Reports

Poland’s Economy Can Grow Faster, but Needs Reforms

Poland can sustain growth at relatively high rates over the long term and converge to the standards of living of the eurozone countries by 2038 if it implements an ambitious reform package that bolsters productivity, increases labor force participation, and invests in foundational skill formation, finds a World Bank report published on Tuesday.

The report, The Green Transformation in Poland – Opportunities and Challenges for Economic Growth, suggests that Poland’s ability to converge to Western Europe’s standards of living by 2050 will require investments in modern technologies, and human capital. In addition, meeting rising energy demands, in part due to the electrification of transport and heating, must be supported by fostering energy independence from fossil fuel imports through increased investments in energy efficiency and renewable sources, especially wind and solar power.

“The ongoing energy crisis triggered by Russia’s invasion of Ukraine has brought energy prices in the European market to record highs,” says Cristina Savescu, senior economist at the World Bank. “Many people will struggle to pay their bills in the winter and support will be needed to help the most vulnerable to avoid energy poverty. Growing energy prices also affect businesses and hampers competitiveness, which has been a driving force behind Poland’s development over the past three decades.”

The report estimates the cost of the more ambitious decarbonization pathway needed to achieve net-zero in the power sector by 2050 at close to USD 130 billion. This amount is more than twice the current baseline and investment would need to be accelerated. Such a pathway is aligned with the European Union’s development strategy. For such investments to materialize, a more conducive regulatory environment, including for renewables, is needed. In addition, there is substantial potential for Poland to increase its role in global green supply chains. Photovoltaics, wind turbines, or electric vehicles are technologies positioned for rapid growth in the coming years.

A rigorous package of reforms that simultaneously increases investment and improves pre-tertiary and tertiary education, total factor productivity, and labor force participation could add to per capita annual economic growth rate of as much as 1.1 percentage points on average until 2050.

According to the World Bank, Poland will be able to fully capitalize on the opportunities offered by energy transition if political consensus is forged and there is better coordination of the climate agenda. The publication of a long-term strategy for climate neutrality and reorganization of central institutions could strengthen the coordination of transition efforts. In addition, it is important to adopt more ambitious decarbonization targets and swiftly remove the barriers, including regulatory and infrastructural ones, which have hindered private investment in green energy. Key barriers for any RES solution include spatial planning restrictions (the ‘The 10H Distance Act’ for example), which has effectively restricted the deployment of new wind farms for a number of years. Additionally, Poland needs to continue to improve its grid network through improved infrastructure, flexibility, and quick and transparent grid connection procedures.

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