Once heralded as a great investment opportunity, Poland may have exhausted its advantages. The country’s budget deficit is unsustainably high, the government is struggling to implement promised reforms, and citizens are growing weary of Ukrainian immigrants.
Poland has been a darling of the investment community for good reason. After joining the EU in 2004, the Eastern European state enjoyed high growth off a low base, in terms of economic size and productivity. Its relatively cheap labour attracted European industry and investments, and many Polish workers sent home remittance payments from the rest of the EU.
But in recent years Poland’s debts and deficits have been increasing. The war in Ukraine saw inflation peak at more than 14% in December 2023, with millions of immigrants flooding across the border, lowering wages, raising prices and putting a strain on public resources.
The results of the Brexit referendum, which saw the UK leave the EU, have also had implications for Poland. Instead of receiving remittances from abroad, more Polish workers now stay at home, boosting the economy but dampening wages. A flood of wheat from Ukraine that was once exported via the Black Sea has simultaneously put a strain on Polish farmers.
Unlike Hungary’s Viktor Orban, who has called for a diplomatic solution to the conflict, Polish prime minister Donald Tusk has remained a steadfast supporter of more arms and sanctions. During his speech at the Warsaw security forum in September, Tusk called the war in Ukraine “our war”, emphasising the need for Western unity and Poland’s role as a Nato logistics hub.
The following month Tusk doubled down, warning Britain that it was a “sweet illusion” that it would be spared in the event of a war between Nato and Russia, arguing that Moscow could deploy ballistic missiles in Belarus or Kaliningrad that could reach London.
Yet, just a few days later Polish media reported that the government’s Main Traffic Inspectorate had approved the launch of a new bus connection from Kaliningrad to Warsaw. Tusk followed up this contradiction by announcing the reopening of two border crossings with Belarus — at Bobrowniki-Berestowice and Kuznica-Bruzgi.
It may be that the war rhetoric is being used to distract from domestic shortcomings. The government-run radio station Polskeradio24 reported in mid-October that in two years Tusk has fulfilled just 19 out of 100 campaign promises made in the 2023 election, and even these modest legislative successes have come at a hefty fiscal cost.
Poland’s most notable reforms under Tusk have been pay raises for teachers and other public sector workers, increased funding for in vitro procedures, and pension reform for widows. But there has been a notable failure to deliver on promised energy market and tax reforms, not to mention Poland’s stringent anti-abortion laws, which remain firmly in place.
Under Tusk, the budget deficit and national debt are growing rapidly. The latest figures from the Central Statistical Office and Eurostat show that by the end of 2025 the budget deficit could reach 7% of GDP, giving Poland the fastest-growing public debt pile in the EU.
The EU’s prudential limit is 3% for member states’ deficit-to-GDP ratios and 60% for debt-to-GDP. However, according to Eurostat only Denmark, Ireland and Cyprus have maintained healthy surpluses (all about 4.5%), while Portugal, Luxembourg and Greece enjoy modest surpluses (ranging from 0.7% to 1.3%).
Every other EU member state has reported a deficit, the highest of which were recorded in Romania (minus 9.3%), Poland (minus 6.6%) and France (minus 5.8%). This means more than half the EU had deficits of 3% or higher, with Poland being the second worst offender.
While Polish GDP growth has remained about 3% thanks to deficit stimulus combined with billions in additional annual funding from the EU, unemployment has started to rise. This might explain why Polish public support for Ukrainian immigrants is waning.
A recent Bloomberg report noted that Polish attitudes toward Ukrainian migrants have cooled sharply. Though Poland remains one of Kyiv’s key supporters and hosts 2.5-million Ukrainians (representing nearly 7% of the total population), more than half of Poles view state benefits for newcomers as too generous.
Public approval for accepting Ukrainian migrants has fallen from 94% in early 2022 to 48%, and recent surveys suggest Polish citizens believe social programmes such as free healthcare should apply only to migrants who work and pay taxes. The latest surveys also suggest about two thirds of Poles would object to Ukraine joining the EU and Nato.
The war in Ukraine has undermined Europe’s economy. GDP growth is weakening and foreign investment in the EU has dropped to a nine-year low. Businesses have been squeezed by high energy costs, US tariffs and competition from China, and citizens are becoming more hesitant about spending, leading to a decline in demand across the bloc.
This changes the investment calculus for countries such as Poland that have performed strongly in recent years but now face new challenges. The Spar Group’s Polish misadventure is certainly a cautionary tale. Spar acquired a controlling stake in the Polish deli and supermarket chain Piotr i Pawel in 2019, but the business underperformed, incurring about R4bn in losses.
While the Polish stock market has performed well in 2025, the JSE has performed even better, and the rand has started to recover from an April low against the zloty. While Poland’s budget deficit continues to rise, South Africa’s is forecast to fall below 3% by 2029. This has led to South Africa’s first sovereign credit rating upgrade in 20 years.
South Africa emerged as a top-performing market in 2025, with over 55% year-to-date gains (more than 40% in dollar terms), according to analysis from Morningstar. Despite comprising only about 3% of the emerging-market index, South Africa has performed extremely well this year thanks to gold, platinum and diversified mining stocks.
For investors, the contrast is stark. Poland’s once enviable combination of cheap labour, EU integration and political stability has given way to spiralling deficits, public frustration and policy inconsistency. As South Africa and other emerging markets stage a comeback, nations such as Poland could lose their crown as the darlings of the investment world.
• Shubitz is an independent Brics analyst.
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