Since 1992 Poland has enjoyed positive GDP growth for 25 years, including 2009 which was a harsh year due to the global recession. It is also forecasted that its good development will further continue for several coming years. Some economic analysts attribute the important role of EU funds (grants from the EU) and foreign direct investments (FDI) for the successful GDP growth. The GDP ratio of foreign capital is 3.2% and 4.8% for EU funds and for FDI respectively, which is a relatively high ratio totaling 8% of the Polish economy. 20% of EU funds are allocated to Poland, and this makes it the top beneficiary. The inflow of FDI is also the top among Central and Eastern European Countries (11 countries).

Despite its long period of successful economic growth, it seems that an economic level (represented by GDP per capita) has not converged with the EU average and has been stagnant in recent years. Under these circumstances, it is not surprising that arguments for the Middle-Income Trap in the Polish economy are gradually increasing. That is whether Poland faces the Middle-Income Trap or is already in it.

What is the background of the Middle-Income Trap? Here we look at not only the positive side of foreign capital but the negative side as well. The positive side is its function as a powerful engine to drive the Polish economy. The negative side is an unwanted effect causing an excessive dependence on foreign capital, which constrains or at the very least, deteriorates self-sustainable growth, resulting in stagnation of future growth. In order to keep competitiveness needed for continuing growth and to avoid the Middle-Income Trap, it is essential to reform the industrial structure from labor-intensive to capital/knowledge-intensive industry through successive innovation.

On February 16, 2016 Polish authorities released the Action plan for responsible development of Poland. It is a remarkable plan, because it officially acknowledged five development traps (The Middle-Income Trap, Lack of balance trap, Average product trap, Demographic trap, and Weak institutions trap), which Poland currently faces. Before the publication of this plan, Polish authorities often appealed for EU funds or FDI, and claimed the acquisition as their diplomatic or political achievement without any mention of possible traps.

On June 23, 2016, it was decided that the UK would withdraw from the EU through a referendum, known as Brexit. As the UK’s economic size is the second largest in the EU, there is concern about continued political and economic turbulence for at least a couple of years. And the withdrawal of the UK from the EU will cause a reduction in the EU budget including EU funds, which will be an external shock on Polish economic growth.

This paper focuses on the background and development of economic growth and the Middle-Income Trap in Poland.

Poland has shown strong economic growth for 20 years since 1995, and is also the only EU country that achieved positive GDP growth in 2009 during the global recession.

Several studies have looked at the causes of this good economic performance, and attribute it to such as the effective utilization of EU Funds, stimulus by macroeconomic policy, devaluation of Polish currency, prudential control or regulation in the financial system and so forth.

Poland is a country well favored with foreign aid both before and after its accession to the EU from international institutions including the EU. When the focus is given to EU Funds after joining the EU on May 1, 2004, it is easy to understand that such funds play an important role as key driver of economic growth in Poland.

Poland enjoys a comparatively big allocation of EU Funds, indeed it was the top recipient of funds when the Multiannual Financial Framework (MFF) was in effect (2007–2013). The financial transfer of EU Funds is 3.7 times greater than the Polish contribution to the EU, and this amounts to 4% of Polish overall GDP (3% by Structural Fund and 1% by Common Agricultural Policy (so called CAP)) according to 2013 statistics. Furthermore the ratio of EU Funds to the governmental budget is 10-20%. The G20 members at the London Summit 2009 agreed to a financial stimulus of around 3% of GDP to mitigate the global recession. Thus the 4% of GDP from EU Funds should contribute greatly to Polish GDP growth.

EU funds can be classified by 2 main categories, one is Structural Funds and the other is CAP payments mentioned above. Structural Funds are used to support the modernization of infrastructures by member states or between member states. Therefore it can be utilized as fiscal investment to promote GDP growth. Most CAP payments are allocated to farmers as direct-aid payments, which may result in an expansion of domestic demand (as household consumption). In fact, GDP ratio of the construction industry in Poland is 2% higher than in other EU member states, and the consumption propensity is also 5% higher.

EU Funds are costless financial grants from the EU without any fiscal burden falling on the Polish government. Hence there is no serious concern about crowding-out in the financial market, nor about rising interest rates of government bonds. EU Funds are, therefore, a very effective tool for Polish authorities to control economic growth. As they fully understand its function and importance in their national economy, Poland had tried as much allocation of EU Funds as possible under the current MFF regime.

In the recent economic forecast by the EU, Poland is expected to continue its good economic performance in the coming years mainly due to robust domestic demand. But there is fear that the Polish economy may fall into the Middle-income trap over the long-term, if they continue to depend on EU Funds for the progress of their economy.

The article documents and compares the childcare support policy reforms in Central Eastern Europe implemented after the Global Financial Crisis. On the one hand, Estonia and Poland have maintained or expanded their childcare support policies after the crisis. Especially, Poland has expanded both cash benefits for families and public childcare during this period. On the other hand, Hungary and Slovenia have decided to cut back on childcare support measures during this period. While Slovenia was forced to cut back on childcare support due to the financial crisis, Hungary has intentionally adopted policies of focusing on the middle class with children by expanding tax credits and reducing cash benefits. As a result of these policies, the employment situation for women improved in Estonia, but it worsened in Slovenia, and the situation remained largely unchanged in Hungary. As for Poland, despite the expansion of measures to support childcare, the employment situation of women has not improved. This situation is provably caused by the fact that the ruling party of Poland, Law and Justice (PiS) emphasizes on the traditional role of women based on Catholic values.