In 2017, the new Defense Concept of the Republic of Poland was published, summarizing The Strategic Defense Review 2016, including the State development and defense financing framework outlined in The Strategy for Responsible Development. On October 7, 2017, the Ministry of National Defense signed the updated Technical Modernization Plan of the Armed Forces in the Republic of Poland for the period from 2017 to 2022, implementing the results of The Strategic Defense Review 2016. According to the government's current plans, the expenses for defense are expected to amount to PLN 282.8 billion in between 2017 and

2022 and the number of Polish soldiers should reach 150,000. Procurement processes for military equipment are ongoing.

In September 2017, the Sejm passed amendments to the law on technical modernization and financing of the Polish military forces. Under that law, the level of expenditures dedicated to national defense will increase to 2 percent of GDP in 2018 and 2019, 2.1 percent in 2020, 2.2 percent in the years 2026-2029 and should reach 2.5 percent of GDP in 2030.

As a result, the limit for defense spending in the draft 2018 budget increased by PLN 3.9 bn.

Restructuring of the Coal Mining and Energy Sectors

In December 2015, the new Government adopted amendments to the Polish Act on the Functioning of Coal Mining dated September 7, 2007. While amendments to the Act adopted by the previous Government covered a period until the end of 2015, the amendments enacted following the 2015 Parliamentary elections extend certain of the provisions until 2018. The main reason for the recent amendments is to enable the free disposal of mines by mining companies or designated assets to Spółka Restrukturyzacji Kopalń S.A. until January 2018. The latest amendments also define the conditions for granting one-off severance payments to employees, whom this provision will benefit from January 1, 2016. Payment may be granted to employees whose employments were terminated by mutual agreement between December 31, 2015, and December 31, 2018, and who have a minimum of five years' work experience in the mining sector. According to the Ministry of Energy, the amendment does not imply liquidation of mines.

After reviewing policies with regard to state-owned enterprises, the new Government created Polska Grupa Górnicza ("PGG") – a special purpose vehicle company designed to acquire assets and liabilities of the coal mining company Kompania Węglowa S.A., which was facing financial difficulties. Due to the above mentioned acquisition, PGG currently is the biggest coal enterprise and the biggest coal producer in Europe.

Rating considerations

Since the mid-1990s, Poland has been assessed by rating agencies including Standard & Poor's ("S&P"), Moody's ("Moody's") and Fitch ("Fitch"). Poland's credit rating has been upgraded several times throughout the years, in line with the country's economic growth. On January 15, 2016, Poland's credit rating was downgraded by S&P, for the first time in history. The Polish long-term foreign currency sovereign credit rating was downgraded from "A-" to "BBB+." S&P also downgraded the Polish long-term and short-term local currency sovereign credit ratings from "A/A-1" to "A-/A-2", respectively. At the same time, the rating outlook was revised from positive to negative. Over time, the concerns raised by S&P have not materialized, which resulted in the agency revising the rating outlook positively. In December 2016, Poland's rating outlook was raised to stable and then to positive in April 2018. The positive outlook reflects S&P's view of the strong economic expansion and solid fiscal performance of Poland. The outlook level itself indicates an increased likelihood of a rating upgrade within 24 months.

International Relations and Regional Arrangements

International Relations

Poland is a founding member of the United Nations, belongs to most international organizations and maintains diplomatic relations with 189 countries. In 1967, Poland joined the General Agreement on Tariffs and Trade ("GATT") and is a member of the World Trade Organization ("WTO"), the successor to GATT. In 1986, Poland re‑joined the International Bank for Reconstruction and Development ("IBRD"), known as the World Bank, and the IMF, having withdrawn its original memberships in 1950. Since 1987, Poland has also been a member of the International Finance Corporation ("IFC") and the International Development Association ("IDA"). Poland became a member of the Multilateral Investment Guarantee Agency ("MIGA") in 1990. In addition, Poland was a founding member of the European Bank for Reconstruction and Development ("EBRD"). In 1996, Poland was accepted for full membership in the Organization for Economic Co‑operation and Development ("OECD"). It became a member of the European Investment Bank ("EIB") in 2004 following its accession to the EU, and joined the Council of Europe Development Bank ("CEB") in 1998. Poland is also one of the founding members of the Asian Infrastructure Investment Bank ("AIIB").

On March 12, 1999, Poland became a member of the North Atlantic Treaty Organization.

Regional Arrangements

European Union Membership

Poland and nine other candidate countries signed the Accession Treaty with the EU (the "Accession Treaty") on April 16, 2003 in Athens. The Accession Treaty was ratified by all EU members and candidate countries and came into force on May 1, 2004.

Accession to the EU enabled Poland to participate in the EU legislative and decision‑making process and made it bound by EU law (i.e., EU treaties, regulations, directives and decisions). By acceding to the EU, Poland became eligible to have representation in the European Parliament. For the purpose of European Parliamentary elections Poland is subdivided into constituencies, in the same manner as the United Kingdom, Ireland, Italy, France, Netherlands, Belgium and Germany. Following the European Parliamentary elections in 2014, Poland has 51 members of the European Parliament, with the majority of its members belonging to the Group of European People's Party or the Group of European Conservatives and Reformists.

As a member of the EU, Poland has to comply with the Stability and Growth Pact, which is a rule‑based framework for the coordination of national fiscal policies in the EU. It was established to safeguard sound public finances, an important requirement for the Economic and Monetary Union ("EMU") to function properly.

While no deadline has been set, the adoption of the euro is required by the Accession Treaty. In order to adopt the euro, a member state must fulfil the euro convergence criteria. While taking the Treaty obligations into account, it is borne in mind that Poland is still a developing and converging economy. The level of real convergence of Poland with the Eurozone in terms of GDP per capita still lags behind developed EU member states. Moreover, although the rate of business cycle synchronization is relatively stable in the recent period, Poland's economic structure diverges from the euro area. In such circumstances, the adoption of the euro would pose a threat of negative shocks affecting the Polish economy. At the same time, the effectiveness of the EU reform agenda may also still be perceived as unsatisfactory (despite recent reforms) and does not ensure the long-term stability of the Economic and Monetary Union ("EMU"). Therefore the government is currently focused on improving the potential of the Polish economy and not on the adoption of the euro. As the stability of the Eurozone is of vital importance for the Polish economy, the Government will still take part in initiatives at the EU level to strengthen the institutional setup of the EMU. Fiscal and economic turbulence that was observed in several Eurozone member states stressed the need for institutional reforms. Actions at the EU level will be conducted along with structural reforms in Poland to foster competitiveness of the Polish economy.

Like all EU member states, Poland is subject to multilateral surveillance by the EU's Council and like all non-Eurozone member states; it is obliged to prepare convergence programs on an annual basis. Each convergence program provides for the monitoring of economic developments in each of the EU member states and for the EU as a whole, as well as consistency of economic policies with the broad guidelines set by the EU on a regular basis.

Convergence programs cover fiscal policy, the main assumptions underlying the economic outlook and an assessment of economic policy measures and their budgetary impact. This information is presented for the current and previous years and also includes forecasts for the next three years. Poland published its latest Convergence Program update in April 2018. According to the Program, the general government deficit is projected to reach 2.1 percent of GDP in 2018. From 2019, a declining trend is projected for the deficit, which is forecast to decline to 1.5 percent of GDP in 2019, 1.1 percent of GDP in 2020 and 0.7 percent of GDP in 2021.

According to the "Public Finance Sector Debt Management Strategy in the years 2018-2021" accepted by the Council of Ministers in September 2017, the debt-to-GDP ratio is projected to reach 53.8 percent in 2017, and it is projected to increase to 54.2 percent (calculated in accordance with the EU definition of public debt) in 2018. In 2019 and 2020, it is projected to decrease to 54.0 percent and 51.8 percent, respectively. As of 31 December 2017, the State Treasury debt (the main component of public debt) decreased in nominal terms (from PLN 928.7 billion at the end of 2016 to PLN 928.5 billion) and was lower than assumed in the strategy by PLN 40 billion (approximately 2.0 percent of GDP), which constitutes a lower base for levels of debt in subsequent years.

EU Rule of Law Assessment

In March 2014, the European Commission established a new EU Framework to strengthen the Rule of Law (the "Framework"). The Framework establishes a three-stage process with the objective of preventing, through a dialogue with the relevant EU member state, the escalation of an emerging systemic threat to the rule of law into a situation where the European Commission would need to issue a proposal to trigger sanction mechanisms under Article 7 of the Treaty of the European Union (the "TEU"). Those three stages are: (i) European Commission assessment, (ii) European Commission recommendation and (iii) monitoring of the member state's follow-up to the European Commission's recommendation. If no solution is found within that Framework, the European Commission may apply Article 7 of the TEU, which provides for special mechanisms with far-reaching sanctions in case a member state does not respect the fundamental values referred to in Article 2 of the TEU, including the rule of law. The most serious sanction under Article 7 is to suspend a member state's voting rights in EU institutions.

In January 2016, the European Commission announced that it has commenced an assessment of recent developments in Poland pursuant to the Framework. The College of Commissioners held a first orientation debate on January 13, 2016 to assess Poland's situation under the Framework and started a dialogue with Polish authorities in connection with the recent changes to the Constitutional Tribunal and state-owned media. See "‑Government Policies and Legislative Agenda‑Constitutional Tribunal". The Prime Minister of Poland at the time, Beata Szydło, participated in a debate on the matter in the European Parliament on January 19, 2016. On July 27, 2016, the first Rule of Law Recommendation regarding the rule of law in Poland was published, setting out the European Commission's concerns about the Constitutional Tribunal in Poland. The first recommendation stated that effective constitutional review by the Constitutional Tribunal in Poland is limited. On December 21, 2016, the second Rule of Law Recommendation was published by the European Commission. In the second recommendation, the European Commission advised the Polish Government to follow up on actions already requested in the first recommendation and publish as well as fully implement all the judgments of the Constitutional Tribunal. On July 26, 2017, the third European Commission Recommendation was published. It addresses concerns about the judiciary reform in Poland, which in the European Commission's opinion is a systematic threat to the rule of law in Poland. See "- New Government Policies and Legislative Agenda‑Constitutional Tribunal".

