A Guide to Investing in Poland
Invest in Poland with ETFs and ADRs
Poland’s high-income economy is the sixth-largest in the European Union and historically one of the fastest-growing. After economic liberalization in the 1990s, the country’s gross domestic product (GDP) expanded at roughly 3% per year until the European Sovereign Debt Crisis. Poland was the only country to avoid a decline in GDP growth in the European Union at the time.
It is worth looking into Poland's economy if you are looking to invest in the country. Poland's economy is very reliant on Germany, with $54.5 billion in exports to Germany. The country is experiencing conservative swings in politics and has a legal framework that is still developing.
Poland is experiencing investment increases, GDP growth, increases in exports, and economic expansion—an indication of possible investment opportunities for forex (foreign exchange) investors.
Poland’s Robust Economy
After the collapse of the COMECON trading bloc in 1991, Poland moved rapidly to increase trade throughout the European Union. Their $1.11 trillion economy is focused on manufacturing machinery and transport equipment. It exports this equipment primarily to Germany, with generally stable credit ratings, strong growth, and manageable public debt.
Since the country lies outside of the Eurozone, its own currency was permitted to depreciate throughout the regional crisis and boost exports. The unemployment rate has also remained lower than the European average, 5.3% in July 2019. The country's economic growth rate remains one of the highest in Europe and reached 3.5% in the fourth quarter of 2019.
The Polish economy is relatively open to foreign investors and entrepreneurs, with various incentives designed to attract both.
Investing in Poland with ETFs
The easiest way to invest in Poland is by using exchange-traded funds (ETFs), which offer instant diversification in a single U.S. traded security. With approximately $340 million in assets under management, the iShares MSCI Poland Investable ETF (NYSE: EPOL) is the most popular option for international investors seeking exposure to Poland’s economy.
Other options for investing in Poland include the Market Vectors Poland ETF (NYSE: PLND) or American Depository Receipts (ADRs).
ADRs provide exposure to individual Polish companies in a security that's traded on a U.S. stock exchange, but investors should be aware that many of these ADRs are illiquid and could entail significantly more risk. Some popular Polish ADRs are:
- Asseco Poland (ASOZY, PNK)
- Eurocash S.A. (EUSHY, PNK)
- GLobe Trade Center SA (GBCEY, PNK)
Benefits of Investing in Poland
Poland has a robust economy that weathered the European Sovereign Debt Crisis and continues to post strong growth rates. According to economist consensus estimates, the country's GDP growth is expected to continue, albeit at a slower pace.
The World Bank states that investments in government have been increasing, indicating confidence in the economy:
Poland’s economy continued to perform strongly in 2018. Real GDP growth reached 5.1 percent in 2018, driven by domestic consumption and pick up in investment. The pace of growth is expected to subside in the coming years in the face of a tightening labor market and slowing growth in the rest of the EU. Labor shortages and expansionary fiscal policies are the main challenges to sustained growth in the medium-term.
Poland’s regulators have been working to liberalize the country’s economy and reform many public sectors. The labor market has tightened in recent years, the median income is on the rise, and the poverty level is decreasing.
International investors investing in the Eurozone must contend with the common currency's influence over equity and bond performance. However, Poland's independent currency has helped it weather crises and succeed.
Investing in Poland may seem attractive given the company’s robust growth rates, but investors should consider the many risks inherent in investments.
Risks of Investing in Poland
Poland’s economy is largely dependent on Germany, which accounts for approximately 26% of its exports and 27% of its imports. Any downturn in Germany’s economy could have a negative impact on Poland's economy.
Poland's politics have destabilized slightly after the Law and Justice party came to power in 2015. After taking control of the constitutional court and public broadcasters, the party has many in the European Union worried.
The Organisation for Economic Co-operation and Development (OECD) has ranked Poland low for government regulations burden, the legal framework in challenging regulations, the amount of time it takes to start a business, and taxation on incentives to work.
Key Takeaway Points
Poland’s high-income economy is the sixth-largest in the European Union and historically one of the fastest growing and most robust. The easiest way to invest in Poland is using the iShares MSCI Poland Investable ETF (NYSE: EPOL), although there are some other ETFs and ADRs.
There are many benefits and risks of investing in Poland that you should carefully consider before investing. The Polish political crisis could become a cause for concern moving forward, particularly as the European Union looks for ways to respond.