Poland more than doubles defense spending to 4.8% of GDP since 2022 invasion

Moody’s cuts Poland rating to lowest since 2002 amid projected 7.1% EU-high deficit

A short distance north of Warsaw along the Vistula river, the village of Czosnów — where camouflaged missile launchers now roll toward a hi-tech weapons facility opened this month — had been a cornfield as recently as two years ago. As Poland drives up defense investment at one of the fastest rates in the developed world, that rural spot has been transformed amid Europe’s response to Russian aggression and US disengagement from European security. “Everyone has had to move twice as fast to meet the Polish needs,” said Jim Price, the managing director of MBDA Polska, the local subsidiary of the European multinational arms group. Based in the UK, the former Royal Marine said Poland is shifting from importing its weapons to manufacturing them at home. “When it became clear there is a need to defend Nato’s eastern flank, in the event of a war itself, they needed to be able to do things in the blink of an eye. So we decided to invest in the country to create a facility. We had to build up our Polish subsidiary – and that means Polish jobs.”

Poland’s defense budget has more than doubled as a share of gross domestic product since Russia invaded Ukraine in 2022, rising from 2.2% to 4.8% this year. In cash terms, the increase takes Polish defense spending to $53bn (£39.8bn), the fourth-highest in the European Union after Germany, France and Italy.

Attention in Warsaw is clearly focused on the risk of an imminent Russian test of Nato resolve. However, there is also another motive: growing the economy. Inside the soundproofed, airlock-style doors enclosing his office in Warsaw, Marcin Bosacki, Poland’s deputy foreign minister, said Russian aggression is heavily influencing the Polish government’s plans for economic development and cooperation with EU and Nato allies. “[It] is clearly benefiting Polish security; Polish defence, and the Polish economy as well,” Bosacki said. He added that strengthening economic ties in the pursuit of military readiness would discourage Vladimir Putin — whom he called “a traditional Russian imperialist” — from attacking Nato. “The only thing which Putin understands is solidarity and power,” Bosacki said. “And so the more we are united and strong, the less likely the outcome of more aggressive Russian provocations against Nato member states is.”

Hope remains for a diplomatic solution. This month, Donald Trump’s envoys Steve Witkoff and Jared Kushner held talks in Moscow with Putin and in Kyiv with Ukrainian President Volodymyr Zelenskyy. Further negotiations are scheduled in Abu Dhabi next month. However, diplomatic sources believe Russia is unlikely to cede ground, rendering Nato’s demonstrations of military readiness critical.

History shows defence and economics are closely intertwined. Statisticians first devised GDP as a metric in response to the 1930s Great Depression and needs of wartime planning to gauge the capacity of an economy. Poland has been through an economic transformation since the Solidarność (solidarity) movement that arose from the Gdańsk shipyard strikes paved the way for its transition from communism almost four decades ago. Living standards have risen from 40% of the EU average in the mid-1990s to 81% last year. Joining the EU in 2004 and securing catch-up funds from Brussels — spent on new roads, railways, and other productivity-enhancing infrastructure — also helped. Annual output surpassed $1tn (£755bn) in 2025, with Poland among the fastest-growing EU countries at an annualized rate of 3.9% in the second quarter despite the global headwinds caused by the Iran war.

However, Poland’s defence boom is not cost-free. Nor has economic development helped it avoid political polarisation. The rising military budget is among the reasons why Poland is projected to run the largest fiscal deficit in the European Union next year, at 7.1% of GDP. Last week, Moody’s downgraded the country’s long-term sovereign credit rating to its lowest level since 2002 amid an apparent lack of willingness to rebuild fiscal buffers. “This path is not sustainable,” said Leszek Kąsek, a Warsaw-based economist at ING Bank. “You should ask people if Poland can maintain its growth story and whether politicians will be ready to adjust?”