Triggering of Article 7 of the TEU by the EU Commission

On December 20, 2017, the EU Commission concluded that despite the efforts described on "—EU Rule of Law Assessment", its concerns about the lack of an independent and legitimate constitutional review and judicial independence in Poland have not been resolved. The Commission has, therefore, triggered Article 7 of the TEU for the first time by issuing a Reasoned Proposal under Article 7.1 of the TEU (the "Reasoned Proposal") and the EU Council has found that there is a clear risk of a serious breach by the Republic of Poland of the rule of law. At the same time, the Commission issued a complementary (fourth) Rule of Law Recommendation (which supplements three previous Recommendations, adopted on July 27, 2016, December 21, 2016 and July 27, 2017) setting out the steps that the Polish authorities can take to remedy the situation. This fourth recommendation invites the Polish authorities to address the issues within three months and to inform the Commission of the steps taken to that effect. If the recommended actions are taken, the Commission will reconsider its Reasoned Proposal. The Commission's concerns relate to: (i) the lack of an independent and legitimate constitutional review (in the Commission's opinion, the independence and legitimacy of the Constitutional Tribunal in Poland have been seriously undermined and it is no longer able to provide effective constitutional review and the effectiveness of a constitutional justice system is a key component of the rule of law), and (ii) the threats to the independence of the ordinary judiciary arising from the adoption of new legislation relating to the Polish judiciary (the Act on the National Judicial Council, the Act on the System of Common Courts and the Act on the Supreme Court), which significantly increases the systematic threat to the rule of law in Poland.

Under Article 7.1 of the TEU, after hearing Poland's position, the Council must obtain consent of the European Parliament before adopting a decision by four-fifths majority of the member states (22 out of the 27 member states entitled to vote) determining that there is a clear risk of serious breach of the rule of law in Poland.

On March 1, 2018 he European Parliament accepted the Commission's proposal to trigger Article 7 of the TEU.

However, under Article 7 of the TEU, sanctions may only be imposed on a member state after a unanimous determination by all member states that of the existence of a serious and persistent breach of the rule of law. Once this decision has been made, the Council may decide, by a qualified majority, to suspend certain of Poland's rights deriving from EU Treaties. The possible sanctions include suspension of the right to elect members of the EU Commission, suspension of certain EU funds and limitation of certain EU support programs (including the cohesion and regional development programs, agricultural and other subsidies), the most severe of which is the suspension of voting rights.

The Government does not believe that the EU Commission will impose any sanctions on Poland.

Inflow of EU Funds

One of the most important issues in the early years of Poland's membership of the EU was to implement effectively projects co-financed by the EU. This is in line with the principle of European solidarity, which requires that the more affluent EU member states help less developed EU countries bridge the gap in their economic and social development. Poland's EU membership resulted in a major inflow of EU funds of approximately EUR 147.6 billion between May 2004 and March 2018 (mostly from structural funds for Cohesion Policy-related initiatives and payments under the Common Agricultural Policy). Conversely, during that period, Poland made approximately EUR 48.4 billion of "Own Resources" payments to the EU. The net inflow of EU resources during that period amounted to approximately EUR 99.2 billion. The following table sets forth information relating to the inflow of EU funds into Poland for the periods indicated.

		2014	2015	2016	2017	Three months ended March 31, 2018
	(EUR millions)
Inflow of EU Funds
Cohesion Policy		12,001.1	7,932.9	5,180.6	7,078.0	1,524.6
Common Agricultural Policy		5,108.7	5,057.9	4,522.5	3,982.0	2,325.2
Other Funds		14.8	63.2	273.3	92.6	10.8
Total		17,124.6	13,054.1	9,976.4	11,152.6	3,860.6

____________

Source: Ministry of Finance

The decrease in inflow of EU funds between the years 2014 and 2017 is due to the change in EU spending policies, from the 2007-2013 EU financial perspective to the 2014 -2020 EU financial perspective. Spending of EU funds allocated under the 2007-2013 financial perspective was possible until the end of 2015.

Under the Cohesion Policy, Poland received higher inflows of EU funds in 2014 related to operational programs under the 2007-2013 EU financial perspective. Inflow of funds under this policy significantly decreased in 2015, as most of the inflows under the 2007-2013 EU financial perspective had already occurred in previous years. This trend was intensified by the fact that the first inflows for operational programs under the 2014-2020 EU financial perspective only occurred in 2016.

The Common Agricultural Policy was implemented in an accelerated pace and by 2015 the entire allocation of EU funds for this policy under the 2007-2013 EU financial perspective had been used. The decrease in inflow of EU funds under this policy in 2016 and 2017 is due to the early implementation of the Common Agricultural Policy under the 2014-2020 EU financial perspective, as inflows for agricultural programs began in 2014.

The following table sets forth information relating to the use of EU funds for the period from May 2004 to March 2018.

	(EUR millions)
Current expenditures	68,649.8
Capital expenditures	78,919.8
Total	147,569.6

____________

Source: Ministry of Finance

The following table sets forth certain information with respect to the projected inflow of EU funds for the periods indicated. These are projections based on the current EU budget and do not reflect legal commitments on behalf of the EU to provide the funds. See "About this Prospectus" for further information with respect to forward looking statements.

	2018		2019
	(EUR millions)
Projected Future Inflows of EU Funds
Common Agricultural Policy		4,838.0		4,861.0
Cohesion Policy	9,953.0		11,684.0

____________

Source: Ministry of Finance

The following table set forth certain information with respect to Poland's contribution to the EU budget (i.e. "Own Resources" payments to the EU) for the periods indicated.

	2014		2015		2016		2017		Three months ended March 31, 2018
	(EUR millions)
Own Resources Payments
Payments related to Gross National Income		2,932.4		2,962.8		3,003.4		2,024.7		683.5
Payments related to VAT		529.6		481.1		555.4		570.8		134.1
Traditional Own Resources Payments		431.2		507.9		604.4		645.3		173.3
Rebates and corrections		259.9		310.2		330.1		316.6		64.7
Total		4,153.1		4,262.1		4,493.4		3,557.3		1,055.6

____________

Source: Ministry of Finance

Climate Change Policies and the Paris Agreement

Polish climate policies are based on the EU's common climate policy, pursuant to which the 2020 climate and energy package, which targets a 20 percent reduction of greenhouse gas emissions (compared to 1990), a 20 percent energy efficiency increase (compared to 2005) and an increase on the share of renewable energy sources in the total energy consumption to 20 percent (the Polish target is to increase to 15 percent), has been adopted for the period through 2020.

EU climate policy divides the economy into two sectors: the Emission Trading Scheme (the "ETS") sector (consisting of, among other sectors, industry and energy production), the total emissions of which are capped in consecutive years by emission allowances, which may be purchased by specific installations in auctions across the EU (the EU-wide goal in the ETS sector for 2020 is to reduce the emissions by 20 percent, as compared to 1990 levels), and the non-ETS sector (which includes agriculture, forestry and transport), for which EU member states have individual emission targets (Poland's target is an increase in emissions of 14 percent, as compared with 2005 levels).

The EU has also agreed to set a target domestic emission reduction of at least 40 percent by 2030 (compared to 1990 levels), where the ETS sector's target reduction is of 43 percent and the non-ETS sector's is of 30 percent (in each case for the EU as a whole). According to the provisional agreement between the European Council, European Parliament and European Commission as of December 2017, Poland will be required to decrease its emissions in the non-ETS sector by 7 percent compared with 2005 levels. This has yet to be formally adopted by both the European Parliament and the Council.

Since the reduction target submitted by the EU to the 2015 United Nations Climate Change Conference ("COP 21") reflects the abovementioned internal EU targets, the conclusion of the Paris Agreement under the United Nations Framework Convention on Climate Change (the "Paris Agreement") at COP 21 will in and of itself have no direct impact on Poland's energy sector or its economy. The final text of the Paris Agreement also calls for climate neutrality as a long-term goal, rather than decarbonization of the economy.

To achieve its energy efficiency goal, the National Energy Efficiency Action Plan for Poland 2017 was adopted by the Council of Ministers on January 23, 2018. The document includes measures to improve energy end-use efficiency by sector. It also includes calculations of the energy savings already obtained and planned to be achieved by 2020.

In order to achieve the goal to increase the share of renewable energy sources to 15 percent of total energy consumption in Poland (the target for the EU as a whole is 20 percent), the Ministry of Energy prepared a draft amendment to the Renewable Energy Law which was adopted by the Council of Ministers on March 6, 2018.

Over the last ten years, Poland has systematically improved the energy efficiency of all sectors of its economy by creating a common energy policy and laws on energy efficiency protecting consumer interests, taking into account available energy resources and the technological conditions of energy generation and transmission.

Poland's energy policy is currently under review by the new Government.

On February 22, 2018, the European Court of Justice ruled that Poland had breached EU standards on air pollution. Between 2007 and 2015, Poland exceeded the European limits for emission of PM10, a particulate matter of less than 10 micrometers in diameter that is harmful when inhaled. In this context, the Polish Government appointed a plenipotentiary to the Prime Minister to fully implement the new "Clean Air" program to fight smog. This new program contains fourteen actions to be taken as part of Poland's fight against smog, such as:

·	Measures to reduce high emissions from coal-fired furnaces;

·	Tax breaks for the purchase of electric, hybrid and hydrogen-powered cars;

·	The introduction of more stringent standards for coal sold to the public;

·	The introduction of lower tariffs for electricity for heating homes;

·	A thermo-modernization program.

Relationship with Multilateral Financial Institutions

Poland is a member of various multilateral financial institutions, including the World Bank, the EIB, the EBRD and the IMF. As of February 28, 2018, Poland's liabilities to multilateral financial institutions amounted to EUR 18.1 billion and accounted for 25.8 per cent. of the State Treasury's total external debt.

World Bank

The World Bank program in Poland currently consists of two investment projects in the area of flood management: (i) the Odra River Basin Flood Protection and (ii) the Odra-Vistula Flood Management Project (with the financial engagement of the Council of Europe Development Bank) and a number of knowledge and advisory products that have helped Poland address its key development challenges, including in the areas of health, fiscal policy or regional disparities. As of March 31, 2018, the World Bank's exposure to Poland, net of principal repayments, amounted to EUR 7.0 billion.

