Last year’s investment slowdown recorded in Poland did not relate to foreign companies – their expansion spending rose by 75% on the year, to almost $10bn.

Due to the amount of foreign investment, Poland was ranked the fifth destination in Europe for greenfield investment, with the pace of growth second only to Hungary – the annual report of fDi Intelligence shows.


Last year, Poland’s contribution in the total amount of foreign investment in Europe grew by 6% versus a 3% increase in 2015. This means that in 2016 Poland’s position in the investment ranking was higher than the size of the country's economy could suggest – Poland generates about 3% of European GDP. Turkey and Spain, with considerably larger economies, recorded slower capital inflows, at $8.8bn and $8.5bn, respectively.

According to Unctad data, in 2016 foreign companies invested $1670bn, 13% less than a year earlier. The biggest decline in foreign investments, by 26%, was recorded in Europe. However, Unctad takes into account all so-called foreign direct investments (FDI), while fDi Intelligence statistics relate only to these investments that generate new jobs and new output capacity. Globally, 2016’s value of such investments stood at $776.2bn, the highest since 2011. When compared with 2015, the value increased by 6% and created 2 million jobs. “It seems that the last year’s drop in FDI (as defined by Unctad) could be explained by lower corporate activity in terms of foreign mergers and takeovers,” fDi Intelligence analysts say. 

When it comes to attracting foreign investment, the UK remains the European leader. Last year, foreign companies invested $34.8bn in the country. However, the UK's decision to leave the EU has already left its mark. Over one year the value of FDI – as defined by fDi Intelligence – declined by 42%. Among EU countries, except for Poland and Hungary, only France could boast an impressive growth in foreign investment (54% increase). However, in terms of investment spending (at $13bn), France remains far behind the UK.

The growth in FDI in Poland seems to contradict a popular thesis suggesting that 2016’s investment slowdown resulted from rising uncertainty related to taxes, legal regulations and Warsaw-Brussels relations. "Greenfield projects do not emerge every year. The decision-making process takes a long time and has to be preceded with a detailed feasibility study. Also, the businesses have to find financing for the project and it is time-consuming as well,” says Jarosław Janecki, chief economist at Société Générale in Poland. "Investment decisions made by global corporations are part of their strategy which shouldn’t be changed due to higher political uncertainty in a particular year. Here, the bottom line wins,” he adds.

"FDI inflow is mainly defined by the economy’s attractiveness in the region, or such factors as GDP growth, the market size as well as access to labour,” says Grzegorz Maliszewski, chief economist at Bank Millennium. But he adds that legal and institutional turbulences were among reasons why investment in general, defined as gross fixed capital formation, crashed. And it is obvious that foreign companies were concerned as well. While in the first half of the year their capital investments in Poland were growing, in the last six months they visibly dropped. Contrary to the situation of domestic companies, it is difficult to explain the phenomenon with lower EU funds absorption as foreign companies are not the beneficiaries of the funds.

"However, the 75% growth in greenfield investment is a very positive phenomenon. It shows that good performance of Polish economy – in particular the economic growth, which, as compared to other EU countries, remains resilient despite the slowdown, as well as large consumer and labour markets – are still Poland’s main assets capable of attracting foreign capital,” says Mr Maliszewski. According to fDi Intelligence data, there are few details suggesting that Poland attracts more and more high-quality investments.

Last year, foreign companies announced the launch of 272 investment projects in Poland, up by 36% on 2015. The biggest year-on-year growth was recorded in construction (more than twice as much), transportation, storage and logistic projects (up by 60%) as well as manufacturing (up by 47%). However, looking from five-year perspective one can notice that the biggest rise is among development projects and investment into corporate headquarters. This is the kind of activity that creates bigger value added than assembly plants. "We should be happy about the new investment capital, but at the same time we should keep in mind that low labour costs are still the main factor,” says Mr Janecki.

So what will the present year look like? fDi Intelligence analysts forecast that it will be similar to the previous one. The amount of global foreign investment is expected to grow by 10%. Just like in 2016, India is to remain its biggest beneficiary, while the US will be the largest source. These expectations result from acceleration of the global economy, with which investment activity is highly correlated, as well as political factors, such as economic policy of the US under Donald Trump’s leadership who, during the presidential campaign, showed himself as an advocate of higher trade and investment barriers. This should be topped by still-unclear Brexit effects and the outcome of elections in France, Italy and Germany. "With the Brexit date approaching, the value of FDI in UK is likely to start falling. Most of the investments will likely be moved to other EU countries, meaning that the global FDI level will remain unchanged. But if Brexit negotiations lead to collapse of the EU-British trade and economic slowdown in Europe, this will have a negative impact on global FDI,” the report reads. Its authors also point out that rising interest rates in the US as well as China’s attempts to limit capital outflows may have a negative impact on the global investment climate.

However, forecasts for Poland are good, mainly due to economic recovery in the eurozone, which is Poland’s main trading partner. According to Mr Janecki, Brexit could have a positive effect on foreign investment in Poland, but its outcome is still unclear. The chief economist of Société Générale in Poland also points to global corporate over-liquidity, which, in general, should support investment activity. Darren Chong, Asia/China group director at PwC, expects a rise in Chinese capital flowing to Poland, despite the above-mentioned restrictions. "Polish-Chinese relations have improved and today we have a very good climate for bilateral business. There is a system of business incentives as well as guarantees that each investor will be treated equally. Right now, Poland holds a lot of tenders – to build a subway, highways. The location, its large consumer market and the fact that the pace of economic growth remains high are the country’s assets,” Mr Chong told Rzeczpospolita.

Article originally published by Rzeczpospolita, in co-operation with fDi. For Rzeczpospolita's coverage, visit:

Foreign investments: Poland among European leaders [English language version] 

Raport fDi: Zagraniczne firmy nie boją się rządu PiS [Polish language version]