Poland secures its position in the international supply chain

Two factors have contributed to Poland becoming an important global supply market: the growth in export of manufactured goods (especially machinery and electronics), and its quick recovery from the effects of the pandemic on trade.

This export growth alone warrants the attention of global supply chain managers worldwide. Poland’s exports grew by a CAGR of 11.6% in between 2001 and 2021, and it must be noted that despite the stagnation caused by the pandemic, exports surged by 25% year-on-year in 2021.

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Poland CAGR and export share table

Poland’s expanding exports of manufactured goods and its continued investment in the manufacturing sector has managed to solidify the country’s position in global supply chains, and as mentioned above, the economy has recovered from negative growth in 2020 to pre-pandemic levels in 2021, as industrial activity gradually resumed. It would appear that the pandemic caused little lasting damage to the economy of this country.

What played a major role in Poland’s economic growth was that the country became a member of the European Union (EU) in May 2004 and consequently, since 2005, it has ranked among the top 30 exporters in the world: in 2021, it came in at number 23. Most of Poland’s export partners are other EU members and, given its geographical location and historical ties with Germany, it comes as no surprise that this country is the top recipient of Poland’s exports.

Facts and figures on Poland’s export market

  • Poland’s annual exports in 2021 increased to USD 318bn, a year-on-year export growth of 25.1% from USD 254bn in 2020, despite the disruptions brought on by the pandemic.
  • Machinery and electronics and agriculture and forestry goods were Poland’s top export categories, and respectively made up 25% and 18% of its total exports in 2021.
  • Total exports grew by a CAGR of almost 12% from 2001 to 2021, with the highest CAGR among the different sectors being in chemicals and plastics at nearly 14% during this period.
  • Although rich in natural resources, Poland largely exports machinery and electronic goods. In 2021, machinery and electronics comprised 25% of total exports, with this category having grown at a CAGR of 13% from 2001 to 2021.
  • Around 29% of the country’s total exports in 2021 went to Germany, and this mostly consisted of vehicles and vehicle parts.
  • Consumer and capital goods made up most of its exports, with the exports of vehicles and vehicle parts accounting for more than 10% of all exported goods. In addition, Poland is one of the leading suppliers of electric vehicle batteries globally.
  • Since 2015, Poland had enjoyed a trade surplus for several years. However, trade deficit increased from USD 0.5bn in 2020 to USD 17.6bn in 2021.
  • From the beginning of the pandemic, Poland’s trade has been characterised by a trade deficit due to an increase in fuel prices.

In short, before the pandemic, Poland’s economic growth was strong and uninterrupted owing to effective macroeconomic policies and social programmes laid out by the government. This had the effect of greatly curbing the negative effects of the pandemic.

However, due to the Russia-Ukraine conflict, Poland’s exports may decline by around USD 10bn as a result of economic and trade sanctions imposed against Russia. But Poland is by no means the only country affected by this war, as has already become evident in the rest of the world, especially Europe.

So why the recent trade surge in Poland?

Several factors have led to the trade surge recently experienced in Poland: its joining the EU, its manufacturing prowess in the sectors of automobiles, textiles and furniture, its role as a food supplier in Europe, and its competitive labour costs.

Here’s more about these key points mentioned above:

  • Poland’s trade surged after it joined the EU, prior to which it managed its foreign trade relationsthrough the Central European Free Trade Agreement (CEFTA).
  • Poland’s manufacturing prowess in automobiles, textiles, and furniture has contributed significantly to its export growth.
  • It is also an important food supplier in Europe, owing to its large areas of cultivated land as well as investments in modern agricultural infrastructure to produce dairy, frozen food, meat, and beverages.
  • With rising labour and operating costs in Asia as well as disruptions caused by the pandemic, European procurement managers are looking for alternative destinations closer to home, with Poland being a strong contender due to its labour costs being lower than most European countries, as well as its diverse, increasingly competitive manufacturing capabilities.

Since Poland resumed economic activity earlier than most countries, its economy has grown by nearly 4% in 2021, but Poland depends heavily on its European neighbours for its exports, so who knows what the future may hold?

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As Russia’s invasion of Ukraine is making an impact on the trade and economies of Europe, economic growth for Poland is forecasted to be 3.9% in 2022. Poland is in fact one of the loudest critics of the EU’s dependence on Russian fuel imports. But it is clear that Poland’s rise in global export rankings will continue in the long term.

Factors to keep in mind when considering Poland as a supply base

  • Take advantage of Poland’s strong economic growth, manufacturing strength, as well as its ability to recover more quickly than many other countries, by seriously considering it as a reliable, competitive supply base.
  • Monitor Poland’s potential to be a resilient supplier amid volatility among its European partners.
  • Also keep in mind its ability to expand its reach to newer and faster-growing markets aided by the advantage of Poland’s centrality in Europe and its proximity to Asia, the Middle East, and Africa.
  • Understand the categories of goods in which Poland demonstrates manufacturing strength and export potential; the category options are expanding, and more opportunities are developing to integrate Poland’s supply in supply chains across industries.
  • Develop a deeper understanding, increase capacity and capability in procurement teams to drive procurement and supply to and from Poland.

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