation (kgoe) divided by 
gross value added in transportation and storage sector (in 2010 EUR). 
Transport carbon intensity: GHG emissions in transportation and storage sector divided by gross value added in transportation 
and storage sector (in 2010 EUR). 
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels. 
Aggregated supplier concentration index: Herfindahl index covering oil, gas and coal. Smaller values indicate larger 
diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels. Smaller values indicate larger diversification. 
* European Commission and European Environment Agency - 2018 provisional data. 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators). 

58 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0.250.230.230.230.230.22Carbon intensity kg / €1.020.960.930.920.91-Resource intensity (reciprocal of resource productivity)kg / €1.681.621.531.551.571.62Waste intensity kg / €-0.44-0.42--Energy balance of trade % GDP-2.7-2.6-1.6-1.4-2.0-2.7Weighting of energy in HICP%15.6714.9315.6513.4713.6113.45Difference between energy price change and inflation p.p.-1.3-0.10.6-1.9-0.10.6Real unit of energy cost% of value added20.119.920.320.8--Ratio of environmental taxes to labour taxesratio0.250.250.250.250.24-Environmental taxes% GDP2.42.62.72.72.72.7Sectoral Industry energy intensity kgoe / € 0.120.120.110.110.120.11Real unit energy cost for manufacturing industry excl. refining% of value added22.021.121.622.0--Share of energy-intensive industries in the economy% GDP13.9313.8113.9214.1113.69-Electricity prices for medium-sized industrial users€ / kWh0.090.080.090.080.090.09Gas prices for medium-sized industrial users€ / kWh0.040.040.040.030.030.03Public R&D for energy % GDP0.010.010.010.000.000.00Public R&D for environmental protection% GDP0.020.030.030.030.030.02Municipal waste recycling rate%15.126.532.534.833.834.3Share of GHG emissions covered by ETS*%52.552.151.549.948.947.8Transport energy intensitykgoe / €0.760.760.810.880.910.88Transport carbon intensitykg / €1.041.061.121.281.371.31Security of energy supplyEnergy import dependency%26.429.529.930.838.3-Aggregated supplier concentration indexHHI27.127.627.325.625.4-Diversification of energy mixHHI37.335.634.834.233.432.7 
  
 
ANNEX D: INVESTMENT GUIDANCE ON JUST TRANSITION FUND 

2021-2027 FOR POLAND 

Building  on  the  Commission  proposal,  this  Annex (37)  presents  the  preliminary  Commission  services’ 
views on priority investment areas and framework conditions for effective delivery for the 2021-2027 Just 
Transition Fund investments in Poland. These priority investment areas stem from the broader analysis of 
territories  facing  serious  socio-economic  challenges  deriving  from  the  transition  process  towards  a 
climate-neutral economy of the Union by 2050 in Poland, assessed in the report. This Annex provides the 
basis for a dialogue between Poland and the Commission services as well as the relevant guidance for the 
Member  States  in  preparing  their  territorial  just  transition  plans  (38),  which  will  form  the  basis  for 
programming  the  Just  Transition  Fund.  The  Just  Transition  Fund  investments  complement  those  under 
Cohesion  Policy  funding  for  which  guidance  in  the  form  of  Annex  D  was  given  in  the  2019  Country 
Report for Poland (39). 

The transition process will likely impact all coal mining regions in Poland, namely Silesia, Wielkopolska, 
Lower Silesia, Łódzkie, Lubelskie and Malopolska. For Silesia ,Wielkopolska and Wałbrzych, there are 
on-going  transition  planning  efforts,  triggered  under  the  Coal  Regions  in  Transition  Initiative.  Priority 
investment  areas  are  identified  in  those  regions  in  the  present  Annex.  Against  this  background;  smart 
specialization  strategies  provide  an  important  framework  to  set  priorities  for  innovation  in  support  of 
economic transformation.  

Silesia,  the  biggest  mining  region,  extracts  coal  in  18 mines,  located  in  the  following  NUTS  level  3 
regions: Katowice; Bielsko – Biała, Tychy, Rybnik, Gliwice, Bytom, Sosnowiec. Despite moving away 
from coal production since the 1990s, there is a strong dependence on the coal mining sector in the local 
economy, with almost half of the number of coal miners in the EU represented by 78,000 direct jobs. The 
significant number of coal mining entities is strongly visible in the high GVA share of the coal industry. 
Moving away from coal extraction would require additional efforts on towards economic diversification, 
reskilling  and  upskilling,  counteracting  depopulation  and  on  revitalization.  Based  on  this  preliminary 
assessment,  it  appears  warranted  that  the  Just  Transition  Fund  concentrates  its  intervention  on  these 
territories. 

In  order  to  tackle  these  transition  challenges,  priority  investment  needs  have  been  identified  for 
diversifying  and  making  the  regional  economy  more  modern  and  competitive.  Key  actions  of  the  Just 
Transition Fund could  target in particular: 

  productive  investments  in  SMEs,  including  start-ups,  leading  to  economic  diversification  and 

reconversion; 

 

 

 

 

 

investments  in  the  creation  of  new  firms,  including  through  business  incubators  and  consulting 
services; 

investments in research and innovation activities and fostering the transfer of advanced technologies; 

investments in regeneration and decontamination of sites, land restoration and repurposing projects; 

investments  in  the  deployment  of  technology  and  infrastructures  for  affordable  clean  energy,  in 
greenhouse gas emission reduction, energy efficiency and renewable energy; 

investments  in  enhancing  the  circular  economy,  including  through  waste  prevention,  reduction, 
resource efficiency, reuse, repair and recycling; 

  upskilling and reskilling of workers; 

 

technical assistance. 

