The country's post-1989 growth model, based on low labor costs, a well-educated workforce, foreign capital and technology, and deepening integration with the European Union, is slowly running out, the authors write in the report, titled “Investment as the foundation of a new model of Poland’s development.”
Bank Gospodarstwa Krajowego (BGK) and the Polish Economic Institute (PIE) argue that the country now needs a new wave of investment to stay competitive.
They say Poland requires a mix of large infrastructure projects and higher-risk investments in areas such as advanced technologies, digitization and rapid expansion of fast-growing companies. Such projects, they add, can create highly innovative and profitable firms at home.
The report places Poland’s challenges in a wider European perspective. It argues that Europe’s weakness in financing high-growth firms stems from a fragmented financial system and many different legal frameworks.
It calls for stronger domestic venture capital (VC) and private equity (PE) funds in member states and for a more competitive capital market across the European Union, referring to renewed efforts to build a single capital market.
According to BGK and the Polish Economic Institute, the central task is to expand equity financing for necessary investments.
In the short term, they expect development institutions to play a crucial role. Over the longer term, they say, Poland must find ways to direct more household and corporate savings into capital-market instruments, and create incentives for people and businesses to save more and invest more of their wealth in productive assets.
Although more than 70 percent of companies carried out some investment activity in 2024, the corporate investment rate has been falling for a decade and remains clearly below that in most European Union countries, according to the report.
Debt aversion
The study finds that 96 percent of Polish companies financed investments from their own funds in 2024, while only 38 percent used bank loans or other borrowing.
The authors say this confirms a strong reluctance to take on debt.
Surveys by the Polish Economic Institute suggest that a lack of appetite for investment often goes together with limited motivation and knowledge among business owners, who need better information and more attractive financing tools that reduce their fear of debt.
Almost 58 percent of surveyed firms show a clear growth orientation, yet about 10 percent of these growth-minded companies made no investments in 2024 because they lacked capital or access to financing.
The report concludes that low equity and difficult access to outside funding remain serious barriers for many promising businesses.
More private capital needed
To fund strategic infrastructure, including energy and transport, the report says Poland will have to mobilize much more private capital.
It cites current budget pressures and the prospect of lower European Union funds in the future, and calls for the development of infrastructure funds and stronger participation by pension funds and insurance companies.
At the same time, the authors argue that the state will need to increase tax revenues, but say research suggests the public may accept changes if they are well explained and linked to specific goals.
A key theme of the report is the gap between Poland and Western Europe in the development of its capital market, especially VC and PE funds, which are central to financing company growth.
VC, PE funds
Citing estimates by consulting firm Deloitte, the authors say the annual shortfall in VC investment compared with France is between PLN 500 million (EUR 120 million, USD 140 million) and PLN 2.2 billion, and between PLN 17.4 billion and PLN 19.1 billion (EUR 4.5 billion, USD 5.3 billion) compared with the United States.
If the analysis is extended to all private equity activity, the annual gap between Poland and Europe is around PLN 14.5 billion (EUR 3.4 billion, USD 4 billion) in unrealized investments, the report says.
The study notes that almost half of VC transactions in Poland last year involved foreign private capital, and around 30 percent relied on public money.
The authors say assets accumulated in the so-called second and third pillars of the pension system are currently not used to finance private equity funds.
Even if these funds were engaged at levels seen in Western Europe, they would cover only about 4.2 percent of the gap between the Polish private equity market and the European average, the report estimates.
Higher-risk projects
The document also looks at how Polish households and companies manage their wealth.
In 2024, the financial assets of households accounted for about 93 percent of gross domestic product (GDP), and those of entrepreneurs to just 41 percent.
The European Union averages are much higher, at 214 percent and 140 percent respectively, according to the study.
A large share of Polish assets is held in cash and bank deposits, while many people keep most of their wealth in real estate.
Capital in such forms is difficult to channel into higher-risk investments, the report notes.
The authors point out that the Polish banking sector is relatively small compared with countries such as Germany, Spain or Finland. Traditional bank lending, they add, does not match the needs of the development-focused, higher-risk projects the Polish economy now requires.
In this context, the report says, the role of national and international development institutions is growing. These bodies help mobilize private capital for infrastructure projects, for example in the energy sector, support rapidly growing firms and reduce risk for private investors by backing specific projects and investment funds.
The authors say the Innovate Poland program fits this approach. By involving public institutions such as the Polish Development Fund (PFR), BGK, the European Investment Fund, and state-controlled insurer PZU, the scheme aims to speed up the development of Poland’s equity investment and venture capital markets.
(rt/gs)
Source: PAP