Poland Has the Highest Fiscal Deficit in the EU This Year. Defence Spending Is the Reason. Here Is the Full Picture.

Poland is growing faster than almost any other country in Europe. It is also running the European Union's largest fiscal deficit as a share of GDP in 2026. Those two facts are not contradictions. They are directly connected.

Fiscal consolidation is expected to advance in 2026, with the deficit estimated at 6.5% of GDP. The debt-to-GDP ratio is set to increase from 59.7% of GDP in 2025 to 68.3% by 2027, mainly driven by high deficits and debt-increasing stock-flow adjustments related to defence investments. The fiscal stance is projected to remain expansionary in 2026, as high EU-financed expenditure offsets the contractionary impact of nationally-financed expenditure.

Poland shares a border with Russia through its Kaliningrad exclave and borders Ukraine, where the war has fundamentally reshaped Central European security assumptions. Poland has responded by committing to one of the highest defence spending levels in NATO, currently targeting 4% of GDP on military expenditure. That spending on equipment procurement, personnel expansion, and infrastructure is flowing directly into the 2026 fiscal deficit.

The European Commission has flagged that Poland's deficit path, at 6.5% in 2026 narrowing to 6.3% in 2027, remains above the EU's Excessive Deficit Procedure threshold of 3% of GDP. That technically places Poland in a category of fiscal concern alongside France, Italy, and several other member states running persistently wide deficits.

EU funds and defence spending currently serve as prominent catalysts for GDP growth in Poland, particularly in the short and medium term. Access to the EU single market remains far more significant than financial transfers from the Union, with single market access estimated to have increased long-term Polish GDP by at least 10%.

The tension Poland now faces is one of sustainability. Defence spending at 4% of GDP and large EU investment programmes cannot both run indefinitely without either higher taxes, reduced other expenditure, or rising public debt. Debt-to-GDP is heading toward 68.3% by 2027, up from a relatively conservative 59.7% in 2025. That is still manageable, but the trajectory is clearly upward.

For Polish households, the deficit itself is not the immediate concern. The more tangible short-term pressure is inflation, forecast at 3.6% in 2026 driven partly by rising energy costs, which is eating into the real wage gains that have supported strong consumer spending over the past two years.