Poland

Europe

GDP per Capita ($)
$18342.7
Population (in 2021)
37.7 million

Assessment

Country Risk
A4
Business Climate
A2
Previously:
A4
Previously:
A2

suggestions

Summary

Strengths

  • Market of 38 million people
  • Proximity to Western European markets
  • Price competitiveness; qualified and cheap labour force
  • Integrated into the German production chain
  • Diversified economy (agriculture, variety of industries, services)
  • Resilient financial sector

Weaknesses

  • Inadequate investment levels; domestic savings rate too low
  • Weakness in R&D; high content of imports in exports
  • Developmental lag of Eastern regions
  • Structural unemployment, low level of female employment
  • The EU rule-of-law dispute

Trade exchanges

Exportof goods as a % of total

Germany
28%
Czechia (Czech Republic)
7%
France
6%
United Kingdom
5%
Netherlands
5%

Importof goods as a % of total

Germany 26 %
26%
China 10 %
10%
Netherlands 6 %
6%
Italy 5 %
5%
Russia (Russian Federation) 4 %
4%

Sector risks assessments

Outlook

This section is a valuable tool for corporate financial officers and credit managers. It provides information on the payment and debt collection practices in use in the country.

Weak growth in 2023

2023 will see the Polish economy record one of its lowest growth rates since its economic transformation in late 1980s. Inflation, which soared in 2022 and hit a high 17.2% in January 2023, has affected real household disposable income and the economy as a consequence. Private consumption (58% of GDP) remains a crucial part of the economy. Inflation is expected peak in the first quarter of 2023 and gradually decrease thereafter, albeit still sitting well above the central bank’s inflation target of 2.5% ±1 p.p. tolerance band. The monetary tightening cycle that started in October 2021 and which so far has delivered eleven interest rate hikes totalling 665 basis point – with the latest occurring in September 2022 – may well not be over. Core inflation developments could spark further monetary tightening if tensions are caused by a stronger labour market that prompts a revival in household consumption. The labour market remains in a good shape with low unemployment (2.9% in December 2022 according to Eurostat methodology and one of the lowest levels in the EU, next to Czechia and Germany) and solid nominal wage growth (+10.3% in December 2022). However, wages have been suffering in real terms as they turned negative and are expected to stay in negative territory as long as double-digit inflation exists and companies are reluctant to increase their headcounts amid the ongoing uncertainty.

At the same time, investments will not come to the rescue as their growth will be restricted not only by economic factors but also by delays in obtaining EU Recovery and Resilience Funds (RRF) due to the ongoing rule of law dispute with the EU. The size of RRF grants and loans is a relatively modest EUR35 billion (5.6% of GDP); however, those funds’ indirectly impact other parts of economy and sectors, along with affected overall investments. Confidence could bear the brunt of missed investments.

The risk of energy disruptions is low thanks to the diversification from Russian gas and coal supplies. However, this does not mean that Poland will escape the risk of high energy prices in the future. If the risk materialises, the competitiveness of energy-inefficient industries and supply chains will erode. On the other hand, Poland still benefits from the inflow of foreign direct investments which could be further enhanced by nearshoring trends.

Growing budget deficit

In 2023, the general government deficit-to-GDP ratio is expected to increase further due to lower revenues and growing expenditure to tackle both the energy crisis and geopolitical issues, added to higher defence spending which is planned at close to 4% of GDP. Despite the reduction of the so-called anti-inflationary shield (reduction in value-added, excise and fuel taxes, among other measures, implemented at the beginning of 2022), the current cap on electricity and gas prices is expected to cost the budget dearly. Furthermore, the parliamentary elections scheduled for the autumn could further encourage fiscal easing.

Easing supply chains disruptions have buoyed export growth and foreign trade as a result. As weaker domestic demand limits imports growth, net exports are expected to contribute positively to GDP growth in 2023. Their contribution already turned positive in the second half of 2022 after trending in negative terrain during the previous four quarters. However, the economic performance of the main external partners will be crucial (i.e., other EU countries which constitute a 76% share of exports). The current account deficit should ease slightly. Increasing foreign direct investment and steady EU capital inflows (cohesion funds) will finance it.