(37)  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  Just  Transition  Fund  2021-2027  (COM(2020)22)  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament  and  of the  Council  laying  down  common  provisions  on  the  European  Regional Development  Fund,  the  European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument (COM(2020)23). 
(38) See Commission Communication on the Sustainable Europe Investment Plan (COM(2020) 21) and Arts 6 and 7 of the proposal 
for a Regulation of the European Parliament and of the Council on the Just Transition Fund 2021-2027 (COM(2020) 22). 

(39) SWD(2019) 1020 final. 

59 

 
 
                                                           
D. Investment guidance on Just Transition Fund 2021-2027 for Poland 

The  territories  of  Katowice,  Bielsko  –  Biała,  Tychy,  Rybnik,  Gliwice,  Bytom,  Sosnowiec  could 
experience job losses, which realistically might not be entirely offset by the creation and development of 
SMEs. Exceptionally, and where necessary  for the implementation of the territorial just transition plan, 
support to productive investments in large enterprises could therefore be considered. 

In  the  region  of  Wielkopolska  (Konin  ‘NUTS  3  level  region’),  6,000  people  are  employed  in  lignite 
extraction and power generation activities. Moving away from lignite extraction could require measures 
aimed  to  create  new  jobs  in  areas  other  than  mining  and  lignite-based  power  generation.  Furthermore, 
open-pit  lignite  mines  create  environmental  challenges,  such  as  lowering  of  groundwater  and  droughts. 
Based on this preliminary assessment, it appears warranted that the Just Transition Fund also intervenes 
in this territory. 

In order to tackle these transition challenges, investment needs have also been identified for alleviating 
the  socio-economic  costs  of  the  transition.  Key  actions  of  the  Just  Transition  Fund  could    target  in 
particular: 

  productive  investments  in  SMEs,  including  start-ups,  leading  to  economic  diversification  and 

reconversion; 

 

 

 

investments  in  the  creation  of  new  firms,  including  through  business  incubators  and  consulting 
services; 

investment in research and innovation activities and fostering the transfer of advanced technologies; 

investment in land restoration and repurposing projects; 

  upskilling and reskilling of workers; 

 

 

job-search assistance to jobseekers; 

technical assistance. 

The territory of Konin is expected to suffer from substantial job losses, which might not be entirely offset 
by the creation and development of SMEs. Exceptionally, and where necessary for the implementation of 
the territorial just transition plan, support to productive investments in large enterprises could therefore be 
considered. 

In  Lower  Silesia,  NUTS  level  3  region  Wałbrzych  relied  heavily  in  the  past  on  the  coal  extraction 
industry, but due to an unfinished economic transition, suffers from low levels of economic development, 
the highest unemployment rate in Lower Silesia, social issues and degradation of infrastructure. Poverty 
and  depopulation,  low  GDP/capita,  geological  and  water  problems  related  to  underground  mining 
structures, prevent the efficient development of the area.   

In order to tackle these transition challenges, priority investment needs for alleviating the socio-economic 
costs of the transition have therefore been identified, through actions targeting in particular: 

 

 

 

 

investments in regeneration and decontamination of sites, land restoration and repurposing projects; 

investments  in  the  deployment  of  technology  and  infrastructures  for  affordable  clean  energy,  in 
greenhouse gas reduction emission, energy efficiency and renewable energy; 

investments  in  the  creation  of  new  firms,  including  through  business  incubators  and  consulting 
services; 

investments  in  enhancing  the  circular  economy,  including  through  waste  prevention,  reduction, 
resource efficiency, reuse, repair and recycling; 

  upskilling and reskilling of workers; 

 

job-search assistance to jobseekers; 

  active inclusion of jobseekers; 

 

technical assistance. 

60 

ANNEX E: PROGRESS TOWARDS THE SUSTAINABLE 

DEVELOPMENT GOALS  

Assessment of Poland’s short-term progress towards the SDGs (40) 

Table E.1 shows the data for Poland and the EU-28 for the indicators included in the EU SDG indicator 
set used by Eurostat for monitoring progress towards the SDGs in an EU context (41). As the short-term 
trend at EU-level is assessed over a 5-year period, both the value at the beginning of the period and the 
latest available value is presented. The indicators are regularly updated on the SDI dedicated section of 
the Eurostat website. 

Table E.1: 

Indicators measuring Poland’s progress towards the SDGs 

(40)  Data  extracted  on  9  February  2020 

from 

the  Eurostat  database 

(official  EU  SDG 

indicator 

set; 

see 

https://ec.europa.eu/eurostat/web/sdi/main-tables).  

(41)  The EU SDG indicator set is aligned as far as appropriate with the UN list of global indicators, noting that the UN indicators are 
selected for global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong 
links with EU policy initiatives. 

(Continued on the next page) 

61 

 
 
                                                           
 
  
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

62 

 
 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

63 

 
 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

64 

 
 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

Source: Eurostat 

65 

 
   
 
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