European Investment Bank

The main areas of EIB operations in Poland comprise the transport, power and energy, water, sewerage, solid waste, urban development, health, higher education, telecommunications and agriculture sectors. In addition, the EIB provides commercially based loans to private enterprises and municipalities, as well as loans to financial intermediaries, in order to fund loans to small and medium sized enterprises.

Total investment of the EIB in Poland amounted to EUR 5 billion in 2017. As of March 31, 2018, the EIB had committed EUR 66.2 billion to Polish borrowers, of which more than EUR 49.4 billion had already been disbursed. As of March 31, 2018 the EIB's exposure to Polish borrowers, net of principal repayments, amounted to EUR 33.6 billion.

In the second half of 2015, the European Fund for Strategic Investments ("EFSI") was launched jointly by the EIB Group and the European Commission to drive investment in infrastructure and innovation projects across the EU as well as to help finance small- and medium-sized enterprises and mid-cap companies. Poland is implementing the Plan and has obtained financing for several projects under the EFSI.

As of April 30, 2018, 37 projects were approved under the infrastructure and innovation window in Poland, totaling EUR 2.7 billion and mobilizing total investments related to the EFSI of up to EUR 8.5 billion. As of the same date, ten SME financing agreements were concluded with financial intermediaries (banks, investment funds) in Poland, totaling EUR 156 million in financing which is expected to trigger EUR 1.4 billion in investments.

European Bank for Reconstruction and Development

Since the beginning of its operations in Poland, the EBRD has invested over EUR 8.9 billion in nearly 398 projects (as of February 28, 2018) in various sectors of the country's economy (corporate, financial institutions, infrastructure and energy). Most of the EBRD's investments, approximately EUR 8.0 billion, was granted to the private sector.

EBRD's strategic directions for Poland include promotion of low carbon economy, enhancing the private sector's role in the economy and assisting in the development of a sustainable financial sector and capital markets.

International Monetary Fund

Poland is a member of the IMF's Special Data Dissemination System and complies with applicable practices and standards in publicly disseminating economic and financial data. Currently, the IMF performs standard Article IV consultations with Poland on a 12-month cycle.

Between 2009 and 2017, Poland had access to IMF funds under the Flexible Credit Line ("FCL"), an instrument designed for countries with very strong economic foundations and policy frameworks. In those years, Poland treated the FCL as an emergency resource and did not borrow any of the available funds. Since January 2015, Poland has been gradually reducing the amount of funds available to it under the FCL, in line with its intention to terminate the agreement once external conditions improved. On November 3, 2017, Poland terminated the FCL agreement.

The last Article IV consultation with Poland was concluded by the Executive Board of the IMF on June 7, 2017. The consultation confirmed the strong economic fundamentals, adequate policies and the resilience of the financial sector in Poland. GDP growth is currently projected to accelerate to 3.8 percent in 2017 and remain strong in 2018. Risks to the short-term growth outlook are broadly balanced. The general government deficit is projected to be 2.9 percent of GDP in 2017. In the IMF's view, Poland's fiscal performance in 2017 has been very encouraging. The visible success of measures implemented to improve efficiency of the fiscal administration constitutes an important support for further fiscal consolidation. In the medium- to long- term the economy faces a number of challenges. The recently adopted Responsible Development Strategy sets a program designed to overcome these challenges as well as ambitious targets to raise living standards to the same level as in the more developed EU countries.

International Development Association

Since 1988 Poland has been a member and contributor to the IDA, which grants preferential long term loans to the world's poorest countries. As of April 30, 2018, Poland's contribution to the IDA amounted to SDR 40.4 million and EUR 17.3 million of which SDR 35.9 million and EUR 1.0 million had already been paid. Poland's latest commitment to the IDA was made in October 2017 (IDA 18) and was twice as high as the previous commitments (amounting to EUR 17.3 million). Poland also participates in IDA's MDRI (Multilateral Debt Relief Initiative). As of April 30, 2018, Poland had committed PLN 37.0 million and had already paid PLN 8.3 million.

Nordic Investment Bank

Although Poland is not a member of the Nordic Investment Bank ("NIB"), it has access to NIB financing. As of March 31, 2018, the NIB's exposure to Poland, net of principal repayments, amounted to approximately EUR 488.2 million.

Asian Infrastructure Investment Bank

In June 2016, Poland became a founding member of the Asian Infrastructure Investment Bank ("AIIB"). Poland is currently not borrowing from the AIIB.

Council of Europe Development Bank

Poland has been a member of the CEB since 1998. As of March 31, 2018, the CEB had approved EUR 4.9 billion in loans to Poland, of which EUR 3.3 billion had already been disbursed. As of March 31, 2018, the CEB's exposure to the State Treasury amounted to EUR 210.4 million.

Major International Treaties

Since joining the EU, Poland's trade policy has been in accordance with the rules of the EU Treaty. The EU has a customs union among EU member states and a common trade policy in relation to non-EU countries which involves, among other things, a common customs tariff, a common import and export regime and the undertaking of uniform trade liberalization measures as well as trade defense instruments. Poland is a party to all trade agreements concluded by the EU with other countries.

The Accession Treaty, together with the Treaty on the EU and the Treaty on the Functioning of the EU, constitute the legal basis for regulating, inter alia, economic, trade, service, capital and human resource flows, investment support and protection.

In June 2017, Poland signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ("MLI"). On September 29, 2017, the Sejm implemented the act upon ratification of the MLI and gave its consent for the MLI's ratification by the Polish President. The act was approved by the Senate on October 19, 2017, and ratified by the Polish President on November 9, 2017. The MLI offers solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide. The MLI modifies the application of thousands of bilateral tax treaties concluded to eliminate double taxation.

The Economy

Poland, with over 38.4 million inhabitants, is the most populous member of the EU among all the countries of Central and Eastern Europe (and the 6th in the EU as a whole). The Polish economy has significant strengths: the private debt of nonfinancial enterprises and households is relatively low and the currency regime is flexible. Poland's exports and economy do not depend on a single sector and the domestic market is broad. The banking sector remains well capitalized, liquid and profitable and the macroeconomic policy is geared towards maintaining long-term high and sustainable growth. Since joining the EU in 2004, Poland has benefited significantly from EU structural funds, allowing the government to invest steadily in infrastructural and social development. Adjustments to the EU standards have supported the country's modernization. The service sector comprises the largest component of the Polish economy (63 percent), followed by the industry and construction sectors (34.5 percent) and agriculture (2.4 percent).

Strong macroeconomic fundamentals and policy framework, large and diversified domestic demand and agile fiscal policy made Poland the only EU country to have avoided recession during the post-2007 global economic and financial crisis, and growing by nearly 40 percent between 2008 and 2017, with an average annual GDP growth of more than 3 percent. Today Poland is the eighth-largest economy in the EU in real GDP terms, with a buoyant private sector, internationally competitive export-oriented companies, as well as well-educated and skilled human capital.

Poland's monetary policy framework is laid out in the Constitution and the Act on the National Bank of Poland ("NBP"). The NBP is responsible for the implementation of the monetary policy, the basic objective of which is to maintain price stability while supporting the Government's economic policy. For nearly 20 years, the Monetary Policy Council (the independent decision-making body of the NBP) ("MPC") has been conducting monetary policy with a direct inflation targeting strategy. In 2004, the MPC adopted an inflation target of 2.5 percent with a symmetrical tolerance band for deviations of ± 1 percent. The principles of the monetary policy strategy and the inflation target level have not changed since then.

Since 2004, the average consumer price index ("CPI") annual rate in Poland has not exceeded 4.5 percent and was slightly above 2 percent on average. Because of the relatively high share of food and energy in the CPI basket, inflation in Poland is sensitive to changes of commodity prices. Nevertheless, the level of core inflation (CPI excluding food and energy) remains low: it ranged from -0.2 to 2.7 percent per year between 2004 and 2017.

The following table illustrates certain macroeconomic statistics for the specific periods below:

	2004		2008		2015			2016			2017
	(Current prices, Purchasing Power Standards per capita)
GDP per capita		11,300		14,500		19,800			19,900			-
	(% of GDP)
Private consumption		64.2		61.8		58.4			58.6			58.6
Public consumption		18.3		18.6		18.0			17.9			17.7
Investment		18.3		23.1		20.1			18.0			17.7
Export		34.3		37.9		49.5			52.3			54.0
Import		36.9		42.9		46.4			48.2			49.9
Value added:
Industry		22.9		21.8		23.2			23.4			23.9
Construction		5.7		6.9		7.1			6.2			6.5
Trade; repair of motor vehicles		16.5		16.4		15.7			15.5			15.7
	(total=100)
Structure of employment (LFS^(1), 15 years and over):
Agriculture		18.0		14.0		11.5			10.5			10.2
Industry and Construction		28.8		31.9		30.4			31.3			31.5
Services		53.2		54.2		58.1			58.1			58.3
	(%)
Participation rate (LFS^(1),, 15 and over)		54.4		54.2		56.2			56.2			56.4
Employment rate (LFS^(1),, 20-64 years)		57.3		65.0		67.8			69.3			70.9
Unemployment rate (LFS^(1),, 15-74 years)		19.1		7.1		7.5			6.2			4.9
Labour productivity per person (EU28=100)		61.7		62.0		74.0			75.2			-
CPI		3.5		4.2		(0.9	)		(0.6	)		2.0
Core inflation		1.7		2.3		0.3			(0.2	)		0.7

	2004			2008			2015			2016			2017
	(million EURO)
Official reserve assets		26967			44139			86894			108064			94 550
	(% of GDP)
International investment position		(45.4	)		(47.1	)		(61.0	)		(59.9	)		(61.9	)
CAB		(5.5	)		(6.7	)		(0.6	)		(0.3	)		0.3
Credit to the non-financial sector:
Nonfinancial enterprises		12.5			16.9			15.6			16.0			15.8
Households		11.8			28.7			34.3			35.1			33.3

Source: Eurostat, NBP, Statistics Poland, own calculations

Notice: data on labor market and balance of payments are not entirely comparable, because of changes in methodology

(1)	LFS – Labor Force Survey

Economic Performance

Poland has had a solid economic performance throughout the four quarters of 2017. GDP growth accelerated to 4.6 percent in 2017. Private consumption remained the main engine of the economy supported by the good conditions of the labor market and fiscal stimulus (child benefits under the Family 500+ Program, a PLN 500 monthly tax-free allowance for each second and subsequent child under 18 in each family (irrespective of the family's monthly income) which includes the first child for families with low income). After contracting sharply in 2016, investment expanded 3.4 percent in 2017, with the biggest contribution coming from the general government sector. Strong foreign demand for Polish goods and services resulted in strong exports in 2017.

