Poland’s defence boom brings jobs but widens fiscal pressure
Poland’s defence spending has risen to 4.8% of GDP as the country expands domestic weapons production and strengthens its eastern flank. The investment is creating industrial opportunities, but economists warn the pace is unsustainable as the fiscal deficit grows and political divisions sharpen.
Poland is expanding defence spending at one of the fastest rates in the developed world, combining military preparedness with an effort to develop domestic industry. Since Russia’s full-scale invasion of Ukraine, defence spending as a share of Polish GDP has more than doubled, reaching 4.8% this year. The supplied report puts the cash total at $53bn, the fourth-highest figure in the European Union after Germany, France and Italy.
A weapons facility opened north of Warsaw illustrates the shift. Jim Price, managing director of MBDA Polska, said Poland was moving from importing weapons towards manufacturing them domestically, with investment bringing Polish jobs. Deputy foreign minister Marcin Bosacki said closer economic ties with European Union and Nato allies were supporting Polish security, defence and the economy.
He argued that greater unity and strength could discourage further Russian pressure on Nato states. The spending is also adding to economic risks. Poland is forecast to record the EU’s largest fiscal deficit next year, at 7.1% of GDP.
Leszek Kąsek, an economist at ING Bank, said the current path was not sustainable and questioned whether politicians would adjust it. The report says Poland’s output exceeded $1tn last year and growth reached an annualised 3.9% in the second quarter. However, Moody’s downgraded the country’s long-term sovereign credit rating to its lowest level since 2002, citing an apparent lack of willingness to rebuild fiscal buffers.
Defence and relations with the EU are expected to be politically contentious before next year’s general election. President Karol Nawrocki attempted to block the government’s access to €44bn in defence investment loans approved through the EU’s Safe programme.
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