Since Law and Justice Party (PiS) came to power in 2015, the EU’s sixth largest economy has drawn attention mainly to alleged backsliding democracy. However, at the same time, the resilience of the Polish economy is astonishing.
The Eastern European Development Bank (EBRD) expects 3% growth in 2021, which will make Poland the only EU member to reach pre-crisis levels by the end of 2021. The country has grown from 49% to 70% of average EU economic wages since joined the EU in 2004 and in November Poland is again number three in the EU in terms of industrial production growth.
Economy Minister Jaroslaw Gowin told the German business daily Handelsblatt recently: “Many Polish companies have used the pandemic to reset themselves, digitize more, and step into where other supply chains have been crushed.”
And EBRD Chief Economist Beata Javorcik told the same newspaper that two aspects would differentiate Poland’s recovery from others in Europe: diversity and flexibility. “Both of them have served the country well during the coronavirus pandemic,” he said, adding that during the coronavirus crisis a “generous package of support” has been helpful.
Since the collapse of Communism in Eastern Europe, the Polish and German economies have become increasingly intertwined. In the city of Lodz, German home appliance maker Bosch-Siemens Hausgeräte, for example, not only saw washing machines roll off the production line, but also researched new household technologies.
In the Walbrzych special economic zone near Wroclaw, Daimler has expanded its newly built engine production site with a second battery plant, which is the latest Industry 4.0 standard and is CO2 neutral, powered from a wind farm 10 kilometers (6.21 miles) away. Meanwhile, Volkswagen not only produces Caddy, Crafter and Transporter models, but aluminum castings also come from Poznan which are distributed throughout the VW network around the world.
Germany’s trade with Eastern Europe suffered in the 2020 pandemic, falling 8.4% to € 423 billion ($ 512 billion), according to Germany’s Eastern Economic Committee. However, trade with Poland remained almost constant at € 123 billion despite the crisis, while imports from Poland to Germany even increased by 1%. Poland rose to fifth place among Germany’s most important trading partners, behind China, the Netherlands, the US and France, still ahead of Italy, Switzerland, Britain and Austria. Trade with Russia fell 22% to € 45 billion.
“Put simply, there is little that may not prove beneficial in terms of economic success in Poland from a German perspective and vice versa,” said Marek Wasinski, head of the foreign trade team at the Polish Institute of Economics.
“The diversity and size of Poland’s economy was key to its resilience during the crisis,” he told DW. “The strong relationship with the German economy was another factor shaping this success.”
Wasinski pointed out environmental technology as the most attractive potential for future growth in Poland. “From a transformational point of view – changing the energy mix, increasing the energy efficiency of buildings or electrifying the economy, but also related to tradels – Poland is largest trolleybus exporter in the European Union – it is very well positioned in the European battery supply chain, it is the fifth largest exporter of ‘green’ goods in the EU, “he said.
Energy is the key
Above all, the planned restructuring of the energy industry, away from coal and towards renewable energy, could become a major area of activity for German companies. Minister of Climate and Environment Michal Kurtyka recently announced that Poland wants to invest “a total of € 240 billion by 2030.”
Poland’s energy transition appears to determine the country’s medium-term economic success. Three-quarters of the electricity generated there still comes from coal-fired power plants. During the COVID-19 pandemic, Silesian district, place the miner cut close to the black chunks tight at the seams, was the largest corona hotspot in Vistula province last summer.
Some 61 Polish cities are on the list of most polluted places in the EU. The largest lignite power plant in Europe and number two in the world in Belchatow is the largest single emitter of CO2 in the EU – bigger than the whole of Ireland or Slovakia.
Kurtyka wants to reduce the share of coal to between 28% and 11% within 20 years, depending on how fast the investment required for the energy sector flows in by 2030. By 2040, wind power alone should generate 8,000 to 11,000 megawatts of electricity. Apart from state funds, which mostly come from the EU, huge private investment must also be made and billions must be obtained from electricity through environmental taxes.
Poland’s energy transition through 2040 is estimated to cost 1.6 trillion zlotys (€ 355 billion, $ 430 billion). Of this, changes in the fuel and energy sector will total around 890 billion zlotys, including up to 342 billion zlotys in investment in power generation, according to Polityka Insight, a leading think tank for political and economic analysis.
In total, about 745 billion zlotys will be spent on transitions in the industrial sector, by households, services, transport and agriculture, notes Warsaw-based Polityka Insight.
“Poland needs major investments in heating grids and energy infrastructure,” said Robert Tomaszewski, an energy analyst at Polityka Insight. Many coal-fired power plants are owned by small local governments and unable to invest in renewable energy or reduce gas emissions, Tomaszewski told DW.
Private capital is needed to decarbonize the district heating sector with around 100 billion zloty to be invested over the next 10 years. “This opens a window of opportunity for foreign companies,” Tomaszewski added, noting for example that German power company e.on, which has heating assets in Szczecin and Opole, is looking to expand in Poland. Veolia France, which has a district heating network in Warsaw, has similar plans.
The offshore industry also has enormous investment potential, said Tomaszewski because Poland wants to expand its offshore wind power plants to a capacity of 5.9 gigawatts by 2030. As for gas, this form of energy will gradually replace coal. in the Polish energy mix.
In both wind and gas sectors, German engineering company Siemens seeks to play a role by working with Polenergia, one of Poland’s largest private energy companies, and in delivering gas turbines for energy projects at the Plock and Rybnik power plants.
“In nuclear space, there may be a strong reaction from the German Green Party [party] after September [general elections in Germany], while the Nord Stream 2 Baltic pipeline is likely to encourage Poland to accelerate its gas diversification plan, “noted Tomaszewski.
Another key sector
Another sector to watch is business and IT services, where Germany is only the fifth largest investor, in the chemical industry, with the investment needed to reduce emissions, as well as in the pharmaceutical industry, said Wasinski.
“There is also a growing potential for cooperation in the automation and digitization of the Polish economy and particularly the manufacturing sector,” he added.
Germany and Poland, Wasinski is confident of becoming the industrial hub of Eastern Europe, capable of developing value chains that “benefit both partners”.