After four years of very weak inflationary pressure (including over two years of CPI deflation from July 2014 to October 2016, in the first quarter of 2017), the CPI rate increased, mainly driven by higher energy and food prices. In the following quarters of 2017, the CPI rate was relatively stable and it reached an average of 2.0 percent in 2017. In the first quarter of 2018, the CPI rate decreased to 1.5 percent, mainly driven by the slower growth of food and energy prices. Despite the favorable conditions of the labor market and the high growth of private consumption, core inflation (CPI excluding food and energy) has remained at low levels and has remained in the narrow band between 0.7 percent and 1.0 percent since April 2017.

The positive trends on the labor market continued in 2017 and in the beginning of 2018. Labor demand increased, unemployment declined and growth of real wages remained at a relatively high level. Harmonized unemployment rate (seasonally adjusted, Eurostat) fell to a historically low level (4.4 percent in February 2018).

External imbalance of the Polish economy is currently at a low level in historical terms. In 2016, Poland's current account deficit amounted to 0.3 percent of GDP. In 2017 the current account was slightly positive (0.3 percent of GDP). The main driver of the overall external imbalance was the negative primary income component (3.8 percent of GDP). At the same time, the balance of services registered a record high surplus (4.0 percent of GDP).

The MPC has kept the NBP's interest rates unchanged since March 2015, with the reference rate at 1.5 percent. The MPC has assessed the current level of interest rates to be sufficient to keep the Polish economy on the sustainable growth path as well as to maintain macroeconomic balance.

The following table sets out certain macroeconomic statistics for the five years ended 2017:

	2013			2014			2015			2016			2017
	(Real growth, %)
GDP		1.4			3.3			3.8			3.0			4.6
Total consumption		0.8			2.8			2.8			3.4			4.4
Private consumption		0.3			2.4			3.0			3.9			4.7
Investment		(1.1	)		10.0			6.1			(8.2	)		3.4
	(Contribution to GDP growth, pp)
Domestic demand		(0.6	)		4.7			3.2			2.2			4.85
Net export		1.9			(1.4	)		0.6			0.7			0.21
	(%)
Employment growth (LFS^(1),, 15 years and over)		(0.1	)		1.9			1.4			0.8			1.4
Unemployment rate (LFS^(1),, 15-74 years)		10.3			9.0			7.5			6.2			4.9
CPI		0.9			0.0			(0.9	)		(0.6	)		2.0
NBP reference rate (end of the period)		2.50			2.00			1.50			1.50			1.50
	(% of GDP)
CAB		(1.3	)		(2.1	)		(0.6	)		(0.3	)		0.3

Source: Statistics Poland, NBP, Eurostat, own calculations

(1)	LFS – Labor Force Survey

The following table illustrates the composition of GDP (as a percentage of total GDP) by sectors for the periods indicated:

	2013		2014		2015		2016		2017
	(%)
Sectors
Agriculture, forestry and fishing		2.9		2.6		2.2		2.4		2.1
Industry		22.0		22.5		23.2		23.4		23.9
Construction		6.6		7.0		7.1		6.2		6.5
Trade; repair of motor vehicles		17.1		15.8		15.7		15.5		15.7
Transport		5.3		5.5		5.7		5.7		6.0
Accommodation and catering		1.0		1.0		1.0		1.0		1.0
Information and communication		3.5		3.5		3.6		3.7		3.4
Financial and insurance activities		3.8		4.0		3.6		3.9		3.6
Real estate activities		4.6		4.7		4.4		4.6		4.5
Professional, scientific and technical activities and Administrative and support service activities		6.6		6.7		7.2		7.0		7.9
Public administration and defense; compulsory social security; Education; Human health and social work activities		13.3		13.3		13.1		13.1		12.5
Arts, entertainment and recreation; other service activities; activities of household and extra‑territorial organizations and bodies		2.1		2.1		2.0		2.1		2.0
Gross value added		88.8		88.7		88.7		88.4		88.0
Taxes on products less subsidies on products		11.2		11.3		11.3		11.6		12.0
Gross Domestic Product		100.0		100.0		100.0		100.0		100.0

___________

Source: Statistics Poland.

Risks to the Polish Economy

The major risk factors for GDP growth in Poland are associated with the situation in the external environment, particularly with the Eurozone's economic performance. Poland's strong trade and financial links with the Eurozone, including through participation in the German supply chains, make it susceptible to shocks emanating from major trade partners. The weakening of the growth rate of the Eurozone might weigh on Polish exports and investment and ultimately adversely affect the economic growth in Poland. In the short term, downside risks from the external environment come mainly from elevated geopolitical tensions and protectionist policies, but also from potentially tighter global financial conditions. Uncertainties about macroeconomic policies pursued in major countries outside Europe and the upcoming Brexit add to these factors.

Supervision of companies with State Treasury shareholdings

The key element of the reform of the exercise of ownership rights of the Treasury is the December 16, 2016 Law, in force since January 1, 2017, on the rules of state property management, along with its implementing provisions, which implemented changes to the management system of state property.

In line with the new state property management system, the Prime Minister coordinates the ownership policy with respect to companies with Treasury shareholdings. Ownership rights with respect to those companies are exercised by ministers, government plenipotentiaries or state legal persons, according to rights conferred upon them by the Prime Minister.

The standards for both the selection of supervisory board members and the requirements from candidates to such positions were raised. The role of the supervisory board in the current activities of the companies was enhanced, which improved the transparency of distribution of the companies' funds with special oversight of representation, marketing and consulting expenses.

A new restriction on selling Treasury and state legal persons' shares was introduced and direct privatization was abandoned.

A group of 30 companies of particular importance for the economy was selected, in which the exercise of rights of the Treasury is subject to the Prime Minister's close scrutiny. The companies selected are characterized as having fundamental importance for the safety of the Polish economy and the country. This group includes, among others, companies from the sectors of hard coal mining, power generation, distribution of electricity and gas, as well as oil and gas, utility companies, air and rail transport, a postal company and defense companies. It also includes companies that have a key market share in a given sector, such as chemicals, banking and insurance.

The selection of companies was made taking into account (i) the company's size, measured by its assets, number of employees and turnover; (ii) the industry in which the company operates, with special emphasis on energy, fuel, gas, transport, media, banking, insurance, raw materials and state security; and (iii) the significance of the company's market share in the sector or industry or the national economy.

Analysis of the entities in which the State Treasury has a stake, taking into account the above criteria, led to the selection of a group of companies whose operations have a direct impact on the economic sphere in Poland, ensuring an appropriate level of national security.

The effectiveness of the new ownership policy can be evidenced by the increase in value of the key companies with Treasury shareholdings listed on the Warsaw Stock Exchange by almost PLN 15 billion (7.71 percent) in 2016 and more than PLN 67 billion (32.59 percent) in the first nine months of 2017. As a comparison, the WIG index (Warsaw Stock Exchange Index) increased by 24.22 percent, and the WIG20 (Warsaw Stock Exchange Index of the twenty largest companies on the Warsaw Stock Exchange) rose by 25.95 percent in the first nine months of 2017.

The Treasury property also generates regular income for the State budget, such as dividend and income payments, which in 2017 exceeded PLN 2 billion. This income is stable despite the intensive investment policy of the Treasury, which will continue to improve them and will increase future profits.

Labor Market

As of June 30, 2017, the number of employed persons in Poland amounted to 16.5 million. One person out of three (31.6 percent) in the workforce was employed in the industrial sector and 57.5 percent in services. A substantial share of the workforce is still employed in the agriculture sector (approximately 10.5 percent).

The registered unemployment rate at the end of December 2017 was 6.6 percent, down from 8.2 percent at the end of December 2016. As of December 31, 2017, young people (aged 18 to 24) constituted 13.5 percent of the registered unemployed, approximately 27.1 percent of all registered unemployed were persons with only primary education, incomplete primary or lower secondary education, and 42.1 percent of the registered unemployed had been without a job for more than one year.

The following table shows the employment rate by gender in Poland as of the end of the periods indicated (according to the Statistics Poland's Labor Force Survey):

	Employment rate
	Total		Male		Female
	(%)
2016
Q1		52.1		60.0		44.9
Q2		52.7		60.6		45.5
Q3		53.0		61.3		45.4
Q4		53.2		61.6		45.5
2017
Q1		53.2		61.3		45.8
Q2		53.9		61.9		46.6
Q3		54.0		62.7		46.1
Q4		53.7		62.2		45.8

___________

Source: Statistics Poland

The following table shows the employment by age in Poland as of December 2016 and 2017 (according to the Statistics Poland's Labor Force Survey):

					Employment rate
	Total				Male				Female
	(%)
	2016		2017		2016		2017		2016		2017
Total		53.2		53.7		61.6		62.2		45.5		45.8
15 – 17 years		1.3		1.7		2.0		2.1		-		1.2
18 – 19 years		8.5		9.7		8.8		10.1		8.5		9.3
20 – 24 years		48.9		51.0		56.5		58.5		40.9		43.1
25 – 29 years		78.7		78.7		86.4		86.7		70.6		70.3
30 – 34 years		81.0		82.3		89.1		91.0		72.6		73.2
35 – 39 years		82.4		83.3		89.8		90.7		74.9		75.8
40 – 44 years		83.8		84.2		89.7		89.9		77.8		78.4
45 – 49 years		81.5		82.4		84.3		84.8		78.7		79.9
50 – 54 years		75.5		76.6		78.5		79.7		72.6		73.5
55 – 59 years		63.1		64.7		70.0		71.4		56.9		58.1
60 – 64 years		32.3		33.5		44.9		48.2		21.4		20.6
60 years and more		5.1		5.4		9.0		8.7		2.6		3.2
In the age:
15 – 64 years		65.1		66.4		71.8		73.4		58.4		59.4
20 – 64 years		69.9		71.1		77.3		78.8		62.6		63.5
55 – 64 years		47.7		48.5		57.6		59.7		38.8		38.5
Pre - working		1.3		1.7		2.0		2.1		-		1.2
Working¹		71.0		72.4		75.0		76.6		66.4		67.7
Mobile		72.4		73.7		79.3		80.8		65.3		66.4
Non - mobile		68.6		70.2		68.8		70.4		68.5		70.0
Post – working²		8.2		8.2		9.0		8.7		7.8		7.9

___________

Source: Statistics Poland

(1)	Women aged 18 – 59, men aged 18 – 64.

