Poland and Ukraine

The Basque Country has established a developing business relationship with Poland in recent years, driven by the mutual interest in strategic sectors such as the manufacturing and automotive industries, renewable energy and advanced technologies.

Poland has become a key partner for Basque companies due to its strategic location in Central Europe and its expanding economy. As regards Ukraine, the armed conflict has frozen Basque companies’ growing interest in that country, where the Basque Country has the possibility of working on the rebuilding of the country, particularly in infrastructures, energy and technology. The cultural proximity and the traditional ties of cooperation between Europe and those countries have facilitated a favourable climate to strengthen trade relations.

A favourable landscape for the commercial development of Basque companies

Poland is positioned as an attractive destination for the automotive and emerging technologies industries, with a government interested in attracting foreign capital. An economic impact is also expected once the payment of the EU subsidies is renewed, as they were frozen due to the actions of the previous government. In Ukraine, a slow recovery is expected up to pre-war levels, mainly underpinned by foreign investment in the country and the slow return of the country’s key industries; however, it will depend on how the conflict evolves and its ending.

Poland’s economy is one of the most dynamic and with the greatest growth in Central and Eastern Europe, and is noted for its great diversification and resilience. Manufacturing, which includes the automotive industry, machinery and electronic products, are among the most prominent sectors, along with agriculture, which continues to be an important part of the economy, with extensive production of cereals, fruits and dairy products.

Market confidence in the new Polish government is revaluing the zloty and attracting foreign investments. Employment has risen to record levels, with a significant increase in consumer spending and the property market. Poland is positioned as one of the main beneficiaries of European protectionist policies, with major investments in the manufacturing of electric cars.

As regards Ukraine, the GDP is expected to grow to near the pre-war level, with a forecast of prudent growth due to the uncertainty surrounding the conflict. Foreign investment is likely to grow gradually between 2025 and 2028.

Poland’s external sector plays a crucial role in its economy; it mainly exports manufactured products such as vehicles, machinery, electronic products and industrial goods to its main trade partners, particularly to Germany that receives a third of its exports. The country has strengthened its role as a distribution and logistics centre in Central Europe, benefitting from its strategic geographical position. In recent years, it has diversified its trade relations, expanding links with non-European markets, such as China and the United States, which has bolstered its global position in foreign trade.

Even though it posted a small surplus in 2023, Poland’s trade balance is forecast to show a small deficit this year. That will be mainly due to the unprecedented increase of domestic demand, with imports up.

In Ukraine, the trade balance deficit is likely to continue to rise, mainly due to the country basically relying on imports. However, the gradual increase in production is expected to grow its exports, with a considerable reduction of the deficit.

The Polish market is one of the largest and most dynamic of Central Europe, noted for a steadily growing economy, a population of over 38 million people, and a rising middle class with greater purchasing power. Poland is an attractive market thanks to its political stability, its membership of the European Union, and its strategic location, which makes it an important distribution and logistics centre.

The automotive industry in Poland seems to be on the edge of a boom, both in terms of consumption and production. The EU’s penalising of Chinese electric vehicles has turned Poland into one of the main destinations of the sector’s investments and subsidies, and the record employment rate will boost vehicle purchases in the country. Polish economic growth may also be seen in a rise in private spending, including purchasing technological goods. In the energy sector, the Polish government has announced greater investment in renewable energies.

Poland’s country risk is low, thanks to its economic and political stability and to its membership of the EU. Furthermore, the current Polish government has managed to recover the confidence of the European Commission; therefore, the funds that had been frozen have been again released, leading to international confidence in the Polish market being restored and making it more attractive for investors.

Ukraine has been heavily hit by the war with the Russia, with the east of Ukraine being the worst affected, and the risk for the majority of investors has risen exponentially. Attracting investments, even for those that assume greater risks, will be contingent on the end or the limitation of the conflict. The economic recovery of the country will be led by investment in the zone that has not been devastated, the west of the country.

In recent years, there has been a focus on increasing state control on certain strategic sectors and on encouraging industrial policies aimed at developing technology and innovation. Furthermore, the State plays an important role in the distribution of European Union funds and in the pursuing of economic policies aimed at growth and social cohesion.

In Ukraine, governmental intervention is considerable, given that the government is under martial law. That means that the government has strict control over the financial and banking sectors for reasons of national security. The restrictions on investment or the withdrawal of funds from the country are not likely to be lifted soon.

Poland has an economy that is greatly open to international trade, as the result of its joining the European Union in 2004 and its access to the single market. That openness now means that foreign trade accounts for an important part of its GDP, with exports and imports growing steadily. The country has developed a modern infrastructure that facilitates trade and has signed trade agreements under the framework of the EU with global markets.

It has become an important logistics centre for transporting freight from western countries, such as Germany, to Central and Eastern Europe.

Ukraine used to be a cornerstone in international trade, as a key country in the agricultural and manufacturing industries in Eastern Europe. The tariffs in the country are low, with various treaties that eliminate them.

Poland is a market nearly free of trade barriers, as the country’s economy greatly depends on international trade. The import tariffs are low and, with an average of 2.9%, are among the lowest of the world. The non-tariff barriers are also minimum. Thus, Poland is one of the cheapest and most efficient countries when investing or importing.

The difficulties caused by the war with Russia has forced Ukraine to apply strict foreign currency controls. The risk of unforeseeable and immediate restrictions due to the war is very high.

Poland’s legal risks are limited as the result of the government’s sustained endeavour to streamline and lower the costs of the administrative and bureaucratic processes, and to create a friendly climate for foreign investments.

As regards Ukraine, the situation of the country means that the judiciary is not fully functioning, which means that any legal dispute is lengthy and, therefore, expensive. Furthermore, the judicial system is not fully transparent and independent, and is therefore subject to political interference. Furthermore, the current situation has prevented Ukraine from making greater progress in its fight against corruption.

Contact office

Iwona Gieldowska

Director of Basque Trade & Investment Poland and Ukraine

BASQUE TRADE & INVESTMENT POLAND AND UKRAINE

Królewska 18, 00-103 Warszawa

+48 5 0221 8200

igieldowska@basquetrade.eus

* Office hours:

Monday to Thursday: 7.30 a.m. to 4.00 p.m.
Fridays: 8.00 a.m. to 1.00 p.m.

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