Republic of Poland: Selected Issues

This Selected Issues paper analyzes various factors that show potential growth in Poland. Poland has achieved substantial economic convergence within the EU. Labor productivity growth was robust until the disruptions from coronavirus disease. Poland’s economic convergence within the EU is expected to continue albeit at a slower pace. Using a production function approach, IMF now estimates that Poland’s potential growth to remain solid, but gradually decline, reaching 2.7 percent by 2029. Moving forward, the labor supply is expected to comprise a substantial drag on potential output. Policies should focus on deepening capital, facilitating resource reallocation, supporting labor supply, and enhancing innovation capacity. Strengthening vocational training and skill-matching could improve skills and allocative efficiency. Raising labor force participation among older cohorts should be complemented by enhancing adult learning. Poland has closed on Europe’s productivity frontier in most sectors. In order to sustain growth, it will need to transition from technology adoption. Government incentives and the financial system should be geared toward creating a conducive environment for R&D and other innovation activities, including by promoting private equity and venture capital.