Russian President Vladimir Putin is testing the resolve of the free countries of Europe. He continues to wage an aggressive war against Ukraine, and now he is launching drones against Poland, a strong NATO member and close ally of the United States.
Fortunately for Poland and NATO, Poland is an increasingly strong country. It shares a 300-mile border with Russia’s Kaliningrad exclave and is fast becoming an economic powerhouse. Poland also devotes almost 5% of its annual GDP to its defense budget. As a percentage of GDP, that defense allocation represents the highest amount of any NATO member state.
Poland is an economic miracle. Since 1992, its economy has expanded by 220%. It has enjoyed uninterrupted growth since the early 1990s, with the exception of 2020, when it experienced an economic downturn caused by the COVID-19 pandemic. The country is the economic superstar of the European Union. It has the fastest-growing economy of the region. Poland’s currency is the world’s strongest emerging market currency, and its sovereign bonds have appreciated dramatically in recent years.
Poland’s GDP will approach a trillion dollars within 2 years. Its GDP should expand by over 3% this year, as well as in 2026 and 2027. At the same time, inflation in Poland is low and well contained. Its people are wealthier than the citizens of Russia, and its economy is on a far stronger growth trajectory. Economic growth in Poland is driven by private domestic consumption, strong internal capital investment with a focus on services, and high technology. Because of its strong economy, Poland has been able to increase defense spending without sparking inflation.
Since Russia invaded Ukraine, Warsaw has increased defense spending from 2.7% of GDP in 2022 to 4.2% in 2024, and is projected to spend 4.7% of GDP in 2025. Poland is the poster child of a strong and determined NATO ally. Importantly, though it shares a long border with Russia, the Polish people firmly support the military buildup and a foreign policy based on confronting Russian aggression.
International investors are rapidly becoming aware of the Polish economic miracle. The zloty, the currency of Poland, is the best performing emerging market currency among the most actively traded currencies of this asset class. The zloty has appreciated against the dollar by 14% since early 2022. Importantly, Polish sovereign debt is delivering strong positive returns for international investors. Poland can easily raise capital in global debt markets.
Poland’s stock market, which has a capitalization approaching $500 billion, is up 49% in dollar terms this year. The Polish stock market is heavily weighted toward financials. It is noteworthy that Polish banks remain a bargain for investors who pay only 1.7 times for their net assets, compared to 4.7 times assets for the typical emerging market bank.
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With its strong economy, stable political climate, and rapidly appreciating stock market, investors with a tolerance for risk should look at Poland for exposure to emerging markets and portfolio diversification. The most actively traded Exchange-Traded Fund with significant exposure to Poland is the iShares MSCI Poland ETF, symbol EPOL.
Put simply, Poland is winning.
James Rogan is a former U.S. foreign service officer who has worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be followed on X and reached at [email protected].