Stock exchanges across Central and Eastern Europe (CEE) saw strong gains last week, led by Warsaw, Prague and Budapest.
Poland’s WIG index is now just 0.6% shy of its all-time high, Hungary’s BUX index set a new record and Prague’s PX index is nearing its 2007 peak. The rally was largely fueled by speculation over a potential resolution to the Ukraine-Russia war, following reports from The Daily Mail that U.S. President Donald Trump was working on a peace proposal aimed at ending the conflict by April 20.
Although these reports were later denied, markets responded as if a peace deal was imminent. Optimism was especially strong in Warsaw, where the WIG-Ukraine index—tracking Ukrainian companies listed in Poland—surged 19.6% in a single day. The rally was driven by Astarta, an agricultural giant, whose shares climbed 13% to their highest levels since 2021.
Further fueling the optimism, Trump signaled that U.S. aid to Ukraine could continue, a notable shift from his campaign rhetoric, in exchange for post-war access to Ukraine’s rare earth mineral deposits. The proposal mirrored ideas from Ukrainian President Volodymyr Zelenskyy, hinting at a new geopolitical framework that could aid Ukraine’s long-term economic recovery.
Political analysts, including Nobel laureate Paul Krugman, argue that Trump has a vested interest in ensuring Russia does not win, as allowing Russia to claim victory would damage his administration politically, forcing it to maintain support for Ukraine.
So far in 2025, Poland’s WIG and WIG20 indices have been among the world’s top performers, while Czech and Hungarian exchanges also ranked in the global top five. Meanwhile, the Polish złoty and Hungarian forint have emerged as Europe’s strongest currencies, with the euro falling below PLN 4.20 (€0.92)—the lowest since 2018.
Despite the złoty’s strength, its performance is increasingly driven by geopolitical factors rather than monetary policy. Last week, the Polish Monetary Policy Council (RPP) kept interest rates unchanged, as expected, but Governor Adam Glapiński adopted a more dovish tone. For the first time in months, he refrained from mentioning 2026 as the earliest date for rate cuts, suggesting reductions could occur once inflation stabilizes and projections confirm a sustained decline. Analysts speculate that the July inflation forecast may provide the basis for easing.
Although these reports were later denied, markets responded as if a peace deal was imminent. Optimism was especially strong in Warsaw, where the WIG-Ukraine index—tracking Ukrainian companies listed in Poland—surged 19.6% in a single day. The rally was driven by Astarta, an agricultural giant, whose shares climbed 13% to their highest levels since 2021.
Further fueling the optimism, Trump signaled that U.S. aid to Ukraine could continue, a notable shift from his campaign rhetoric, in exchange for post-war access to Ukraine’s rare earth mineral deposits. The proposal mirrored ideas from Ukrainian President Volodymyr Zelenskyy, hinting at a new geopolitical framework that could aid Ukraine’s long-term economic recovery.
Political analysts, including Nobel laureate Paul Krugman, argue that Trump has a vested interest in ensuring Russia does not win, as allowing Russia to claim victory would damage his administration politically, forcing it to maintain support for Ukraine.
So far in 2025, Poland’s WIG and WIG20 indices have been among the world’s top performers, while Czech and Hungarian exchanges also ranked in the global top five. Meanwhile, the Polish złoty and Hungarian forint have emerged as Europe’s strongest currencies, with the euro falling below PLN 4.20 (€0.92)—the lowest since 2018.
Złoty Strength Holds Despite Softer Signals from Polish Central Bank
Despite the złoty’s strength, its performance is increasingly driven by geopolitical factors rather than monetary policy. Last week, the Polish Monetary Policy Council (RPP) kept interest rates unchanged, as expected, but Governor Adam Glapiński adopted a more dovish tone. For the first time in months, he refrained from mentioning 2026 as the earliest date for rate cuts, suggesting reductions could occur once inflation stabilizes and projections confirm a sustained decline. Analysts speculate that the July inflation forecast may provide the basis for easing.
Glapiński also downplayed the impact of anticipated electricity price hikes in 2025, further signaling a shift toward a more dovish stance. He highlighted slower wage growth as another potential indicator for rate cuts. While wages had grown at double-digit rates for most of 2024, December saw annual wage growth dip below 10% for the first time in over a year.
A potential end to the Ukraine war could significantly impact Poland’s labor market. According to a report by Personnel Service, up to one million additional Ukrainians may migrate to Poland. A survey by the Razumkov Foundation found that 21% of Ukrainians, and one-third of those under 30, are considering leaving. Poland is the preferred destination for 43% of those planning to leave, while 30% favor Germany.