Upcoming parliamentary elections

The ruling right-wing Law and Justice party (PiS) won a second term in office at the last parliamentary elections held in October 2019. The latest polls still show large support for the governing party, albeit lower than at the 2019 elections. The next elections due in 2023 may see a more divided political scene.

Externally, conflict with the European Commission over erosion of the rule of law is making the disbursement of EU recovery funds uncertain. The delay in approving key judicial reform is jeopardising the release of the first tranche of RRF funds. The European Commission introduced the Conditionality Mechanism back in 2020 which could withhold budget disbursements to Poland and Hungary. A bill to overhaul Poland’s disciplinary system for judges was passed by Parliament in February 2023. However, the move has not unlocked the stalemate as President Andrzej Duda decided to send the bill to the Constitutional Tribunal, the court that decides whether laws comply with the Polish constitution.

Payment & Collection practices

This section is a valuable tool for corporate financial officers and credit managers. It provides information on the payment and debt collection practices in use in the country.

Payment

Standard bills of exchange and cheques are not widely used, as they must meet a number of formal issuing requirements in order to be valid. Nevertheless, for dishonoured or contested bills and cheques, creditors may resort to fast-track procedures resulting in an injunction to pay. There is, however, one type of bill of exchange that is commonly used – the weksel in blanco. This is an incomplete promissory note bearing only the term “weksel” and the issuer’s signature at the time of issue. The signature constitutes an irrevocable promise to pay, and this undertaking is enforceable upon completion of the promissory note (with the amount, place, and date of payment), in accordance with a prior agreement made between the issuer and the beneficiary. Weksels in blanco are widely used as they also constitute a guarantee of payment in commercial agreements and the rescheduling of payments.

Cash payments were commonly used in Poland by individuals and firms alike, but under the 2018 Business Law Act (Ustawa – Prawo przedsi?biorców), companies are required to make settlements via bank accounts for any transaction exceeding the sum or equivalent of 15,000 Polish z?otys even when payable in several instalments. This measure has been introduced to combat fraudulent money laundering.

Bank transfers have become the most widely used payment method. Following phases of privatisation and consolidation, Polish banks now use the SWIFT network.

Debt Collection

Amicable phase

Amicable debt collection is the first step of the debt recovery procedure in Poland. These actions include reminders and/or demands for payment. These communications usually serve to obtain repayment of outstanding debt, to warn the debtor of further official actions, to obtain acknowledgment of the debt, to conclude an agreement between the creditor and the debtor based on the acknowledgment of its debt and to obtain a commitment to the repayment agreed.

As of 2004, interest can be claimed as from the 31st day following delivery of the product or service, even where the parties have agreed to longer payment terms. The legal interest rate will apply from the 31st day until the contractual payment date. Thereafter, in the case of late payments, the tax penalty rate will apply. This is very often greater than the legal interest rate, unless the contracting parties have agreed on a higher interest rate.

A bill to implement the 2011/7/EU directive of 2011 on “combating late payment in commercial transactions” provides the contracting parties with maximum payment terms of 60 days. Similarly, default interest is due the day after the deadline, without the need for a formal notice. By implementing the EU Directive, Poland introduced new rules regarding compensation for payment defaults in commercial transactions. These rules oblige debtors to pay the costs of recovery when the payment term expires. The defined amount is a lump sum of €40 – but it is possible to demand a larger amount if the costs of recovery prove to be higher.

Legal proceedings

Fast-track proceedings

Creditors can seek an injunction to pay (nakaz zaplaty) via a fast-track and less expensive procedure, provided they can produce positive proof of debt (such as unpaid bills of exchange, unpaid cheques, weksels in blanco, or other acknowledgements of debt). If the judge is not convinced of the substance of the claim – a decision he alone is empowered to make – he may refer the case to full trial.

As since 2010, the district court of Lublin has jurisdiction throughout Poland to handle electronic injunctions to pay when claims are indisputable. The clerk of the court examines the merits of the application, to which is attached the list of the available evidence. He then, using an electronic signature, validates the ruling granting the injunction to pay. This procedure appears, at first glance, to be fast, economic and flexible, but in reality the sheer number of cases mean that this process can be slow and drawn out.

