If globalisation was meant to obviate liberal democracies’ instinct toward national competition, it seems the world’s headline writers didn’t get the memo. Every few months, whenever a major report on the economic health of nations is released, it’s all about the leaderboard.
Often, this results in a gloomy news day for Blighty. At the start of 2023, we had “UK faces worst and longest recession in G7, say economists”. While this had shifted a few months later to the fractionally better "revised data from ONS shows Britain is not worst G7 performer”, the year ended with a rotter from Reuters: “UK set to have weakest growth among G7 in 2024, IMF forecasts”.
Of course, in this particular contest, there’s usually only one winner. “US to grow at double the rate of G7 peers this year, says IMF,” the Financial Times website reminded us this week. It’s the kind of observation that explains why – in a self-fulfilling loop – investors’ capital so often flocks to the Land of the Free, whatever the sensitivities around pricing and valuations.
For both investors and interested citizens, therefore, a sense of how nations measure up against their peers can be a useful metric.
One important, if non-G7, country that is perpetually absent from this conversation is Poland. That’s largely because of the nominal size of its economy – roughly $842bn (£676bn) at the end of 2023 – which gives it a share of just a 30th of Europe’s (including Russia), per the International Monetary Fund (IMF).
Within the European Union, but outside the eurozone, the nation is largely overlooked despite its well-diversified economy, fiscal conservativism, and growing geopolitical heft. Other than size, the oversight might have something to do with the way Europe’s various blocs and national characters are depicted. Short of a world-renowned company or big-ticket industrial advantage, Poland doesn’t capture the imagination in the same way that Germany’s engineers, France’s luxury goods firms, or Italy’s chronic indebtedness does.
But as an investment destination, the country is proving its mettle. Last February, this column put together a screen of European nations (including the UK), to add a smidgen of context to the usual blunt GDP-based pecking order.
In this rather unscientific poll, Poland came out top, by a distance. Anyone who used that exercise to take a punt on the country through a simple exchange traded fund like iShares MSCI Poland (SPOL) would have since bagged a total return of 39 per cent, a little above the run-up in the złoty-priced Warsaw Stock Exchange General Index (aka the WIG), and 17 percentage points ahead of the MSCI All-Countries benchmark.
How, then, do things look 14 months on? The answer, as the refreshed table below shows, is pretty much the same. In terms of economic growth projections, fiscal stability, and the cheapness of its stock market, it is ahead of its larger, better known European neighbours.
| Screen of nations | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Country | Unemployment* (%) | Gov debt to GDP* (%) | 2024 GDP forecast (%) | 2025 GDP forecast (%) | Two-year GDP growth (%) | 2024 CPI forecast (%) | PE NTM (listed firms) | Median age | Fitch credit rating | SCORE (/54) |
| Poland | 3.1 | 50.2 | 2.9 | 3.5 | 6.4 | 4.4 | 8.9 | 42.4 | A-, stable | 44.5 |
| Spain | 12.1 | 108.3 | 1.8 | 2 | 3.8 | 3.2 | 11.2 | 46.3 | A-, stable | 31.5 |
| France | 7.2 | 110.2 | 0.7 | 1.3 | 2 | 2.3 | 15.6 | 42.4 | AA-, stable | 31.5 |
| UK | 4 | 98.4 | 0.4 | 1.2 | 1.6 | 3.4 | 11.2 | 40.6 | AA-, stable | 29.5 |
| Germany | 5.7 | 63.6 | 0.1 | 1.2 | 1.3 | 2.5 | 12.4 | 46.7 | AAA, stable | 27 |
| Italy | 7.7 | 137.3 | 0.7 | 1.2 | 1.9 | 1.7 | 9.2 | 48.1 | BBB, stable | 25 |
| *2023 year-end. Source: FactSet, CIA World Factbook, Fitch Ratings. NTM = Next twelve months. | ||||||||||
Contained within these rows are a litany of dodgy assumptions about what constitutes a ‘good’ economic metric. For example, I’ve somewhat arbitrarily decided a cheap stock market is better than a more highly rated one, and that lower levels of government debt are optimal. Median working age gives hints as to the old-age dependency ratio, but says nothing about birth rates or population growth which ultimately sustain a nation and its economy. On this count, despite efforts by the former government, Poland has struggled.
Still, if near-term growth is what investors seek, then there aren’t many better options in Europe than Poland. And while Warsaw-listed equities are an imperfect proxy for the Polish economy, they are cheap. Nie ma za co.
