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Poland’s Government Debt Surges to 57.4% of GDP in Q1 2025, Raising Concerns
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Poland’s government debt has climbed to 57.4% of its Gross Domestic Product (GDP) by the end of March 2025, totaling over PLN 2.12 trillion. This marks a notable increase from 55.3% of GDP in the previous quarter, equivalent to over PLN 111 billion. The Ministry of Finance’s summary of the first quarter reveals a debt surge that has economists taking notice.
Did You Know? The 5.5% quarterly increase is among the highest in Poland’s history, rivaling growth rates seen during the 2008-09 financial crisis and the 2020 pandemic.
Significant Quarterly Increase
The 5.5% quarterly increase in government debt is raising eyebrows among financial analysts. PKO BP bank economists describe it as “one of the highest growths in history.” A year prior, after the first quarter of 2024, the EDP debt stood at PLN 1.77 trillion, more than PLN 351 billion lower than the current figure.
This rapid accumulation of debt prompts questions about the underlying factors driving this trend and its potential implications for Poland’s economic stability.
Economists Weigh In on Rising Debt
Economists highlight several factors contributing to this surge. “Stronger increases were observed at the beginning of the 21st century, during the financial crisis (2008-09) and the pandemic (2020),” according to PKO BP’s analysis.They also note that the new debt primarily originates from the central sector, while local government debt decreased by PLN 1.8 billion quarter-on-quarter.
Furthermore, economists point out that debt in non-budgetary funds has decreased, mainly due to the repayment of Polish Progress Fund (PFR) bonds worth PLN 18.5 billion from central budget funds.
Pro Tip: Monitoring the composition of debt, especially the balance between central and local government obligations, provides valuable insights into the sources of financial pressure.
Key Factors Behind the Debt Increase
Several factors are identified as potential drivers behind the significant increase in total debt. These include:
- Arms contracts
- The loan portion of the National Recovery Plan (KPO), which is treated as public debt
- Securing funds for future expenses
These factors suggest that fiscal consolidation, aimed at reducing the deficit relative to GDP, may not have fully taken hold, leading to continued deficit growth.
According to the European Commission, Poland’s general government deficit was 3.5% of GDP in 2023 and is projected to remain elevated in the coming years European Commission Autumn 2023 Forecast.
Debt Approaching Critical Thresholds
While the debt calculated using the national methodology increased to 46.3% of GDP from 44.3% in the previous quarter, it remains below the constitutional threshold of 60% of GDP. The Ministry of Finance report highlights a positive aspect: the lack of a significant increase in debt generated by non-state-purpose funds, which enhances the transparency of public finances.
though, economists at PKO BP caution that “after taking into account this data, we cannot rule out that the level of 60% of GDP through the GG sector’s debt may take place this year.” They also admit that their current debt forecast of 57.8% of GDP by the end of 2025 is outdated and requires upward revision.
Poland’s Debt Metrics
| Metric | Q1 2024 | Q1 2025 | Change |
|---|---|---|---|
| EDP Debt (% of GDP) | 55.3% | 57.4% | +2.1% |
| EDP Debt (PLN Trillion) | 1.77 | 2.12 | +0.35 |
| National Debt (% of GDP) | 44.3% | 46.3% | +2.0% |
The rising debt levels are occurring against a backdrop of global economic uncertainty. the International Monetary Fund (IMF) has warned about rising global debt levels, which could pose risks to financial stability