(2)	Women aged 60 and older, men aged 65 and older.

The following table shows the registered unemployment rate in Poland since 2013 for the periods indicated:

	2014		2015		2016		2017		As of March 31, 2018
	(%)
Registered unemployment rate		11.4		9.7		8.2		6.6		6.6

___________

Source: Statistics Poland

Citizens of Ukraine are the largest group of foreigners working in Poland. In 2016, the number of work permits issued for citizens of Ukraine totaled 106,223 (83 percent of total work permits issued). It represents an increase of 110 percent in comparison to the previous year. In 2016, short-term employment of Ukrainians increased by approx. 66 percent as compared with 2015. In 2016, district labor offices registered 1,262,845 employer's declarations of an intention to entrust work to Ukrainian citizens (96 percent of all registered declarations in that year).

In the first six months of 2017, the number of work permits issued for the citizens of Ukraine amounted to 91,436, which represented an increase of 114 percent in comparison to the first six months of 2016 (42,650 work permits issued).

At the same time, in the first six months of 2017, the number of registered employers' declarations of an intention to entrust work to Ukrainians was 904,854 which represented an increase of over 47 percent in comparison to the first six months of 2016 (614,196 registered declarations).

While recent statistics indicate a significant increase in the number of foreigners working in Poland, the participation rate of foreigners in Poland's labor market is still low in comparison with other EU countries, although it affects local economies in some regions. Immigration is considered to be a supportive instrument in alleviating the demographic challenges faced by Poland, and the Government's main focus in this context is on family policy (including expanding maternity leave and child income tax credit schemes) and labor force activation policy.

Balance of Payments and Foreign Trade

Balance of Payments

Since September 30, 2014, Poland has prepared balance of payments and international investment position data according to the sixth edition of the Balance of Payments and International Investment Position Manual ("BPM6"). Historical data was also re-compiled according to BPM6. Poland's current account deficit amounted to U.S.$2.7 billion in 2015 and U.S.$1.4 billion in 2016. Measured by balance of payments statistics, the trade surplus (goods) amounted to U.S.$2.5 billion in 2015 and U.S.$3.3 billion in 2016. In 2017 the current account was positive and amounted to U.S.$1.6 billion. This balance was influenced by positive balances of services, trade in goods as well as negative primary income balance and secondary income.

Poland's exports of goods have grown from approximately U.S.$72.7 billion in 2004 to U.S.$224.5 billion in 2017. Significant expansion of Polish foreign trade has been fueled by a favorable competitive position and strong trade links with other EU countries, including participation in regional and international supply chains. Export growth has been supported by the resulting gains in market share, and an expansion towards Central and Eastern Europe as well as other developing countries.

In 2017, the value of Poland's exports increased by 14.4 percent and the value of imports increased by 15.8 percent in comparison with 2016. FDI inflows have financed a substantial portion of the current account deficit. In 2016, net FDI decreased and amounted to U.S.$5.6 billion. In 2015 and 2016 net FDI fully covered the current account deficit. In 2017, the balance of net FDI was positive and amounted to U.S.$1.9 billion. The following table sets out Poland's balance of payments and related statistics for the periods indicated:

	2013			2014			2015			2016			2017
	(U.S.$ millions)
Current Account		(6,744	)		(11,444	)		(2,659	)		(1,369	)		1,584
Balance on Goods		(453	)		(4,291	)		2,464			3,263			873
Goods: exports f.o.b.		198,107			210,628			191,023			196,340			224,538
Goods: imports f.o.b.		198,560			214,919			188,559			193,077			223,665
Balance on Services		10,145			12,046			12,111			15,582			21,035
Services: Credit		44,629			48,723			45,098			49,812			59,211
Services: Debit		34,484			36,677			32,987			34,230			38,176
Balance on Primary Income		(15,896	)		(18,649	)		(16,284	)		(18,680	)		(20,218	)
Primary income: Credit		15,263			15,443			12,560			12,654			12,321
Primary income: Debit		31,159			34,092			28,844			31,334			32,539
Balance on Secondary Income		(540	)		(550	)		(950	)		(1,534	)		(106	)
Secondary Income: Credit		8,028			7,884			6,443			6,093			6,883
Secondary Income: Debit		8,568			8,434			7,393			7,627			6,989
Capital Account		11,964			13,305			11,331			4,884			6,805
Capital account: Credit		12,620			14,340			12,025			5,670			7,327
Capital account: Debit		656			1,035			694			786			522
Financial Account		(6,018	)		(6,350	)		753			(551	)		1,473
Direct investment assets		(3,411	)		6,799			4,913			11,170			4,394
Direct investment liabilities		795			19,776			15,065			16,758			6,268
Portfolio investment assets		2,162			5,866			11,035			(6,101	)		1,161
Equity securities		1,185			2,613			9,997			(6,392	)		70
Debt securities		977			3,253			1,038			291			1,091
Portfolio investment liabilities		2,399			3,616			7,859			(2,200	)		6,105
Equity securities		2,648			3,146			4,117			(2,655	)		1,578
Debt securities		(249	)		470			3,742			455			4,527
Other investment assets		1,559			4,453			5,153			2,421			5,082
Monetary authorities		1			2			1			245			(245	)
Central and local government		58			(5	)		41			243			(18	)
MFI (excluding Central Bank)		(1,001	)		859			67			345			594
Other sectors		2,501			3,597			5,044			1,588			4,751
Other investment liabilities		3,369			316			(2,419	)		16,274			(12,154	)
Monetary authorities		1,888			(1,480	)		(50	)		16,732			(11,177	)
Central and local government		2,843			2,503			(34	)		(122	)		(786	)
MFI (excluding Central Bank)		193			1,278			(1,902	)		(2,746	)		(2,832	)
Other sectors		(1,555	)		(1,985	)		(433	)		2,410			2,641,
Financial derivatives		(710	)		(64	)		(978	)		130			(1,157	)
Official Reserve Assets		945			304			1,135			22,661			(7,788	)
Net errors and omissions		(11,238	)		(8,211	)		(7,919	)		(4,066	)		(6,916	)

Source: NBP

Foreign Direct Investment

FDI comprises transactions on shares in direct investment entities (including purchases of such shares), reinvestment of earnings and a balance of transactions on debt instruments.

The inflow of FDI to Poland is based on data reported by companies and by banks. Annual figures on FDI are set according to the OECD Benchmark Definition of Foreign Direct Investment – 4th edition. The following table sets out the inflow of FDI to Poland for the periods indicated:

	Components of FDI inflow
	Equity capital			Reinvested earnings		Other capital		Total (net)
	(U.S.$ millions)
Year
2012		3,822			5,605		2,996		12,422
2013		(1,795	)		4,661		760		3,625
2014		4,214			8,221		1,830		14,266
2015		5,803			7,731		1,735		15,268
2016		2,137			8,679		3,110		13,927

___________

Source: NBP

In 2016 the value of net FDI inflow amounted to U.S.$13,927 million. In 2016, the net inflow from EU countries amounted to U.S.$12,792 million, with the most significant investments coming from the Netherlands and Germany, and the net outflow to countries outside the EU amounted to U.S.$1,135 million,

with the most significant investment coming from Switzerland. The following table sets out the inflow of FDI to Poland from selected countries in 2016:

	Components of FDI inflow
	Equity capital			Reinvested earnings		Other capital			Total (net)
	(U.S.$ millions)
Country
Total World		2,137			8, 679		3,110			13,927
of which:
EU		2,296			7,848		2,649			12,792
of which:
Netherlands		2,051			2,284		785			5,120
Germany		146			2,129		1,202			3,477
Luxembourg		195			799		1,213			2,207
France		159			370		503			1,032
Austria		397			171		454			1,022
United Kingdom		302			284		(56	)		531
Ireland		85			3		(660	)		(573	)
Extra EU		(158	)		832		461			1,135
of which:
Switzerland		272			407		218			898

___________

Source: NBP

In 2016, the most significant inflow of investment was in the manufacturing sector, which amounted to U.S.$4,037 million. There were also significant inflows from professional, scientific and technical activities (U.S.$2,643 million) and from information and communication (U.S.$2,485 million). The following table sets out the inflow of FDI to Poland in selected sectors in 2016:

	Components of FDI inflow
	Equity capital			Reinvested earnings			Other capital			Total (net)
	(U.S.$ millions)
Economic activity
Manufacturing		(278	)		3,538			777			4,037
Professional, scientific and technical activities		1,371			623			649			2,643
Information and communication		125			1,030			1,330			2,485
Wholesale and retail trade; repair of motor vehicles and motorcycles		523			1,490			(497	)		1,516
Real estate activities		545			644			292			1,481
Financial and insurance activities		(261	)		892			428			1,058
Transportation and Storage		(27	)		235			(219	)		(12	)
Electricity, gas, steam and air conditioning supply		49			(286	)		(251	)		(488	)
Other service activities		0			8			(4	)		4
Total		2,137			8,679			3,110			13,927

___________

Source: NBP

Inflow of FDI in 2016 was mainly attributable to: (i) reinvested earnings amounting to U.S.$8,679 million; (ii) net inflow of capital against debt instruments (other capital) of U.S.$3,110 million; and (iii) net inflow of equity of U.S.$2,137 million.

