Tomorrow, on 19^th May, our ETF branch will proudly ring the bell for yet another regional ETF, this time for the largest, most liquid and by many the most attractive CEE market – Poland. To mark this, we cover Poland’s economic prospects and risks, WIG30 composition, and what investors should expect from 7POL.

The headline story is of course the strong GDP growth, especially in the past two years when most European and CEE economies started to slow down. It is also notable that Poland is the only EU economy that never recorded a recession during the 2008-2009 GFC and has compounded growth at well above EU average for two decades. This drove Poland’s GDP per capita on a PPS basis through 80% of the EU average last year – a classic convergence trajectory, with further potential ahead. Also, in 2025 Poland joined the USD 1 trillion GDP club, coming to the doorstep of top 20 largest economies in the world.

CEE economies’ real GDP growth (2021-2025, % YoY)

Source: Eurostat, InterCapital Research

So, what is the reason behind the recent strong performance of Poland’s economy? Since 2015, PiS (“Law and Justice”) – Poland’s main right-wing national-conservative party – has been systematically restructuring the Polish judiciary. The 2021 Constitutional Tribunal ruling challenging the primacy of EU law over Polish law was the most dramatic escalation, but the EU response was already in motion: an Article 7 TEU procedure had been triggered in December 2017 (the first such use against any member state), and by 2022 the EC had frozen ~EUR 137bn in combined RRF (EUR 60bn) and Cohesion Policy funds (EUR 76.5bn) pending fulfillment of specific judicial-independence milestones. After the October 2023 election, Tusk’s three-party coalition took office in December 2023 and within 10 weeks had presented an Action Plan that the EC accepted as sufficient to unblock the funds in late February 2024 – a decision widely criticized as accepting executive commitments before the underlying legislative reforms had passed. Three years later, much of that reform legislation remains blocked at the presidential level. The structural reform debate is still active, but the cash, however, is flowing.

Several political fronts remain unresolved: judicial reform has stalled, newly elected PiS-aligned president Nawrocki is vetoing legislation at a record pace (though notably did sign the bank CIT hike into law), and a potential PiS win in the 2027 election could call current EU-policy alignment back into question.

Poland’s key forward macro indicators

Source: Eurostat, NBP, IMF, InterCapital Research

Looking forward, EU funds absorption is expected to slow as the cliff hits in 2027. That said, investment-led growth is unlikely to dissipate. Cohesion funds have a longer distribution horizon than RRF, the defense build-out and EU-wide investments are still in their early stages, Germany’s expansionary fiscal stance acts as both an FDI and export opportunity, and several large infrastructure and energy projects – Poland’s first nuclear plant, the CPK central airport, high-speed rail – are slated for the coming decade. Beyond that, Ukraine reconstruction represents a sizeable ceasefire-conditional catalyst. A less obvious tailwind is demographic as roughly 1 million Ukrainian refugees currently reside in Poland, bolstering the working-age population, although a ceasefire would likely trigger partial repatriation.

However, like every hero, Poland has its Achilles’ Heel – fiscal policy. Croatian readers will empathize as Poland too is running an expansionary fiscal stance into a closed output gap and effectively full employment, though Poland’s current fiscal position is somewhat worse than Croatia’s (granted, markets don’t seem to care much about debt and deficits these days). In 2025, Poland recorded the second-largest public deficit in the EU at 7.3% of GDP, only behind the troubled Romania. The deficit is expected to narrow somewhat but remain well above the Maastricht 3% guideline. Public debt sat just under the 60% Maastricht ceiling at end-2025 and is set to break above it in 2026, with the IMF projecting it to reach 78% of GDP by 2031 under unchanged policies. A major driver of the deficit is defense spending, slightly below 5% of GDP – the highest share in NATO.

Regarding inflation and monetary policy, the NBP successfully brought inflation back to target through 2025, but recent oil-price pressure from Middle East tensions has caused a renewed uptick, signaling a pause in the rate-cutting cycle.

WIG30TR and WIG20TR index composition

Source: Bloomberg, InterCapital Research

Turning to the ETF itself – 7POL tracks the WIG30TR index, comprising the top 30 Polish names, rather than the more common WIG20. The rationale is visible in the chart above – the WIG20 carries very high concentration, particularly in financials. WIG30TR remains heavily skewed toward banks and insurers, but allows more weight to consumer discretionary, consumer staples, and communication services – sectors dominated by domestic-demand exposure and supported by a loan-growth cycle expected to continue as NBP rates approach their floor. That said, banks are expected to remain highly profitable as private-sector credit volumes – still low relative to the EU average as a percentage of GDP, and so with significant room to grow – should offset compression in net interest margins.

Investments in energy and infrastructure should further stimulate the energy, materials, and industrials sectors, with a positive tail risk from Ukraine reconstruction. A financials- and cyclicals-heavy index with limited IT exposure may look like a suboptimal growth vehicle on the surface, but combined with strong EU funds absorption, booming domestic demand, foreign investment inflows, and major infrastructure, defense, energy, and Ukraine-reconstruction spending, it makes Poland both a high-growth story and a useful diversifier for portfolios overweight US tech.

WIG30TR current and forward P/E and dividend yield

Source: Bloomberg, InterCapital Research

Poland becomes even more attractive if we look at its price. Trading at a material discount to both Europe and regional peers (CROBEX10 and SBITOP 2026 forward P/E is 15.0x and 14.3x, respectively) despite higher growth naturally raises questions about risks – and as is often the case, there are several. We’ve already covered the fiscal picture – rising debt and an outsized deficit. Geopolitically, although Ukraine is a future opportunity, sitting that close to and being so interconnected with the conflict in Eastern Europe is itself a risk. PLN volatility is another factor, though forecasts point to continued appreciation, which benefits EUR investors. A key risk for the financials-heavy index is the increase in the bank CIT rate from 19% to 30% in 2026, stepping down to 26% in 2027 and 23% from 2028, but still materially elevated versus the previous 19%. The hit is partially offset by a parallel reduction in the bank asset tax, and several smaller tax changes affecting the sector are also underway. Finally, there is SOE governance risk: almost half the index sits under State Treasury control or SOE cross-holdings, leaving open political-intervention risk.

Overall, Poland is a fast-growing market sitting at the intersection of peak EU-fund absorption, a loan-growth inflection, and substantial infrastructure, defense, and energy investment backed by a proven ability to dodge economic crises and ease monetary policy without tipping into recession. Key risks on the other side include the worsening fiscal position, high financial-sector concentration in the index, higher bank tax rates, and the SOE overhang. Whether Poland can deploy this capital efficiently into productive investment and stabilize its fiscal position without overly restrictive policy or imposing tax on top of tax remains to be seen. One thing is clear, though: Poland is a developed economy, or at the very least a transitioning one, priced at emerging-market multiples – a textbook convergence and re-rating opportunity. And of course, this is not financial advice and before any financial decisions you should do your own research 🙂