Fiscal consolidation is likely to prove difficult. The government revised the fiscal deficit target for 2025 wider to 6.9% of GDP, on the back of continued shortfalls in revenues (set against already high social expenditure and record-high defence spending). For 2026, the government has pencilled in a general government deficit at 6.5% of GDP, marking only a limited consolidation. Projected revenues for 2026 are expected to improve from 2025 levels – mainly due to the proposed increase in taxes on banks, proposed larger excise duty hikes on alcohol and tobacco products, improved growth outlook and changes to the VAT regime. At the same time, both social and defence expenditures will likely remain elevated. Implementation risks to the 2026 budget remain, given the uncertainty regarding the President's support for the excise duty increases (the President has now approved the increased taxes on banks, thereby limiting further deterioration in the fiscal outlook). We expect the general government deficit to remain elevated at around –6.7% of GDP in both 2026 and 2027, reflecting limited consolidation progress and persistent pressures from social and defence spending. Further significant consolidation in 2027 is also subject to uncertainty as Poland approaches its next round of general elections in autumn of 2027. That said, the strong growth outlook means that we see risks from revenue slippage as limited – and this should support continued, albeit gradual, fiscal consolidation in Poland.

Strong domestic demand is likely to mean that the current account will remain in deficit over the next few years, though improving export demand could lead to a slight narrowing in the deficit in 2026. Despite the twin deficit, strong EU funds flow and robust domestic growth should continue to support credit ratings.

The Polish business environment is well above average, despite a perceived deterioration over the past decade. The World Bank Institute’s governance indicators point to generally business-friendly regulation, even as corruption perceptions persist and elements of judicial independence and legal effectiveness have weakened. The Heritage Foundation’s 2025 Economic Freedom Index ranks Poland 45th of more than 180 economies, reflecting strong scores in property rights, business and trade freedom and market openness, although government spending and judicial effectiveness remain key weaknesses.

Environmental performance is mixed. In our proprietary Environmental Sustainability Index, Poland ranks 56th of 210 economies, benefiting from low energy use and emissions per unit of GDP and relatively low water stress, but hampered by lagging renewable electricity generation, weak recycling rates and exposure to climate-related disruptions. Continued investment in energy security and decarbonization remains critical to maintaining competitiveness as EU climate policy tightens.

Political risks have eased following Poland’s 2023–24 electoral cycle but remain relevant. The new centrist coalition government has restored constructive relations with EU institutions, sharply improving predictability in policymaking and paving the way for the unblocking of previously frozen EU funds. Judicial reform and rule-of-law commitments have helped to stabilize domestic governance expectations and investor sentiment.

Nonetheless, vulnerabilities remain. Coalition cohesion is fragile, with divergent priorities on fiscal consolidation and institutional reform. The opposition remains strong and politically motivated challenges to the government’s agenda cannot be ruled out. Policy volatility could re-emerge ahead of the 2027 general election, particularly if fiscal pressures intensify or reform fatigue sets in. Still, compared with recent years, the political environment is markedly more stable, with a clear pro-EU trajectory underpinning policy continuity.