Portfolio Investment Liabilities

In the first six months of 2017, the balance on foreign investment portfolio was positive and amounted to U.S.$4.3 billion. Investment in debt securities by non-residents stood at U.S.$3.9 billion, mostly in Treasury Bonds issued in the domestic market (U.S.$4.7 billion). Investment in equity securities by non-residents stood at U.S.$0.4 billion net (mostly equity securities issued by the enterprise sector).

At the end of June 2017, Poland's investment liabilities portfolio totaled U.S.$171.4 billion. The foreign investment holdings of Polish debt securities portfolio amounted to U.S.$124.3 billion and of equity securities to U.S.$47.1 billion. The main holders of Polish debt securities (issued in the domestic market) originated from Japan, the United States, Luxembourg, Norway, Ireland, Germany and the United Kingdom.

Non-resident holders (other than direct investors) of Polish equity securities originated mainly from the United States, Germany, Luxembourg and France.

Foreign Trade

Exports accounted for 46.3 percent of GDP in 2013, 47.6 percent in 2014, 49.5 percent in 2015, 52.3 percent in 2016 and 54.0 percent in 2017. Imports constituted 44.4 percent in 2013, 46.1 percent in 2014, 46.4 percent in 2015, 48.2 percent in 2016 and 49.9 percent in 2017.

Focus of Trade

In 2017, trade with EU countries accounted for 79.7 percent of exports and 60.1 percent of imports. Germany is Poland's largest trading partner, accounting for 27.4 percent of exports and 23.1 percent of imports in the first nine months of 2017. Trade with other EU countries accounted for 52.3 percent of exports and 37.0 percent of imports in the same period.

The most significant export items in 2016 were machinery and transport equipment (cars, vehicles, ships, boats, parts and accessories to motor vehicles), manufactured goods and miscellaneous manufactured articles (other consumer goods). The most significant imported items are similar to those which dominate exports, with chemicals and related products playing a relatively more important role than that of exports.

The following table sets out, on a percentage basis, the geographic distribution of Poland's exports and imports for the years indicated:

	2013				2014				2015				2016				2017
	Export		Import		Export		Import		Export		Import		Export		Import		Export		Import
Developed Countries:
Germany		25.1		21.7		26.3		22.0		27.1		22.9		27.4		23.3		27.4		23.1
United Kingdom		6.5		2.6		6.4		2.6		6.7		2.7		6.7		2.6		6.4		2.4
Other EU countries		43.4		34.2		44.8		34.4		45.6		34.4		45.7		35.3		45.9		34.6
Other developed countries		6.9		7.5		6.6		6.9		6.3		6.9		6.5		7,0		6.7		7.4
Total developed countries		81.9		66.0		84.1		65.9		85.7		66.9		86.3		68.2		86.4		67.5
Central and Eastern Europe:
CEFTA⁽¹⁾		0.6		0.2		0.7		0.2		0.6		0.2		0.7		0.3		0.7		0.3
Russia		5.3		12.1		4.2		10.3		2.9		7.3		2.8		5.8		3.0		6.5
Other Central and Eastern Europe⁽²⁾		4.2		1.6		3.1		1.5		2.5		1.3		2.7		1.4		2.9		1.6
Total Central and Eastern Europe		9.4		13.6		7.3		11.8		5.3		8.6		5.5		7.2		5.9		8.1
Developing countries		8.7		20.4		8.6		22.3		9.0		24.5		8.2		24.6		7.7		24.5
Total		100.0		100.0		100.0		100.0		100.0		100.0		100.0		100.0		100.0		100.0

___________

Notes:

⁽¹⁾

In 2006, CEFTA consisted of Bulgaria, Romania, Croatia and Macedonia. From May 1, 2007 to July 2013, CEFTA comprised: Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia and Kosovo. Since July 1, 2013, CEFTA no longer includes Croatia due to Croatia’s accession to the EU.

⁽²⁾	“Other central and eastern Europe” includes European countries of the former USSR.

Source: Statistics Poland

Trade Policy

Since Poland's accession to the European Union on May 1, 2004, Poland has applied the EU's Customs Tariff.

The Common Customs Tariff specifies tariff classification rules and customs rates for each Combined Nomenclature ("CN") code describing goods. Each economic operator that operates in Poland is obliged to comply with the Common Customs Tariff if its activity consists of the import or export of goods, regardless of whether they are domestic or foreign economic operators.

The Common Customs Tariff is binding in its entirety and directly applicable in all EU member states, including Poland.

Since January 1, 2018, the Commission Implementing Regulation (EU) No 2017/1925 of October 12, 2017 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on

the Common Customs Tariff (OJ L 282 of October 31, excise tax 2017) has governed the Common Customs Tariff.

The average effective tariff rate as provided in the Budget Act for 2018 is 1.0 percent.

Official Reserves

In 2015, Poland’s official reserves decreased by U.S.$5.5 billion and as of December 31, amounted to U.S.$94.9 billion. In 2016, reserves increased by U.S.$19.5 billion and as of December 31, amounted to U.S.$114.4 billion. In 2017, Poland’s official reserves decreased by U.S.$1.1 billion and as of December 31 amounted to U.S.$113.3 billion. The Government considers these reserves to be adequate based on Poland’s short-term external debt and the months of import coverage these reserves provide.

The following table sets out certain information in U.S. dollar equivalents regarding Poland's official reserve assets at the end of the periods indicated.

	Official Reserve Assets⁽¹⁾ Excluding Monetary Gold		Official Reserve Assets of Monetary Gold		Total Official Reserve Assets		Months of Import Coverage⁽²⁾ in Total Official Reserves Assets
	(U.S.$ millions)		(U.S.$ millions)		(U.S.$ millions)
2013		102,243.8		3,975.7		106,219.5		6.4
2014		96,469.6		3,968.6		100,438.2		5.6
2015		91,405.8		3,515.3		94,921.1		6.0
2016		110,554.6		3,837.0		114,391.6		7.1
2017		108,986.8		4,292.1		113,278.9		6.1

___________

(1)	Including Poland's reserve position in IMF.

(2)	Based on average imports of goods.

Source: NBP

Monetary and Financial System

Structure and Development of the Polish Banking System

As of September 30, 2017, there were 35 commercial banks (14 with majority Polish ownership and 21 with majority foreign ownership), 555 cooperative banks and 28 branches of foreign credit institutions operating in Poland. Three domestic banks performed services abroad either through a subsidiary or a branch, however the scope of this activity remained limited. The sector was dominated by commercial banks, which collectively held 92.9 percent of the total sector's assets. The market share of foreign controlled banks in the banking sector assets amounted to 45.4 percent (including branches of credit institutions). Concentration of the market is moderate, the market share of the five largest banks in the sector's assets amounted to 48.3 percent.

The Polish banking sector earnings and profitability were in line with European averages. At the end of September 2017, annualized Return on Assets ("ROA") was 0.76 percent, which was considerably higher than the ratio in the EU as demonstrated by EBA Risk Dashboard Data as of Q2 2017. On the first nine months of 2017, the net profit of the banking sector was 7 percent lower than in the same period of the previous year, mainly as a result of external factors (such as the banking tax (which has been in force since February 2016), and one-off annual payments to the bank resolution fund (which was paid in full by most banks in the first three months of 2017, compared to payments in four installments in 2016)) and the high base effect (non-recurring income from the sale of Visa Europe in June 2016). The monthly banking tax rate of 0.0366 percent is applied to the tax base of total assets decreased by PLN 4 billion, value of Treasury bonds, value of own funds and, in the case of affiliating banks, deposits of affiliated cooperative banks. The banking tax has been in force since February 2016. Banks are obliged to pay the total annual contribution to the bank resolution fund in the Bank Guarantee Fund ("BGF") each year until July 20, comparing to four quarterly instalments in 2016. Most large banks paid the total annual contribution in Q1 2017. Despite the persistent low interest rate environment, the NIM ratio was steadily rising over the recent two years and in September 2017 amounted to 2.41 percent.

Lending to non-financial customers grew by 5.0 percent year-on-year (on an exchange rate adjusted basis) as of September 2017. Growth of lending to non-financial customers was slightly higher than the growth of nominal GDP in the same period and thus supported sustainable economic growth without giving rise to imbalances in the economy nor in the financial system. The ratio of loans to the non-financial sector to GDP was stable and relatively low (it amounted to approximately 51 percent as of September 30, 2017 and increased by 5 percent since the end of 2008). Lending to corporations increased at 5.6 percent per year, mainly backed by a strong growth of 12.1 percent on investment loans. Consumer loans grew by 5.8 percent per year, and housing loans by 3.4 percent per year. Zloty denominated housing loans grew by 10.7 percent and foreign currency denominated housing loans decreased by 7.3 percent per year. Since 2011, new housing loans are being granted mostly in domestic currency, as a result the share of FX housing loans in the total stock of housing loans is continuously decreasing. In September 2017, the total share of FX housing loans in the total stock of housing loans amounted to approximately 36 percent (in 2009 it reached over 70 percent). All data on loan volume changes quoted in this paragraph are exchange rate adjusted.

The quality of the Polish banking sector's assets was high and gradually improving, supported by favorable performance of the corporate sector and the labor market. Total NPL ratio decreased to 6.9 percent in September 2017 from 7.3 percent in the same period of 2016. Housing loans portfolio outperformed other loan portfolios, the NPL ratio amounted to 2.9 percent. Coverage of impaired loans by provisions (59.1 percent for household impaired loans and 48.5 percent for enterprise impaired loans) is sufficient, taking into account the average collateralization of loans and market prices of impaired loans.

The Polish banking sector remained well capitalized. According to EBA Risk Dashboard as of September 30, 2017 the average capital ratios of Total Capital (TCR) and Tier 1 was 18.0 percent and 16.5 percent, respectively. Even though the Tier 1 capital ratio of the Polish banking sector remained close to the EU average (15.7 percent as of June 30, 2017), it was better capitalized since banks in Poland apply significantly more conservative risk weights. The ratio of risk weighted assets to total assets in Poland was significantly higher than the EU average (60.5 percent compared to 36.8 percent as of June 30, 2017). Consequently, according to ECB the average leverage (assets to equity) for Polish banks was approximately 9.3, compared to 15.5 in the EU.

