Reports 2023

Global trade shifts triggered by the pandemic, the Russian invasion of Ukraine and the trade rivalry with China have prompted the EU to take its own measures to support domestic industry. Annual spending on state aid to companies increased by 188 % between 2020 and 2021. Aid from Germany and France alone accounted for as much as 77 % of all notified state aid to companies in the EU between March 2022 and January 2023. However, new measures are limited at EU level, with more transfers between existing funds and plans to mobilise private funds. Efforts to maintain the EU's global competitiveness threaten cohesion and competitiveness within the EU. For example, Central and Eastern Europe did not receive any funding under the third round of allocating funds for low-carbon industry from the Innovation Fund. Support for green industry and the cohesion of the single market is analysed by the Polish Economic Institute in its report 'The Single Market in a Time of Storm: The struggle to maintain competitiveness and cohesion in an era of growing protectionism.'

Poland and the EU economy are slowly recovering from the slowdown. Poland's GDP in 2023 grew by 0.3 %, which is close to the average for the 27 EU countries - the European Commission estimates 0.6 %. A rebound is expected next year. Poland's economic growth in 2024 should oscillate around 2.3 %, while in the EU the Commission optimistically forecasts 1.3 %. Inflation is also systematically slowing down. Its average value in Poland in 2023 amounted to 11.6 %. In the following year, the rate of price growth will fall to 5.1 %. At the same time, a two-digit rate of salary growth will be maintained, which in 2024 will amount to 10.3 %. These are the conclusions that can be drawn from "Economic Review PEI: Winter 2023", a report published by the Polish Economic Institute.

On 14-15 December, EU leaders will decide whether to start accession negotiations with Ukraine. In this context, Kyiv faces a number of challenges, as set out by experts from the Polish Economic Institute and the Ukrainian Centre for Economic Strategy in a joint report entitled Stronger Together: Present and Future Challenges on Ukraine's Road to EU Integration. In the short term, the greatest challenge is to ensure stable sources of financing, especially for significant needs linked to conducting military operations. In the medium term, Ukraine will need to overcome infrastructure problems and attract investments. In the long term, the primary change will be successful reforms that will build strong institutions that will ensure the country’s socio-economic development and allow Ukraine to join the European Union.

The French project of the European Political Community (EPC), including EU member states and 17 other countries in Europe and Eurasia, excluding Russia, has significant political and economic potential. The participation of EPC economies in the global GDP would be 23.5 percent. Currently, this area is home to 689.5 million people, which constitutes 8.7 percent of the world's population. The GDP per capita of countries outside the EU that would be part of the EPC is 88.8 percent of the EU average. The Polish Economic Institute, in its report titled "European Political Community: Geopolitics, Civilization, and the French Vision for the Future of the European Union," analyzes the French idea of the geopolitical and civilizational opening of the EU to other countries.

Poland is one of the leaders in the EU in terms of road freight transport. It was responsible for the transport of 380 billion tonne-kilometres (tkm) in 2021 — the most in the entire EU and 24% more than Germany, which ranks second. The Polish truck fleet consisted of 1.15 million vehicles in 2021. The sector employed 486,000 people in 2020, 15% of the EU total. The TSL industry is currently facing changes resulting from EU CO2 emission standards for trucks, which will force it to electrify. In its report entitled The electrification of the heavy-duty road transport created in cooperation with the Polish Alternative Fuels Association (PSPA), the Polish Economic Institute analyses the electrification scenarios for the sector and the potential economic consequences.

Building Small Modular Reactors (SMRs) could be an important form of support for the energy transition. According to official announcements by manufacturers, over 100 SMRs are set to be built in Poland by 2040. Experts indicate that, apart from producing energy for industry, SMRs’ greatest potential may lie in the production of system heat in the largest Polish agglomerations; for example, three reactors with a capacity of 900 MWt (300 MWe) could meet up to 80% of Warsaw's demand for system heat in 2040. At the same time, experts point out that — although they could play an important role in the decarbonisation process — building SMRs will not replace the need to invest in renewable energy and large-scale nuclear energy. These are the conclusions of the Polish Economic Institute’s report entitled Prospects for the use of SMRs in Poland’s energy transition, which analysed SMRs’ potential in the energy industry and the potential barriers to developing this technology.

The ICT sector in the Three Seas Initiative (TSI) countries is developing rapidly. The total value of exports of ICT goods and services from the TSI countries was USD 154 billion in 2021. The ICT industry generated USD 73 billion of value in the TSI countries and 4.7% of the region’s GDP. This has been accompanied by improvement in the level of digitalisation in the TSI countries. According to the DESI, the TSI countries are catching up with Finland, which opens the ranking, in three out of four categories. In a new report entitled “The ICT sector in the Three Seas Initiative countries as a regional driver of growth”, the Polish Economic Institute and the CEE Digital Coalition, a coalition of the digital industry in the Central and Eastern European countries, examine the TSI economies’ digital development and the ICT sector’s role and significance in the region.