Wedged between larger neighbours it has been subjugated twice within living memory, Poles are uneasy about national security. Despite the country’s economic turnaround under EU membership and as it secures billions of euros in defense funds from Brussels, support for Eurosceptic politics remains. In the run-up to a general election next year, defense of the country, support for Ukraine and EU relations will be highly politically charged. This year, President Karol Nawrocki, who has backing from the rightwing Peace and Justice party, attempted to block Prime Minister Donald Tusk’s liberal, pro-EU government from accessing €44bn (£38bn) of defense investment loans approved under the bloc’s security action for Europe (Safe) programme. Outside the foreign ministry in Warsaw, protesters waved placards at a “Poles for peace” nationalist rally organized by rightwing politicians opposed to the EU and its support for Ukraine. Inside the building’s marble halls, where the Polish flag appears to be positioned next to those of Nato and the EU at almost every opportunity, Bosacki said divisions over the benefits to Poland of membership in both institutions has emerged for the first time.

“I think our right is so eager to regain power they will use anything,” Bosacki said. “Here for the first time, the opposition was [against doing] something which, in my opinion – and the opinion of the majority of Poles – is clearly benefiting Polish security, Polish defence and the Polish economy as well.”

Through Safe, Warsaw secured the largest single disbursement in the loan programme. The government has pledged to channel almost 90% of it to domestic industry — led by Polska Grupa Zbrojeniowa (PGZ), the state-owned defense conglomerate. However, in the race to build up capacity, the tills are ringing for US-arms manufacturers supplying Patriot missiles, Abrams tanks and F-35 fighter jets. In March, the International Monetary Fund cautioned that the positive economic spillovers from EU defence investment would not necessarily flow for the governments taking out their chequebooks.

Warsaw is also doing deals with international partners, including the UK, to help develop its domestic manufacturing base at the same time as building military readiness. The British defense group Babcock is working with PGZ on a fleet of new frigates — known as the Miecznik, or swordfish, programme — at a shipyard in Gdynia on the Baltic coast. The first ship was launched this summer by Tusk. “It’s a must for Poland, basically, to invest more. But they want to do it in a smart way,” said Andrzej Maciejewski, Babcock’s country director for Poland. “We’re addressing this ambition – that these great investments in defence will bring greater value for money and, in the longer run, these capabilities.”

BAE Systems is partnering with PGZ’s subsidiary Mesko — which makes ammunition and rockets — to build an artillery plant near Katowice, in southern Poland’s old industrial heartlands. The investment is part of a plan for three new munition factories by 2028. During a visit to the Mesko facility in August, Tusk said Polish production of 155mm ammunition — a Nato-standard artillery shell — stood at 5,000 rounds in 2023. “More is used in one day on the Russian-Ukrainian front,” he said. Polish production will rise to 30,000 rounds this year, with a target of 200,000 a year within two years.

Britain is increasing its own defense investment at a slower pace. The UK government has committed to raising spending from 2.3% of GDP last year to 3%, but has not spelled out precisely how or when the increase will be achieved. This month, British defense readiness minister Luke Pollard visited Czosnów for the opening of the MBDA facility, saying it would support jobs in both countries, including in Bristol, Stevenage and Bolton.

The counter-drone industry is also expanding. Maciej Klemm, co-founder of Advanced Protection Systems (APS), which builds counter-drone systems in Gdynia, said his company has increased its headcount from about 150 staff to 200 this year. Amid growing Russian drone incursions into Polish airspace, APS is part of Poland’s $4bn San programme to build an “anti-drone wall” to protect the country’s eastern flank. “We are spending a lot of money as a nation, and we are almost a poster child for it,” Klemm said. Splitting his time between Poland and the UK, where he still lives with his family after graduating from the University of Bristol in the 2000s, Klemm also summed up Poland’s recent economic history. “I was moving to Britain at the time there was a big wave of Poles coming over here. Now after Brexit, that wave partly receded and went the other way. Now, companies like ourselves and others are showing we have technical talent; we can build on this, and grow companies in Poland,” he said.