5 trends that will shape economic development in Poland in 2018 and beyond
Article 3 minute read

5 trends that will shape economic development in Poland in 2018 and beyond

30 May 2018

There are a number of trends that those operating, or looking to establish, in Poland should take careful note of.

Poland is one of the strongest and most reliable economies in the European Union (EU), having experienced average GDP growth of 4% per year since it joined in 2004.  
The country has now established itself as the top investment destination in the Central and Eastern Europe (CEE) region due to comparatively low labour and rental costs, a strong education system and a large domestic market.

The number of new investment projects is rapidly growing, supported by Poland’s 14 Special Economic Zones (SEZ), which offer companies tax exemptions and employment incentives.

Figures released by the Polish parliament highlighted that the total value of investments made by companies operating in the zones had reached €26.7bn by the end of 2016. The Ministry of Development estimated that in 2017 alone, the 14 zones attracted €5bn in investment and created 16,000 jobs.

The Organisation for Economic Co-operation and Development (OECD) estimated that GDP once again grew by over 4% in 2017, but it is projected to slow in 2018-19. This doesn’t detract from the fact that Poland remains a good location to start a business venture. Fitch has given Poland an A-rating for 2018 which is based upon a strong macro-economic performance and a sound monetary policy. Meanwhile the Doing Business 2018 report by the World Bank Group ranks Poland 27th globally for ease of conducting business.

That said, there are a number of trends that businesses operating in Poland should take careful note of.

Demographic pressures

The proportion of people working is expected to shrink. The population is aging and living longer, whilst the birth rate is decreasing. It is expected that the 15-59 age segment will decline by 2.7m by 2025.

The OECD has recommended that policies should aim at increasing labour force participation and making Poland more attractive for workers of both Polish and foreign origin. Employers are also becoming more amenable to flexible working hours and part-time contracts in order to secure the right talent.

New labour laws

The field of labour law is undergoing some significant shifts at present. Businesses operating in Poland should be aware of changes relating to the wider protection connected to parenthood, and a broader possibility to claim compensation for any incidents that occur in the workplace.

An updated tax environment

Major changes relating to the taxation system include the JPK obligation for micro-entrepreneurs, minimising the transfer of profits to other countries, regulations that will counteract tax optimisation and the introduction of the so-called ‘split payment’, which is a separate account for an entrepreneur splitting their net amount from VAT.

Data privacy

Important changes in data protection provisions are sweeping across the EU in 2018. The General Data Protection Regulation (GDPR) aims to drive more effective compliance with data protection rules. A draft Bill has been put forward, which suggests a range of changes to Polish privacy law to bring it in line with the EU GDPR. The regulation came into effect in late May 2018.

A changing banking system

The government now controls almost 40% of all banking assets following the renationalisation of the Pekao SA, the country’s second-largest bank. This has pushed Poland further away from free market principles towards a model of state capitalism.

Bank profitability has declined, reflecting depressed interest margins as well as tax and regulatory changes. The potential compensation imposed on banks for the holders of foreign currency denominated mortgages may further reduce profitability. It is believed that a swift implantation of the Financial Stability Committee’s recommendations will help to alleviate further regulatory uncertainty.

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TMF Poland’s expertise is in tax, accounting and payroll regulatory changes impacting businesses.

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Written by

Mikołaj Pluciński

Managing Director
Mikołaj

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