QNB Says Poland's Reclassification as Developed Market Reflects Economic Progress

Doha, October 17 (QNA) - Poland's reclassification from an emerging market to a developed market reflects three decades of economic and institutional progress, supported by market reforms, European Union membership and deeper integration into Western European supply chains, Qatar National Bank (QNB) said in its weekly report.

The bank noted that Poland's nominal gross domestic product has exceeded $1 trillion, bringing the country close to the world's 20 largest economies. The United States has also invited Poland to participate as a guest in the G20 during its 2026 presidency.

In August, S&P Dow Jones Indices announced that Poland would be upgraded to developed-market status, with the change scheduled to take effect during its September 2027 index rebalancing. The decision will bring its classification into line with FTSE Russell and STOXX, which upgraded Poland in 2018.

QNB said index providers assess factors including economic and political stability, financial market size and liquidity, and accessibility for foreign investors. Poland was found to meet the criteria for developed markets despite challenges such as inflationary pressures and delays in public investment.

The report identified three key factors supporting the reclassification: sustained economic growth, macroeconomic stability and the development of domestic capital markets.

Poland's economy grew by 3.6% in 2025, according to the country's statistics office, with annual growth accelerating to 3.9% in the second quarter of 2026, up from 3.5% in the first quarter. By comparison, the European Union economy expanded by 1.4% year on year, according to Eurostat.

The European Commission forecasts Polish economic growth of 3.5% in 2026 and 2.8% in 2027, placing the country among the EU's faster-growing economies.

Investment is also playing an increasingly important role. Gross fixed capital formation rose by 8.4% year on year in the second quarter of 2026, while higher domestic participation in new defense spending is expected to provide further support.

QNB also highlighted Poland's position as the largest recipient of allocations under the European Union's Security Action for Europe (SAFE) defense program.

Foreign investment remains another structural pillar of the economy. Poland's inward foreign direct investment stock reached approximately $345 billion in 2024, equivalent to around 38% of GDP, reflecting the country's deep integration into European production networks.

The report concluded that Poland's sustained growth, institutional development and expanding investment base have strengthened its position among advanced economies.

QNB said Poland's macroeconomic stability and deepening capital markets are strengthening its position among advanced economies, although persistent fiscal pressures remain a key challenge.

It added Poland's monetary policy framework had helped contain inflation after it exceeded 18% in early 2023. Tightening by the National Bank of Poland brought inflation closer to its target of 2.5%, with a tolerance band of one percentage point on either side.

The improvement enabled the central bank to cut its benchmark interest rate by a cumulative 200 basis points since 2025, bringing it to 3.75%. However, renewed energy price pressures pushed headline inflation to 3.4% in August, just below the upper limit of the target range.

The European Commission expects inflation to ease to 2.9% in 2027, although the outlook remains dependent on global commodity prices.

Public finances remain a significant concern. Poland's fiscal deficit reached 7.3% of gross domestic product in 2025, the second-highest level in the European Union. QNB said fiscal consolidation following the parliamentary elections scheduled for November 2027 would be a key policy challenge.

The report also highlighted the growing strength of Poland's capital markets and their appeal to international investors.

According to the Warsaw Stock Exchange (WSE), the WIG20 index, which tracks the country's 20 largest and most liquid blue-chip companies, delivered a total return of 30.8% through early September 2026. This compared with gains of 12% for the S&P 500 and 11.6% for the MSCI World Index.

Foreign investors accounted for a record 73% of trading on the WSE's main market in the first half of the year. Primary market activity also strengthened, with 10 initial public offerings completed so far in 2026.

QNB identified a potential upgrade by MSCI as the next major milestone for Poland. The index provider continues to classify the country as an emerging market, while the Warsaw Stock Exchange expects an upgrade within the next three to five years.

The bank said S&P Dow Jones Indices' decision to reclassify Poland as a developed market formally recognizes its sustained economic growth, increasingly investment-driven expansion, credible monetary policy framework and deeper capital markets.

Achieving developed-market status could broaden Poland's investor base and lower financing costs, QNB said. However, the country's longer-term outlook will depend partly on efforts to rein in public spending and secure further recognition from MSCI. (QNA)