Funding and liquidity of Polish banks remained sound. Banks have continued increasing the share of cheaper local funding (mainly non-financial sector deposits) in their funding structure. The growth rate of deposits was high (5 percent year-on-year (on an exchange rate adjusted basis) on September 30, 2017 , of which deposits of households grew by 5.6 percent year-on-year and deposits of enterprises by 3 percent on September 30, 2017). The loan to deposit ratio remained in a gradual downward trend and amounted to 98.2 percent on September 30, 2017. Total liabilities of the banking system to financial non-residents (of which 70.6 percent were in foreign currency as of September 30, 2017) continued the downward trend and accounted for approximately 11.1 percent of bank assets on September 30, 2017 (as compared to the highest historical value of approximately 20 percent in the beginning of 2009.

The National Bank of Poland

The NBP is the central bank of Poland. It is authorized by the Constitution, the Act on Narodowy Bank Polski of August 29, 1997 as amended (the "NBP Act") and the Banking Act of August 29, 1997 as amended (the "Banking Act") and are consistent with EU standards. EU law, the Constitution of the Republic of Poland and the NBP Act all confirm the NBP's independence, which is essential for the credibility of the central bank. According to the Constitution, the NBP has the exclusive right to issue money as well as to formulate and implement monetary policy. In line with the Act on NBP, it provides banking services to the State budget. Although the NBP may act as a financial agent to the Government, it is not regarded as liable for the obligations of the State Treasury in this respect. NBP is also responsible for establishing the necessary conditions for the development of the banking system. Following an amendment to the Act on NBP in 2015, NBP has been assigned the task of acting towards stability of the financial system as well as eliminating or reducing the systemic risk of the financial sector.

The NBP has three governing bodies, the President, the MPC and the Management Board. The President of the NBP is appointed by the Sejm at the request of the President of the Republic of Poland for a six-year term, with strictly limited possibilities of removal. Adam Glapiński was officially appointed President of the NBP by the Sejm on June 10, 2016 and took office on June 21, 2016 after taking an oath of allegiance to the Sejm. The President of the NBP is the chairman of the two other governing bodies of NBP as well as of the Financial Stability Committee in the area of the macroprudential supervision. Under the NBP Act, the powers of the President of the NBP are separated from those of the MPC and the Management Board of the NBP.

Monetary policy decisions are taken by the MPC. According to the Constitution and the Act on NBP, the MPC formulates annual monetary policy guidelines and submits these to the Sejm together with the Draft Budget Act submitted by the Council of Ministers. Based on these guidelines, the MPC makes monetary policy decisions, in particular on interest rates, required reserve ratios and remuneration rates on the reserve holding. In addition, the Constitution requires that within 5 months following the end of each fiscal year, the MPC submits to the Sejm a report on the achievement of the purposes of the monetary policy. The Council also issues a triannual Inflation Report, which presents the MPC's assessment of the macroeconomic conditions influencing inflation developments.

The MPC consists of the President of the NBP as Chairman and nine Members from outside the NBP, which are appointed in equal numbers by the Polish President, the Sejm and the Senate for a period of 6 years. The tenure of eight of the current Members and the Chairman began in 2016.

The principles for setting the zloty exchange rate are laid down by the Council of Ministers (i.e. the Government) in consultation with the MPC. The NBP Management Board performs tasks related to the foreign exchange policy. The NBP publishes current middle exchange rates for foreign currencies and rates for other types of foreign exchange such as buy and sell prices of foreign currencies and performs its function of central foreign exchange authority by holding and managing the official foreign exchange reserves, and by conducting banking operations and taking other measures to ensure the safety of foreign exchange operations and liquidity of international payments.

The NBP Management Board's core responsibilities include implementing the resolutions of the MPC, supervising open market operations, performing tasks concerning the exchange rate policy and analyzing the stability of Poland's financial system. The Management Board consists of the President of the NBP and six to eight members, of which two are Vice Presidents. In line with the Management Board's mandate regarding financial stability set forth in the NBP Act, the NBP produces a semi-annual Financial Stability Report, which

analyzes the resilience of the domestic financial system, in particular of the banking sector, against potential or materialized financial and macroeconomic shocks. The reports take into account a wide range of financial and macroeconomic indicators which are largely based on data received directly from financial institutions and supported by the NBP's own quantitative and qualitative research.

Financial Stability Committee - Macroprudential Authority

According to the Act on Macroprudential Supervision, FSC is the macroprudential authority in Poland. The FSC is a collegial body where four main financial safety net institutions: the NBP, the Ministry of Finance, the Polish Financial Supervision Authority and the BGF are represented. The President of the NBP is the chairman of the Committee in the area of macroprudential supervision. The secretariat for the FSC is provided by the NBP.

The primary task of the FSC is to identify, assess and monitor systemic risks stemming from the financial system or its environment, as well as to limit such risks using macroprudential instruments. For this purpose, the Committee may deploy soft law instruments, such as issuing recommendations or statements.

Recommendations are issued when the FSC wants to indicate the need to take measures to mitigate the systemic risk identified. Addressees of the recommendations can only be the NBP, the Ministry of Finance, the Polish Financial Supervision Authority and the BGF that are institutions that have the possibility to take supervisory and regulatory measures in order to stabilize the domestic financial system. Recommendations are not legally binding, however are backed by a "comply or explain" mechanism.

When a high level of systemic risk is identified and the FSC finds it necessary to inform about the source of this risk and the possible consequences for the financial system, the FSC will issue a statement. The range of addressees of the statement is wide and includes both the NBP, the Ministry of Finance, the Polish Financial Supervision Authority, the BGF and other entities in the financial system. The issuance of a statement may serve only as a communication instrument, but it should also encourage the competent authorities or economic agents to take corrective action to limit the consequences of the systemic risk.

The Committee holds its meetings every quarter. Information on its activities is available at: http://www.nbp.pl/macroprudentialsupervision/index.aspx.

The FSC, as a Polish macroprudential authority, cooperates with the European Systemic Risk Board (ESRB), other European Union authorities, macroprudential authorities of the member states or third countries, as well as international institutions.

Monetary Policy

The primary objective of the NBP's monetary policy is to maintain price stability, while supporting the economic policy of the Government. While striving to maintain price stability, the NBP pursues the inflation targeting strategy under the floating exchange rate regime. At the same time, monetary policy is conducted in a way that fosters sustainable economic growth and financial stability.

The MPC sets a numerical medium‑term target for inflation and meets regularly each month to discuss the economic conditions and outlook, and, after analyzing risks to price stability, takes no action or adjusts the monetary policy instruments. The NBP's main instrument is a short-term interest rate.

Since 2004, the medium‑term inflation target has been set at 2.5 percent with a symmetrical band for deviations of +/‑ 1 percentage point. The target is defined over a medium‑term horizon and in terms of annual growth of CPI. Every year the MPC also publishes Monetary Policy Guidelines, providing an outline for the monetary policy in the coming year. This outline is fully compatible with the medium‑term strategy. Since the introduction of the medium-term target of 2.5 percent, the average CPI inflation in Poland has amounted to 2.0 percent. After a rise of inflation in early 2017, consumer price growth stabilized at a level close to but below the NBP's target (2.0 percent in December 2017). Volatile factors, such as energy and food prices, have been recently exerting some upward pressure on consumer prices. At the same time, since the beginning 2017 core inflation has been stable and moderate (0.9 percent in December 2017). According to the NBP's November 2017 Inflation Report, CPI inflation is expected to remain close to the target in the coming years.

Since March 2015, the MPC has been keeping the NBP interest rates unchanged, with the level of the NBP's reference rate remaining at 1.5 percent.

Monetary Policy Implementation

The NBP's interest rates are the principal instrument of monetary policy with regard to reaching predetermined inflation targets in Poland. By setting the level of these rates, the MPC influences the level of short-term money market interest rates.

The NBP's reference rate reflects the general direction of monetary policy. It determines the yield obtainable on open market operations. Due to a liquidity surplus prevailing in the Polish banking sector, open market operations are used to absorb excess liquidity from the interbank market. Starting from 2008, open market operations have been conducted on such a scale as to enable the Polish Overnight Index Average ("POLONIA") to run close to the NBP's reference rate.

The NBP's open market operations can be divided into the following three categories:

main open market operations, which are executed on a weekly basis in the form of the issuance of NBP bills with a seven-day maturity. A fixed rate at the level of the NBP's reference rate is binding during tenders. Regular issuance of NBP bills plays a pivotal role in pursuing the objectives of the NBP’s open market operations;

fine-tuning open market operations that may be conducted with the aim of limiting the volatility of short-term market interest rates. They are executed on an ad-hoc basis within the required reserve maintenance periods, whenever liquidity conditions in the banking sector are substantially out of balance, as well as on the last business day of the above-mentioned reserve maintenance periods. This may involve liquidity-absorbing operations (issuance of NBP bills, reverse repo transactions) or liquidity-providing ones (redemption of NBP bills before maturity, repo transactions). The maturity and yield of these operations as well as the exact manner in which they are carried out depend on the situation in the banking sector; and

·	structural open market operations which may be conducted in order to affect the long-term liquidity structure in the banking sector. If required, the NBP may carry out the following structural operations: bond issuances and the purchase or sale of securities in the secondary market.

The following table sets out details of interest rates set by the NBP and changes made to them since 2009:

	Lombard Rate		Reference Rate		Deposit Rate
	(%)
Effective Date
January 28, 2009		5.75		4.25		2.75
February 26, 2009		5.50		4.00		2.50
March 26, 2009		5.25		3.75		2.25
June 25, 2009		5.00		3.50		2.00
January 20, 2011		5.25		3.75		2.25
April 6, 2011		5.50		4.00		2.50
May 12, 2011		5.75		4.25		2.75
June 9, 2011		6.00		4.50		3.00
May 10, 2012		6.25		4.75		3.25
November 8, 2012		6.00		4.50		3.00
December 6, 2012		5.75		4.25		2.75
January 10, 2013		5.50		4.00		2.50
February 7, 2013		5.25		3.75		2.25
March 7, 2013		4.75		3.25		1.75
May 8, 2013		4.50		3.00		1.50
June 6, 2013		4.25		2.75		1.25
July 4, 2013		4.00		2.50		1.00
October 9, 2014		3.00		2.00		1.00
March 4, 2015…………………………………………		2.50		1.50		0.50

___________

Source: NBP

The latest easing cycle started in late 2012. Since then, interest rates have been cut on 10 occasions, bringing the reference rate to 1.5 percent in March 2015. Interest rates remain unchanged since March 4, 2015.