By 2040, global demand for rare-earth elements is expected to increase seven-fold and demand for lithium 42-fold. China is the main producer in many categories of critical raw materials. Russia also remains a raw material powerhouse. 19% of the world's reserves of the metals needed to produce a standard lithium-ion battery are in Africa and the Democratic Republic of the Congo’s share in global cobalt production amounted to 71.2% in 2022. In its new report entitled “African critical raw materials and the EU's economic security”, the Polish Economic Institute analyses the demand for critical raw materials in the EU (and Poland) and its compatibility with the raw material reserves on the African continent.

The year 2022 was dominated by the Russian invasion on Ukraine and the rising inflation after the outbreak of the energy crisis. Since then inflation persists in the countries that the price spillovers originated from. The inflation of sticky prices increased more slowly than that of more flexible ones right after the energy crisis. This distorts the relative prices and probably requires another wave of adjustments in the stickiest categories. Polish Economic Institute in the report “The false start of disinflation – evidence from the major European economies” analyses the international risks related to inflation after the outbreak of the energy crisis in 2022.

Poland and other European Union countries are grappling with the economic slowdown. Economic growth in Poland over the next two years will be moderate: 0.7% in 2023 and 2.2% in 2024. In spite of this, inflation will remain high — 12.6% in 2023, on average, and 7.9% in 2024. Nevertheless, average wage growth will remain in double digits and household wealth will increase. The weaker economic activity is having little impact on the labour market. Unemployment will remain low over the next two years, fluctuating around 5.5%. These are the Polish Economic Institute’s forecasts presented in the PEI Economic Review — summer 2023.

1 January 2023 marked 30 years since the establishment of the European single market, which Poland has been benefiting from for over 18 years. Poland derives significant economic advantages from European Union membership. If it were not part of the single market, Poland's GDP per capita would be 31% lower and amount to 60% of the EU average. In 2018, almost a quarter of the country’s GDP was indirectly or directly dependent on the EU, and the demand from end consumers in Germany alone generated 1.15 million jobs. These are the conclusions of the Polish Economic Institute’s report entitled How Poland benefits from the single market.

Russia’s invasion of Ukraine in 2022 has forced countries in the European Union to end their dependence on Russian gas. Although EU imports of gas (including LNG) increased by 37% in 2014-2021, after the invasion daily flows of Russian gas through pipelines to the EU fell sixfold within a year. Of the main gas markets in the EU, Poland — which was historically the most dependent on Russian supplies — managed to reduce its dependence on Russian imports to the greatest extent. Between 2014 and 2021, it reduced gas imports from Russia by 14% and, in Q1 2023, ended them completely. In its report Secure gas supplies for the winters to come. The European path from crisis to independence, the Polish Economic Institute analyses EU countries’ efforts to end their dependence on Russia and increase their energy security.

Over 1 million Ukrainians who sought refugee after Russia invaded Ukraine in February 2022 are currently in Poland. 80% of them believe that Polish society has a positive attitude towards them. However, Poles’ views on refugees’ situation is clearly changing. The percentage who believe that Ukrainian refugees are in need of assistance has fallen from 84% to 50% since the Russian. In its report Poles and Ukrainians — the challenges of integrating refugees, the Polish Economic Institute analyses Poles’ attitudes towards refugees from Ukraine.

The economic recovery in 2021 contributed to the consolidation of dependence on supplies from China and Russia by increasing imports from there. In 2018-2021, China's share in material consumption in the EU-27 grew by nearly 1%. At the same time, the process of moving production to other (cheaper or safer) countries, as well as bringing it home, has been visible in recent years. In 2021, FDI flows to developed countries increased significantly, compared to flows to developing countries. The total value of greenfield transactions grew by 15%, but fell by 50% in the case of China. FDI to developed countries rose by 134% in 2021 (y/y), according to the Polish Economic Institute’s report The new face of global trade. Are we dealing with reshoring?, which analyses the impact of the pandemic and the war in Ukraine on global production chains.

The Polish economy is at the bottom of the slowdown and inflation has peaked already. We expect inflation to slow down in the coming months and amount to 12.6% in 2023 as a whole. The Polish Economic Institute forecasts that GDP will grow by around 0.8% in 2023 and by 2.2% in 2024. Despite the clear slowdown, the situation on the labour market remains stable. These are the conclusions of the Polish Economic Institute’s “PEI Economic Review: Spring 2023”.

Since the beginning of Russia’s invasion of Ukraine, more than 1 million refugees have found refuge in Poland. It has been reflected in the setting up of new undertakings in Poland. 3,600 companies with Ukrainian capital and 10,200 Ukrainian sole proprietorships were established between January and September 2022. 75 per cent of the businesses surveyed started operating in Poland because their founders needed to earn money to support themselves and their families. At the same time, 66 per cent of them declared that they would continue to operate in Poland regardless of the situation in Ukraine. Those are the conclusions to be drawn from the report of the Polish Economic Institute entitled ‘Ukrainian companies in Poland since the start of the war in 2022’.