Poland’s Defence Spending Surge Fuels Domestic Industry and Economic Debate

Since Russia’s invasion of Ukraine, Poland’s defence budget has risen from 2.2 % to 4.8 % of GDP, reaching roughly $53 billion (£39.8 billion)—the fourth-largest defence outlay in the EU. The funds back a high-tech weapons facility in Czosnów, an artillery plant near Katowice, new frigate construction at the Gdynia shipyard, and ammunition output that grew from 5,000 to 30,000 155 mm shells in 2023, with a target of 200,000 annually within two years.

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The war in Ukraine has sharpened NATO’s focus on its eastern flank, prompting Poland to expand its defence capacity. EU accession in 2004 and subsequent infrastructure funds have improved fiscal space, allowing the current spending push.

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• Defence spending share: 2.2 % -> 4.8 % of GDP (2026).

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• Cash value: $53 bn (£39.8 bn), fourth-highest in the EU.

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• EU “Security Action for Europe” (SAFE) loans: €44 bn secured, with almost 90 % earmarked for domestic firms such as Polska Grupa Zbrojeniowa (PGZ).

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• Fiscal outlook: Moody’s downgraded Poland’s sovereign rating, warning the budget deficit could reach 7.1 % of GDP.

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• Ammunition production: 5,000 rounds in 2023 -> 30,000 rounds in 2024 -> 200,000 rounds per year projected by 2026.

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• IMF caution: The IMF noted that EU defence investment may not automatically benefit the governments financing it.

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President Karol Nawrocki, backed by the Peace and Justice party, challenged Prime Minister Donald Tusk’s access to the €44 bn SAFE loans, arguing the opposition would “use anything” to regain power. Tusk affirmed the loans will flow mainly to domestic manufacturers, aiming for a self-sufficient arms sector. UK defence minister Luke Pollard highlighted job benefits of the new MBDA facility, noting ties to British towns such as Bristol and Stevenage.

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Right-wing politicians frame the EU-backed loans as a political tool, accusing the government of prioritising defence over other needs. Moody’s downgrade raises concerns that rapid fiscal expansion could erode creditworthiness and widen the projected deficit. The IMF warning adds that without careful budgeting, the expected economic multiplier may fall short.

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• “Everyone has had to move twice as fast to meet the Polish needs,” — Jim Price

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• “It’s a must for Poland, basically, to invest more. But they want to do it in a smart way,” — Andrzej Maciejewski, Babcock’s country director for Poland

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• “We are spending a lot of money as a nation, and we are almost a poster child for it,” — Maciej Klemm, co-founder of Advanced Protection Systems (APS)

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SAFE loan disbursements will be phased over the coming years, with the first new munition factories slated for 2028.

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