Poland’s inflows of foreign direct investment lagging behind global average by 52%

The amount of foreign direct investment (FDI) attracted by Poland is lagging behind the global average by 52%, according to a new study by UHY, the international accounting and consultancy network.

According to UHY, total inflows of FDI accounted for 3% of Poland’s GDP last year. This compares to the world figure of 2.2% of total GDP.

Countries are keen to win FDI because it helps power economic growth. As well as boosting job creation and tax revenues, it can act as a spur to competitiveness and productivity through knowledge transfer or investment in improved processes, technologies or infrastructure.

The UHY study looked at FDI inflows last year in 45 major economies around the world, measuring how successful they have been in attracting FDI as a percentage of their GDP.

The uncertainty surrounding some of the Polish government’s policies, including taxes which may be seen by some as targeting foreign companies, such as banks and supermarkets, may have contributed to the country’s below average performance. Political uncertainty in Poland over the last year may also have led to a decline in foreign investor confidence.

The research shows that the BRICS economies are easily outperforming the G7 in attracting FDI, with total inflows of FDI accounting for 2.3% of the total BRIC nations’ GDP last year. This figure compares to 1.7% of GDP for the G7.

BRICs economies received total FDI in 2015 of $375 billion – a 59% increase on five years ago in 2010 when the figure was $236 billion.

The USA, China and Brazil attracted the most FDI in absolute terms – at USD 379billion, USD 250billion and USD 75billion respectively in 2015.

UHY says that BRIC economies are seen as providing better growth opportunities for multinational businesses than the more mature economies of the G7.

In addition, the shift towards locating manufacturing facilities in BRIC economies rather than in western countries continues, as multinational businesses seek locations with low labour costs, availability of resources and favourable business climates.

Comments Piotr Wozniak, Partner at UHY ECA Group, a member firm of the UHY network: “While BRIC economies are continuing to attract significant amounts of FDI despite the slowdown in emerging markets, some developed economies – and Poland in particular – are falling behind.”

“Inbound investment by foreign businesses is a sign of confidence in an economy, providing a boost to business growth, job creation and developments in areas such as innovation and infrastructure.”

“Focusing on fostering an environment that encourages foreign investment is key to Poland competing on the global stage.”

“Poland could benefit from making itself a more attractive location for foreign investment. One way to do this would be to make the tax regime more favourable, by lowering corporate tax rates or introducing other incentives for multinationals to establish or expand operations here.”

“There are many advantages of investing in Poland, such as the country’s membership of the Single Market and its educated workforce. It is important that the government promotes these benefits amongst potential foreign investors if Poland’s economy is to compete with that of the BRICs.”

Of the G7, Japan and Italy saw the lowest performance with 0% and 0.7% respectively. Germany was also well below the average with just 1.4% (USD 46billion in total). Overall, Europe saw FDI worth 2% of total GDP, slightly below the global average of 2.2% of total GDP.

ASEAN economies (Association of South East Asian Nations) outperformed even the BRIC nations in terms of FDI as a share of their economies, attracting FDI worth 5.3% of GDP.

Malta saw the highest FDI as a share of GDP in the study at 25.8% (USD 2.5billion in total), as the island continues to take advantage of its location at the crossroads of Europe, Africa and the Middle East to become an international centre for banking and attract substantial inflows of capital.

Inflows of Foreign Direct Investment

Inflows of Foreign Direct Investment as a percentage of GDP

BRIC economies outpace G7 by over a third in attracting inflows of foreign direct investment