Ordinary proceedings

Ordinary proceedings are partly written and partly oral. The parties file submissions accompanied by all supporting case documents (original or certified copies). Oral pleadings, with the litigants, their lawyers, and their witnesses are heard on the main hearing date. During these proceedings the judge is required to attempt conciliation between the parties.

Standard court procedures can be also fast and effective when the creditor can provide documents that clearly show the amount of debt and the confirmation of delivery of goods (or proper performance of services), especially if the documents have been signed by the debtor. The court issues an order for payment which states that the debtor should pay the amount of the debt in two weeks, or return a written argument within the same period of time. However, in standard procedures, it is quite easy for the defendant to postpone the case. When the defendant argues the order of payment during this kind of procedure, it can take a long time to obtain the final verdict, due to the lack of judges and large backlog of cases.

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When all appeal venues have been exhausted, a judgment becomes final and enforceable. If the debtor does not comply with the judgment, the creditor can request that the court orders a compulsory enforcement mechanism of the decision, through a bailiff. For foreign awards rendered in an EU country, specific enforcement mechanisms such as the EU Payment order or the European Enforcement Order can be used for undisputed claims. Awards rendered in non-EU countries are recognised and enforced, provided that the issuing country is party to a bilateral or multilateral agreement with Poland.

Insolvency Proceedings

RESTRUCTURING PROCEEDINGS

The 2015 reform on polish insolvency law introduced four new types of restructuring proceedings which aim to avoid the bankruptcy of insolvent or distressed businesses.

The “arrangement approval proceedings” is available to debtors who are able to reach an arrangement with the majority of creditors without court involvement and where the sum of the disputed debt does not exceed 15% of total claims. The debtor will continue to manage its estate but it will be required to appoint a supervisor, who will prepare a restructuring plan. The creditors approve the proposal through a vote.

Accelerated arrangement proceedings are also available if the sum of the disputed debt does not exceed 15% of total claims. The procedure is simplified in relation to the allowance of claims carrying voting rights. Creditors can only make reservations via a list of claims prepared by the court supervisor or administrator. The debtor’s estate will continue to be managed by the debtor-in-possession, but a court supervisor will be appointed to supervise its management.

The “standards arrangement” proceeding is available for disputed debts exceeding 15% of the total claim. With these proceedings, the court secures the debtor’s estate by appointing a temporary court supervisor.

“Remedial” proceedings offer the broadest restructuring options and scope of protection of the debtor’s assets against creditors. The appointment of an administrator to manage the debtor’s estate is mandatory.

BANKRUPTCY PROCEEDINGS

Bankruptcy proceedings can only be declared when a debtor has become “insolvent”. There are two test of insolvency – the liquidity test and the balance sheet test. Both aim to liquidate the estate of the bankrupt company and distribute the proceeds among its debtors. The entire procedure is court-driven, although the 2015 reform has given creditors holding major claims a right to influence the Polish anti-crisis legislation (so called “Anti-Crisis Shield”) to a small extent affects issues related to cash receivables in business-to-business relations, although the exception here are receivables resulting from lease contracts in commercial facilities over 2000 square meters. In this respect, the obligation to pay the rent was temporarily suspended for the full-lockdown period.

COVID – 19:

The most important solutions introduced by this legislation concern bankruptcy proceedings thus the responsibility of management board members for failure to file a bankruptcy petition was suspended. This resulted in a decrease in the number of bankruptcy petitions (instead of the expected increase) in the initial phase of the pandemic. Anti-Crisis Shield also announced a new type of restructuring procedure, namely the simplified restructuring procedure. This procedure is similar to the procedure for approval of an arrangement, which has not been popular so far. The opening of this procedure is associated with undoubted privileges for the debtor, such as the suspension of creditors' obligations for a maximum period of four months while the court approves the arrangements made with creditors. During this period, it is impossible for the creditors to terminate contracts or to start enforcement procedures titles (like court judgements or payment orders). It is all linked with a minor restriction in managing the debtor’s company. So far, we observe a certain number of these proceedings being opened.

Last updated:June 2023

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