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Saturday, June 22, 2024

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How Poland stands in the AI-era

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IMPACT LEADERS: Beata Mońka, Founder and CEO of Art of Networking

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Investment in Poland at a crossroads

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Poland bucks global investment downturn trend

After a sharp decline in 2020 and a strong recovery in 2021, global direct investment in 2022 fell by 12% to $1.3 trillion. 

According to reports from international organizations (including UNCTAD), the decline was caused by global factors, related to the war in Ukraine, high energy and food commodity prices, rising interest rates and uncertainty on financial markets. 

However, it is worth noting that the decline in global investment was not the same in all countries. In developed countries, there was a strong decline in direct investment inflows, while in developing economies, a slight increase.

Foreign direct investment in Poland 

In 2022 in Poland, the upward trend of direct investment flows continued. Compared to 2021, their volume increased by nearly a quarter, and in comparison with the pre-pandemic period, investment inflows more than doubled.

The capital inflow from foreign direct investments in 2022 was PLN 140.3 billion. The dominant position in the capital inflow was, as in previous years, reinvested profits (PLN 75.8 billion). The balance of transactions also increased as a result of transactions related to debt instruments (PLN 35.7 billion) and as a result of acquisitions of equity shares and capital injections (PLN 28.8 billion). The inflow of foreign direct investment reached 4.6% of GDP in 2022.

Foreign-invested companies performed very well financially in 2022, making reinvested profits more important than the transfer of new capital from abroad. As a result, flows came from countries with the highest capital exposure in Poland. These included the Netherlands (net transactions of PLN 28.4 billion), Luxembourg (PLN 28.3 billion) and Germany (PLN 23.4 billion). 

At the end of 2022, foreign direct investment liabilities in Poland amounted to PLN 1.2 trillion, PLN 74.5 billion, or 6.7%, higher than at the end of the previous year. As in previous years, the main factor in this increase was an increase in liabilities from shares and other forms of equity participation.

If we take into account the country of origin of the group’s parent company, Germany remained the largest direct investor in Poland in 2022. The balance of their receivables from foreign investments in Poland at the end of the analyzed year amounted to PLN 230.3 billion. France came next (PLN 108.3 billion), followed by the Netherlands (PLN 105.7 billion). Fourth place was taken by the United States (PLN 103.5 billion), and the top five investors was closed, as in the previous year, by the United Kingdom (PLN 57.5 billion). 

The value of Polish investments in Poland (made through special purpose entities based in other countries) amounted to PLN 42.9 billion. This gave Polish entities seventh place among the analyzed investors.

Very good financial results of enterprises with foreign capital contributed to an increase in non-resident income from direct investment in Poland. In 2022 they reached a record level of PLN 128.9 billion, 7% higher than in 2021, with the strongest contribution to this increase in interest receivable (by 40% to PLN 11.4 billion). 

Reinvested earnings accounted for nearly 60% of total income and remained at a similar level to 2021. Dividends paid contributed PLN 41.7 billion (up 6%). Despite the increase in income, there was a decline in the profitability of investments relative to liabilities – by 0.9 percentage points, to 11.7%. At the same time, income from foreign direct investment in Poland in 2022 was down from an all-time high of 4.6% in 2021

The highest income from direct investment in Poland was achieved by investors from the Netherlands (PLN 31.9bn PLN), Germany (PLN 23.9 billion) and Luxembourg (PLN 17.1 billion). 

If revenues are attributed to the country in which the parent company is based, the highest revenues were recorded by investors from Germany (PLN 27.1 billion), followed by the United States (PLN 12.4 billion), France and the Netherlands (PLN 11.5 billion and PLN 10.7 billion respectively).

Polish direct investments abroad

The balance of transactions from Polish direct investments abroad in 2022 was nearly

one and a half times higher than in 2021 and amounted to PLN 28.2 billion. Flows related to reinvestment of profits accounted for the largest share in the structure of transactions. In 2022, foreign entities of direct investment increased their liabilities to Polish investors.

The state of net receivables at the end of 2022 reached a historic high and amounted to PLN 130.5 PLN billion – 17.4% more than in 2021. This was driven by an increase in receivables from both equities and other forms of equity interests (by PLN 14.3 billion), as well as on debt instruments (by PLN 5.1 bn).

The highest positive balances of Polish direct investors’ transactions abroad were recorded

in the case of Norway (PLN 13 billion), the Czech Republic (PLN 4.0 billion) and Germany, Hungary and Luxembourg (PLN 1.8 billion each). It is worth noting the marked decrease in the balance in the case of the Russian Federation (PLN -1.3 billion). This was a consequence of Polish entities leaving this market due to economic and political sanctions imposed on Russia. Luxembourg, Cyprus and the Netherlands ranked high among the countries with the highest positive receivables in 2022. 

During the period under review, domestic investors continued to use these countries to optimize their investment structures. Polish direct investment abroad controlled by residents at the end of 2022 amounted to PLN 106.8 billion and accounted for 81.8% of the value of Polish direct investment abroad.

In 2022, residents’ income from foreign investments reached a historically highest

level: PLN 29.2 billion. The reason for their almost doubling is the highest ever recorded

reinvested earnings of PLN 25.1 billion.

Sylwia Ziemacka
Sylwia Ziemacka
“I believe our unique selling point is that we focus on what brings us together. Poland Weekly offers something you will not find anywhere else: a truly international and unifying perspective focused on content that builds cooperation and mutual understanding. This attitude doesn't make us naïve, but it allows us to focus on mutual understanding and a search for solutions. There are so many new challenges that we are all facing, such as energy transformation, climate change and supply chain disruption, to name but a few. By working together and sharing good practices, we can achieve so much more.”
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