Poland is dramatically increasing military spending as it seeks to strengthen its eastern flank, creating a major boost for defence investment while raising questions about the long-term pressure on public finances and economic growth.
Defence spending has risen from 2.2% of GDP in 2021 to about 4.8% this year, equivalent to roughly $53 billion. The expansion is increasingly creating opportunities for domestic manufacturers, jobs and investment as Poland seeks to produce more military equipment locally.
The economic effect, however, is complicated. The International Monetary Fund found that Poland’s earlier military build-up provided only a modest direct growth boost because much of the equipment was imported. At the same time, higher government spending contributed to stronger domestic demand and increased pressure on monetary policy.
Poland’s economy is still expected to grow by about 3.5% in 2026, according to the European Commission, with defence investment contributing to overall investment activity as the domestic component of military procurement expands.
But rising defence costs are adding to fiscal pressures. Moody’s recently cited high defence spending, healthcare costs and public investment when it downgraded Poland’s sovereign credit rating, while warning of further increases in public debt.
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