Poland in global supply chains: worldwide opportunities and local risks

Polish companies have shown great resilience in the face of unprecedented external shocks over the last couple of years. As the Covid-19 pandemic rocked supply chains and war in Ukraine caused prices to skyrocket for energy carriers, both managers and employees adapted readily to the rising turbulence. Such a strong response signals a positive outlook for Poland in a future likely to be characterised by greater volatility, uncertainty, complexity, and ambiguity (a so-called 'VUCA world').

The performance of global supply chains has since seen a return to some sort of normality, with signs of improvement beginning to emerge around mid-year in 2022 and boosted further by the lifting of pandemic restrictions in China in December. We can see this in the decline detailed in the synthetic index (compiled by the Federal Reserve Bank of New York) to summer 2019 levels. The history of the supply chain pressure index dates back to the late 1990s and shows the arrival of the 'black swan' phenomenon in 2020-21.

Just as the effects of the pandemic began to subside, yet another black swan appeared – the Russian invasion of Ukraine. In this report, we take a more in-depth look at the scale of the economic shocks and the key factors affecting the Polish economy through financial turbulence, the collapse of trade with Russia and Belarus, and in particular, the increase in price pressures on energy, metals and grain markets.

Conclusions based on macroeconomic data appear to be at odds with information provided by Polish businesses (senior representatives of 20 companies from various industries) and the three chambers of commerce (German, Scandinavian and Italian) operating in Poland.

This new, unfamiliar reality presents us not only with added costs and risks, but also new challenges and opportunities as a result of greater interest in Poland from both global and European companies. Their declarations – and sometimes concrete business decisions – could mean larger orders and foreign investments in the country (nearshoring as opposed to earlier offshoring).

In times of heightened geopolitical tension, Poland's geographical location can be a curse – but also a springboard for economic development.

For Western economies, Poland exists as a buffer against an aggressive Russia and a bridge to post-war activity in Ukraine, thanks primarily to almost 25 years of NATO membership and 20 years of EU membership. The country's diversified manufacturing base can also act as an alternative to China as the so-called 'world's factory'.

So, what's going to be the key to seizing these global opportunities? We think mitigating local risks needs to be the top priority. These include:

1. Elevated inflationary pressures (and the associated high cost of borrowing)
2. Price and wage spirals amplified by skills shortages
3. Complicated and unstable taxes and regulations
4. Blockage of EU funds
5. Slow progress in the energy transition

We take a more in-depth look at each of these areas and assess their individual impact in our full report below.