The influx of Ukrainian workers could alleviate Poland’s labor shortages, particularly in key sectors, and help bolster the pension system as migrants contribute to the national insurance fund. However, the sudden increase in workers could dampen wage growth, especially in lower-skilled sectors where many migrants are expected to accept lower wages.
Despite this, Deloitte estimates that Ukrainian workers contributed approximately 1% to Poland’s GDP in 2023, underscoring their broader economic impact.
The OECD has recommended a comprehensive overhaul of Poland’s tax system, including the introduction of a progressive property tax based on real estate value and a broader vehicle tax based on emissions. The current property tax system, which does not account for location, is seen as inefficient and regressive. The OECD suggests gradual implementation, with tax relief options for low-income households.
The OECD also advocates for expanding Poland’s planned vehicle tax, set to take effect in 2026 for company cars, to cover all vehicles. These reforms could help Poland address its budget deficit, projected to remain above 5% of GDP in 2025 and 2026.
The report also highlights that Poland’s expansionary fiscal policies are compelling the central bank to maintain high interest rates. The OECD suggests tighter fiscal discipline could create room for monetary easing, supporting economic growth. The OECD projects Polish GDP growth at 3.4% in 2025 and 3.0% in 2026, with inflation expected to decline from 5% to 3.9% next year.
Post-War Migration Could Reshape Poland’s Labor Market
A potential end to the Ukraine war could significantly impact Poland’s labor market. According to a report by Personnel Service, up to one million additional Ukrainians may migrate to Poland. A survey by the Razumkov Foundation found that 21% of Ukrainians, and one-third of those under 30, are considering leaving. Poland is the preferred destination for 43% of those planning to leave, while 30% favor Germany.
The influx of Ukrainian workers could alleviate Poland’s labor shortages, particularly in key sectors, and help bolster the pension system as migrants contribute to the national insurance fund. However, the sudden increase in workers could dampen wage growth, especially in lower-skilled sectors where many migrants are expected to accept lower wages.
Despite this, Deloitte estimates that Ukrainian workers contributed approximately 1% to Poland’s GDP in 2023, underscoring their broader economic impact.
OECD Urges Poland to Reform Property and Vehicle Taxes
The OECD has recommended a comprehensive overhaul of Poland’s tax system, including the introduction of a progressive property tax based on real estate value and a broader vehicle tax based on emissions. The current property tax system, which does not account for location, is seen as inefficient and regressive. The OECD suggests gradual implementation, with tax relief options for low-income households.
The OECD also advocates for expanding Poland’s planned vehicle tax, set to take effect in 2026 for company cars, to cover all vehicles. These reforms could help Poland address its budget deficit, projected to remain above 5% of GDP in 2025 and 2026.
The report also highlights that Poland’s expansionary fiscal policies are compelling the central bank to maintain high interest rates. The OECD suggests tighter fiscal discipline could create room for monetary easing, supporting economic growth. The OECD projects Polish GDP growth at 3.4% in 2025 and 3.0% in 2026, with inflation expected to decline from 5% to 3.9% next year.
Warsaw Stock Exchange Delivers Strongest IPO in Years
The Warsaw Stock Exchange celebrated its most successful IPO in years, with Diagnostyka’s shares rising 23% on their first trading day. The diagnostics firm, which operates over 1,100 blood collection centers and 156 diagnostic laboratories, now ranks among the 40 most valuable companies on the exchange with a market valuation of PLN 4.4 billion (€964 million).
Poland Raises $5.5 Billion in U.S. Dollar Bonds
Poland raised $5.5 billion through U.S. dollar-denominated bonds last week. The issuance included five-year bonds yielding 5% and ten-year bonds at 5.47%, lower than domestic borrowing costs. Although dollar-denominated debt carries currency risk, it allows Poland to ease pressure on its domestic bond market and improve pricing for local debt issuance. As of January’s end, Poland had covered 38% of its 2025 borrowing needs, with this issuance pushing that figure to 42%.
Tesla Falls Behind as Kia Becomes Poland’s Top EV Brand
Tesla has dropped from Poland’s top-selling electric vehicle (EV) brand, with Kia now leading the market. In January, Tesla sold just 103 EVs, trailing Hyundai, Mercedes and the new leader Kia, which sold 196 EVs. Poland’s EV market remains sluggish, with just 1,121 EVs sold in January, a meager 0.4% increase year-on-year. Nearly 86% of EVs were registered by businesses, with private buyers largely absent from the market. Analysts expect price cuts to boost sales this year, but demand remains weak in one of Europe’s least electrified car markets.
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