Bank Regulation

With effect from January 1, 2008, banking supervision has been carried out by the Polish Financial Supervision Authority (PFSA) as stipulated in the Act of July 21, 2006 on the Supervision of the Financial Market (the "Financial Market Supervision Act").

According to Article 4, paragraph 1 of the Financial Market Supervision Act, the PFSA's responsibilities comprise the following:

·	exercising supervision of the financial market;

·	taking action to foster the proper operation of the financial market;

·	taking action to promote the development of the financial market and its competitiveness;

·	taking educational and informative actions related to the operation of the financial market;

·	participating in the preparation of legal acts relating to financial market supervision;

creating opportunities for the amicable and conciliatory dissolution of disputes between the participants of the financial market, including, in particular, disputes arising from contractual relationships between the entities subject to the PFSA’s supervision and the customers buying their services; and

·	other statutory tasks.

Credit Unions

Deposit-taking institutions in Poland include credit unions. Credit unions form a system that is almost entirely separated from the banking sector, both in terms of regulatory framework (they are regulated by specific regulations beyond the Banking Act, however some provisions of the Banking Act apply to them) and economic links. Credit unions constitute a relatively small part of the Polish financial system and the ratio of assets of the 35 credit unions operating in Poland to the total assets of the banking sector stood at less than 0.6 percent as of September 30, 2017. Due to their small size and the absence of links with other financial institutions, credit unions do not pose a systemic risk.

As of September 30, 2017, disbursements of covered deposits made from the BGF to customers of 4 failed credit unions stood at PLN 1.1 billion. The BGF also provided the banks and their subsidiaries that took over failed credit unions with unlimited guarantees covering any losses resulting from the takeovers. Provision of such disbursements and guarantees may continue in the future due to the ongoing restructuring of the credit union sector.

Foreign Currency housing loans portfolio

In the years 2007 and 2008, in the period when the Polish zloty remained strong in relation to foreign currencies, a marked increase in foreign currency housing loans was observed, in CHF in particular. This increase was a result of both demand and supply factors, including housing aspirations of the society, differences in the interest rates and the expectation that Poland would accede to the Eurozone. Since the end of 2011, lending in the housing loans segment has focused almost exclusively on loans in zloty as a consequence of the changes in strategies of banks and the activities of the supervisory authority and the NBP. As of September 2017, the value of the foreign currency housing loans portfolio represents 8.1 percent of the banking sector assets.

In August 2017, the President of the Republic of Poland submitted a draft bill amending the Act of October 9, 2015 on support to borrowers in difficult financial situation, who took out housing loans and the Act of February 15, 1992 on corporate income tax. The draft law provides for, among others, establishing the new Restructuring Fund (supplementary to the already existing Relief Fund) to be financed from banks' quarterly

contributions amounting to 0.5 percent of the value of their FX housing loans portfolio. Banks would be allowed to tap the Restructuring Fund to refund costs resulting from the voluntary restructuring of the FX housing loans, which would assume the conversion to the zloty and outstanding capital reduction (costs are defined as the difference between a balance sheet value of a housing loan before and after the restructuring).

Capital Markets

Warsaw Stock Exchange

In 1991, Poland established the Warsaw Stock Exchange (the "WSE"). The WSE operates the main market and also acts as the operator of an alternative market called NewConnect (established in August 2007) for smaller companies. In November 2010, the WSE went public and its shares were self-listed.

In September 2009, the WSE launched CATALYST, the first organized market in debt securities in Poland and a unique market of its kind in Central and Eastern Europe. The system facilitates and optimizes issuances of, as well as trading in, corporate and municipal bonds. BondSpot SA, a subsidiary of the WSE, also operates the Treasury BondSpot Poland, which is a wholesale market dedicated to trading in Treasury bonds and Treasury bills.

According to the WSE, it is now the largest national financial instruments exchange in Central and Eastern Europe (including Poland, the Czech Republic, Slovakia, Slovenia, Bulgaria, Romania, Austria and Hungary) and in recent years has been one of the fastest-growing exchanges in Europe. It offers a wide range of products and services within its trading markets of equities, derivatives, debt and structured products, electricity, natural gas, property rights, as well as clearing of transactions, operation of the Register of Certificates of Origin of electricity and sale of market data.

As of May 2017, there were 476 companies listed on the WSE (426 local members and 50 foreign members) and out of a total of 65 investment firms conducting their activities under Polish law, 12 of which were banks conducting brokerage activities and the rest were independent entities. In May 2018, there were 2,990 licensed brokers of securities, 383 commodities brokers and 666 licensed investment advisors.

Foreign investors may trade on the WSE on the same terms as domestic investors and may freely repatriate trading profits in a foreign currency.

Treasury securities

Treasury bonds and bills denominated in PLN are sold at regular auctions by the State Treasury. The primary domestic market is based on a selected group of banks acting as primary dealers.

The following table sets forth certain information with respect to the sale of treasury securities on the domestic market for the periods indicated:

		Q1 2017	Q2 2017	Q3 2017		Q4 2017		2017
	(nominal amount, PLN billions)
Gross sales of treasury securities
Treasury bonds		41.3	30.1	16.1		35.2		122.7
Treasury bills		6.0	0	0		0		6.0
Total		47.3	30.1	16.1		35.2		128.6
Net sales of treasury securities
Treasury bonds		23.7	9.7	(4.4	)	(1.0	)	28.0
Treasury bills		6.0	0	(6.0	)	0		0
Total		29.7	9.7	(10.3	)	(1.0	)	28.0

__________

Source: Ministry of Finance

Trading of Treasury bonds is conducted on three secondary markets: non‑regulated OTC market, the Treasury BondSpot Poland electronic platform and on regulated markets of Warsaw Stock Exchange and BondSpot S.A. In 2017, trading of Treasury bonds occurred primarily on the non-regulated OTC market (95.1 percent of total trading volume), while the respective shares of the Treasury BondSpot Poland electronic platform and the WSE of total Treasury bond trading volume amounted to 4.9 percent and approximately 0.01 percent, respectively.

The main holders of State Treasury debt at the end of December 2017 were foreign investors with PLN 471.8 billion (50.8 percent), the domestic banking sector with PLN 257.3 billion (27.7 percent) and domestic non-banking investors with PLN 198.8 billion (21.4 percent).The average time to maturity ("ATM") of domestic marketable debt increased from 4.36 years at the end of December 2016 to 4.49 years at the end of December 2017. The ATM of total State Treasury debt has remained at the safe level above 5 years. The average time to re‑fixing ("ATR") and duration of domestic marketable debt increased from 3.35 and 3.07 years at the end of December 2016, respectively, to 3.33 and 3.04 years at the end of December 2017. The level of interest rate risk for foreign debt does not pose a threat for the cost minimization objective, as sensitivity of foreign currency debt servicing cost to changes in interest rates is limited (ATR at 4.98 years and duration at 4.49 years at the end of December 2017).

The following table sets out the ATM, ATR and duration of State Treasury debt as of the dates indicated:

	As of December 31,
	2013		2014		2015		2016		2017
ATM
Domestic debt		4.49		4.19		4.27		4.36		4.49
Foreign debt		7.19		7.08		6.88		6.92		6.46
Total		5.33		5.24		5.22		5.27		5.12
ATR
Domestic debt		3.28		3.17		3.24		3.35		3.33
Foreign debt		5.68		5.35		4.98		5.23		4.92
Total		4.03		3.97		3.87		4.02		3.84
Duration ⁽¹⁾
Domestic debt		3.09		3.03		3.04		3.07		3.04
Foreign debt		4.79		4.80		4.54		4.71

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per unit ⁽¹⁾	Proposed maximum aggregate offering price ⁽¹⁾	Amount of registration fee⁽²⁾
Debt Securities	U.S.$ 4,000,000,000	100%	U.S.$ 4,000,000,000	U.S.$498,000

Schedule B Item		Heading in Prospectus or location in Registration Statement
1		Cover Page
2		Use of Proceeds
3		Public Debt; Tables and Supplementary Information
4		Public Debt
5		Public Finance
6		*
7		Authorized Agent in the United States
8		*
9		*
10		Plan of Distribution*
11		**
12		Validity of the Securities
13		*
14		**

	2013		2014		2015		2016		2017
	(PLN per U.S.$)(1)
Year end		3.0120		3.5072		3.9011		4.1793		3.4813
Average for year	.	3.1608		3.1551		3.7701		3.9431		3.5482
	(PLN per EUR)(1)
Year end		4.1472		4.2623		4.2615		4.4240		4.1709
Average for year		4.1975		4.1852		4.1839		4.3625		4.2016
	(U.S.$ per EUR)(2)
Year end		1.3779		1.2101		1.0859		1.0552		1.1981
Average for year		1.3281		1.3297		1.1096		1.1072		1.1841

	Seats
Sejm
Law and Justice (PiS)	237
Civic Platform (PO)	136
Kukiz '15	29
Nowoczesna	25
Polish People's Party (PSL)	18
Free and Solidarity	6
Unaffiliated	9
Total	460

	Page
Use of Proceeds	1
The Republic of Poland	2
The Economy	15
Balance of Payments and Foreign Trade	21
Monetary and Financial System	26
Public Finance	33
Public Debt	42
Total External Debt	47
Description of the Securities	48
Enforceability of Judgments	57
Taxation	59
Plan of Distribution	60
Validity of the Securities	61
Authorized Agent in the United States	62
Official Statements and Documents	63
Further Information	64
INDEX TO TABLES AND SUPPLEMENTARY INFORMATION	1

	Seats
Senate
Law and Justice (PiS)	63
Civic Platform (PO)	31
Unaffiliated	6
Total	100