Global investors are focusing on the Polish stock market. Thanks to a relatively free trade structure unaffected by the tariff war and the fiscal expansion of neighboring Germany, the Polish stock index WIG has risen nearly 30% this year.
On the 20th (local time), the Financial Times reported that "the Polish WIG index rose 28.6% compared to the beginning of the year, despite a decline following unexpected close competition in the first round of the presidential election held on Monday," adding that "this is a higher rate of increase than strong markets in Chile and Greece."
Tomasz Barzilowski, CEO of the Warsaw Stock Exchange, evaluated that "the robust economic situation in Poland, the increase in corporations' dividends, and relatively low valuations have led to a rally fueled by a massive inflow of foreign capital." The price-earnings ratio (PER) of the Polish stock market is 15% lower than the average of MSCI emerging countries.
The Polish stock market is gaining momentum due to a trade structure that is relatively free from the impacts of the tariff war. About three-quarters of Poland's trade is conducted within the European Union (EU), which makes it less affected by the high tariffs imposed by the administration of Donald Trump. This contrasts with the U.S. benchmark index, the S&P 500, which has only risen about 1% since the beginning of the year after being hit hard by tariffs.
Moreover, the Polish stock market is relatively small and is greatly influenced by economic changes. The market capitalization of the Polish WIG index is about $135 billion (approximately 187 trillion won), which is significantly less than the UK's FTSE 100 ($2.9 trillion) and the U.S. S&P 500 (approximately $50 trillion). Piotr Arak, chief economist at Bank Millennium, noted that "the small market size can result in noticeable changes from foreign capital movement."
The fiscal expansion movement of Germany, Poland's largest trading partner, has also had a positive impact. In March, the German parliament approved a defense and infrastructure spending plan of over 1 trillion euros for the next decade, thus preparing to launch a "cash bazooka." Investors expect that Germany's economic stimulus measures will lead to increased liquidity and positive ripple effects in Poland.
The outlook ahead is also bright. FT, citing analysts, predicted that the earnings per share (EPS) of corporations listed on the Warsaw Stock Exchange will grow by an average of about 10% this year. The Polish economy grew by 3.8% in the first quarter compared to the same period last year, the second highest figure in the EU after Ireland. The annual economic growth rate is also expected to be around 3.3% this year.
Viata Jabłorczyk, chief economist of the European Bank for Reconstruction and Development (EBRD), said, "Poland will maintain its stability even in unstable times due to its diversified economic structure, large domestic market, and limited direct trade with the U.S."
However, the presidential election results could serve as a variable. In the first round of voting held on the 19th, Rafal Trzaskowski, the ruling party's Civic Platform (PO) candidate with pro-EU tendencies, led with 31.36% of the vote, narrowly ahead of independent candidate Karol Nawrocki, who has the support of the nationalist right-wing opposition Law and Justice Party (PiS) with 29.54%. As no candidate received a majority in the first round of voting, the top two candidates will face off in the runoff on the 1st of next month.
Since the pro-EU coalition government took power in 2023, Poland has received billions of euros in EU funds to invest in infrastructure and energy transition projects. Significant funding has been used to reduce reliance on coal, leading to a 53% increase in the stock price of the state-owned oil company PKN Orlen and a 56% increase for power company PGE this year.
If an upset occurs in the runoff election next month, a 'red light' may be lit for the current government's policy initiatives. Piotr Bujak, chief economist at PKO BP, Poland's largest bank, projected that "if the government of Donald Tusk wins, investor sentiment toward Poland will strengthen, whereas if they lose, concerns about the government's reform policies will grow among investors."