Poland: A Durable Link in the Supply Chain?

Unlocking EU funding is an important step toward Poland’s economic agenda, “Industry 4.0.” This aims to leverage Poland’s diverse economy, with a renewed focus on manufacturing and technologies. Introduced in 2019, these manufacturing-centric policies target eight industries for greater investment and expansion, alongside the pursuit of energy independence and net-zero emissions by 2050.¹

Poland has fourteen Special Economic Zones (SEZs) for these industries, and foreign investors are offered tax incentives via the Polish Investment and Trade Agency. Exemptions include a corporate income tax break of up to 50% of investments, and SEZs come equipped with infrastructure for manufacturing and trade.

Poland has a sophisticated local supply chain ecosystem, particularly within the automotive, construction materials, furniture, agrifood, and information technology sectors. A major benefit of this diversified approach is that Poland is not reliant on one industry, and its diversified economy would benefit from multiple streams of EU funding for climate change, and advanced innovation like robotics and automation.

The COVID-19 pandemic accelerated Poland’s digital transformation and has hastened the development of a modernized supply chain ecosystem with technology at its core. According to the European Investment Bank Investment Survey 2022, 66% of Polish companies have implemented at least one advanced digital technology in their supply chain operations.

The government also encourages collaboration between research institutions and industry through programs like the Polish National Smart Specialization Strategy, which promotes R&D and innovation. Consequently, global corporations seeking to operate in Poland will likely benefit from a digitally savvy workforce that is productive across multiple sectors.

Poland’s outlook is complicated. Prime Minister Donald Tusk, an EU insider, may struggle to transform Poland quickly because of the country’s long-standing institutional problems, his Civic Platform party’s slim majority in parliament, and the need to make major defense investments in the face of Russia’s invasion of Ukraine and ongoing territorial and border concerns. The far-right Law and Justice Party (PiS) that governed from 2015–2023 before Tusk still wields considerable influence in domestic politics and has a more abrasive style that knocks against Brussels’ priorities; this could threaten long-term stability without further investments in institutional capacity and independence.

Labor shortages significantly handicap Poland’s growth prospect, which is a challenge compounded by prevalent domestic anti-immigration sentiments. Poland has a highly educated work force; at the same time, 72% of Polish employers reported labor shortages as a key problem, and a tight labor market with historically low unemployment and high labor force participation means that the solution to Poland’s worker shortages cannot, in the short term, be solved internally. Accepting over one million Ukrainian refugees in the aftermath of the invasion helped, but this one-time shock is insufficient over the long term. Meanwhile, Tusk has adopted much of the anti-immigration rhetoric of the PiS.² As a result, we believe labor shortages are likely to impact companies operating in Poland, making expansion potentially more challenging and expensive, given the limited pool of labor.

Chronic water shortages are also problematic for the country and the implementation of water restrictions during summer months pose critical challenges to industrial plans, particularly for water-intensive businesses. The country struggles with droughts and has one of the worst water scarcity rates in Europe with a water use intensity roughly double the OECD average. Industry in Poland consumes 70% of water resources, two to three times higher than other EU nations, so water scarcity would impact industrial production and potentially lead to cost increases for industry.³