Europe’s Tiger Economy. Europe’s Most Dynamic Economy. There are several accolades that have been touted around about Poland in the recent past. However, with inflation still nearer to 5%, is this newfound optimism real? Is it worth investing in Poland in 2025?
The inflationary spectre is constantly shadowing Polish domestic policies. With extremely low unemployment, surely this can only drive wages higher. Add to that a strong Polish zloty lowering the attractiveness of Polish exports, and you can see that there is a challenge here. Especially if you consider how much of Poland’s exports centre on automotive, and the related challenges that the automotive sector is facing in Europe today.
Returning to the topic of inflation, there are several opponents to the politics of Adam Glapinski, the head of Poland’s central bank. One of those opponents is Joanna Tyrowicz, once dubbed a rising star of Polish economics, and a professor at the University of Warsaw. Joanna recently commented on the current inflationary challenges facing Poland. She was less than complimentary.
“The current head of the Polish central bank has a tendency to pass the blame for inflation onto others,” Joanna shared with Business Insider in October. “First it was by blaming Putin, then something else, then they printed big banners, now it’s because the government has raised public sector salaries.”
Joanna believes that interest rates should be higher. This, in her opinion, would better curtail inflation than current Polish central bank policies.
Joanna isn’t the only one to question the economic policies of the current Polish government. Leszek Balcerowicz, former deputy prime minister, finance minister, and the ‘architect’ of Poland’s transformation also has his misgivings:
“Poland’s economy developed quite quickly in recent years, despite bad economic policy… as there were at work compensating factors, such as the inflow of a million employees from Ukraine. The impact of these factors is to dampen the effects of poor economic policy, which the current government continues but which will anyway inevitably lead to a slowdown in growth. At that time, the state of public finances will become dramatic.”
What do Private Equity Investors say about investing in Poland?
Poland’s economic policies are only one part of the problem. The other is the impact on inward investment into Poland by private equity and venture capital, bearing in mind there is a full war waging just on Poland’s border. Investors, especially private equity, are often scared off by geopolitical uncertainty. Has this affected the appetite of these companies though?
The big story of 2024 so far has been the sale of the remnants of Getin Noble Bank in Poland. Cerberus is an established investment advisor with approximately $65 billion in assets. It found the lure of buying into Polish banking an attractive proposition. The sale was supported by the International Finance Corporation or IFC and the EBRD. The latter named organizations have been involved in other investments in Poland in 2024. Other investors include local companies such as Innova Capital or PFR Ventures.
Several market participants, like DLA Piper, believe that the Polish market is gradually picking up. The company shared how there is potential for investment in emerging companies with disruptive ideas. This could mean that Poland is an attractive option for investors looking to make a significant impact while generating strong returns on their investments.
What about Investment in Poland in 2025?
In 2024 so far there have not been many IPOs across Europe. But there have been a few in Poland. The biggest so far this year has been Poland’s Seven Eleven, or Zabka. This IPO may be one of the biggest in the history of the Polish Stock Exchange in time. It has also helped drag the spotlight back onto the Warsaw Bourse. Other companies that have listed or are still planning to list this year include the Polish software firm TTMS. MediSensonic and Diagnostyka SA.
The future of the Polish equity markets seems sound. To make things even more attractive, Poland’s financial regulator is seeking to speed up approvals for companies planning IPOs to help lure back issuers to the country.
“We need to amend our procedures to make issuers willing to access the Polish market using the Polish regulatory channel,” Chairman of the Polish Regulator, KNF, Jacek Jastrzebski shared in November.
This initiative is being put in place to encourage companies like InPost to choose Warsaw to list, rather than Amsterdam as was the case.
However, generally the performance of shares on the Polish stock exchange this year has not been exemplary. Shares in Allegro, arguably Poland’s biggest tech firm, have dropped year-on-year. PKO BP, the largest company on the Polish stock exchange, and a public sector bank to boot, rose by just under 15%. It hasn’t been a bad year for Polish equities. However, when you take into account inflation (4.6%), then the 5.7% year on year growth reported in the third quarter of 2024, it is a very small return.
What about Polish Startups?
In other news the amount of funding rounds in Poland in Quarter 3 2024 was 45. However, overall it is not a good picture as both deal volume and total funding continue to dwindle in Poland, and in Europe.
Leading investment platform Vestbee recently published a report on the Polish and wider Central Eastern European startup landscape. The report highlights how there has been a decline in the number of deals across the region which may signal a contraction in early- and growth-stage activity.
Poland’s largest investor, PFR Ventures may have an indirect portfolio of over 900 companies today. But it’s clear that there are only about 80 companies the firm is focusing on. The rest might need to up their game to achieve the success they need.
What about Polish Government Bonds, and Polish Private Pensions?
One of Europe’s biggest asset managers, Amundi, is one of the companies buying Polish bonds today. Not necessarily because they are good. But partially because they are better than Hungarian bonds.
A concern about the bond market in Poland is the high percentage of publicly owned banks, their role in selling bonds, and how many bonds they own themselves.
Here, again, Leszek has pointed out his concerns about the percentage of ownership by Polish banks in Poland’s bonds. He estimates this at 34% which if there is a run on the zloty could prove a costly experiment:
However, it’s also the pension pot that worries some investors. For those of you new to Polish fiscal policy, it’s worth mentioning that in 2014, when Donald Tusk was Prime Minister of Poland for the first time, his government was responsible for ‘lifting’ 152,8 billion zloties from privately owned pensions and moving them to the Social Security Department in Poland. With the current privately owned pension pot being estimated at 213 billion zloties, let’s hope that Tusk isn’t planning a second raid. This time there are 14 million Poles who would be affected.
Unlike in other countries, the Polish private pension structure is not able to invest in Polish government bonds. Confused? So are many others. Publicly owned banks are allowed to invest though….
So? Should You Invest in Poland?
Initially things started well for Poland’s current government. Tusk’s ability to unlock EU funds suspended for infringements under the previous cabinet have inspired investor goodwill.
As the year has gone on. Things have not improved as much as some would have hoped. Next year there is very little scope for Poland to lower interest rates:
The economic situation within the EU continues to be challenging. As for Donald Trump… Well, Radoslaw Sikorski, Minister of Foreign Affairs of Poland, has a few words to say about him… Few of them complimentary, google ‘proto-fascist’ if you want to know more.
For now, according to Fitch, Poland has an ‘A-‘ Outlook. The ratings agency highlights a few matters of concern. Growing government debt. High military expenditure. Significant rise in public wages and social benefits. But. Finally. It will probably boil down to how inflation pans out into 2025. Will Glapinski work a miracle, or are his critics correct in their opinions? Only time will tell.
Author: Andy Samu
See Also:
How do they do it at ITCARD in Poland? | Disruption Banking
Poland’s Tech firms are welcome in the United Kingdom | Disruption Banking
Alior Bank Kickstarts Acceptance of Open Banking in Poland | Banking
Why Are Central Banks Purchasing Gold (XAU)? | Disruption Banking
