Thinking Poland - facts in politics and economy

REGIONAL PROCESSES

It has been over 28 years now, since the fall of communism in Eastern Europe and the reestablishment of market driven economies throughout the region. One must notice, that at the initial stage, the ruined and inefficient industries in combination with the frequently corrupted leaders, have been an easy catch for large international players, allowing them to takeover major banks, energy providers and key industry sectors. The local investors had to slowly fight their way through the barriers of bureaucracy, bribery, lacks in technologies and know-how.

With a population of 38 million people (#6 in the EU) and the GDP rate per capita growing from 1,700 USD in year 1990 to almost 13,000 US dollars in 2017, Poland has a fairly strong market of consumers, especially when comparing it to other Central Eastern European countries. Maintaining its own currency - the Polish zloty, despite all pressure from the EU to change to the Euro, limits the risks of external threats and fluctuations influencing the Polish economy.

The above factors have turned out to be significant during the global crisis of 2009, helping Poland to keep the GDP positive – through a high internal consumption and through increased exports, driven by the lower exchange value of the zloty. Not to underestimate in further development trends, were the EU funds, used in conjunction with local assets to modernize multiple private and state-owned businesses and the infrastructure.

CURRENT TRENDS

Indeed, in late 2015 a major switch took place in Polish politics,

which has lead and continues to lead to short- and long-term effects in the economy. A negative impact has been observed in the overall rate of investments, as the local and international players had to get acquainted with the new situation. Over the last 2 years though, changes have been introduced that effectively limited corruption, increased the efficiency of tax collection and improved the average standard of life. Not to be omitted, the social benefits, meant to increase the birth-rate in the long term, have boosted consumption by increasing the “purchasing power” of millions of households.

Thus, in 2017 alone, the salaries grew in average by 5-7%, with an inflation rate at 2,5%, unemployment dropping to a record low of 6,5% and the general GDP growth at 4%. The budgetary incomes of the state increased by 15% in one year (!) mainly through the growing corporate and personal revenues and stopping illegal VAT manipulations.

The current conflict of the Polish government with the EU Commission including the apparent accusations of Poland breaching European values, it’s own constitution and the rule of law, seem in reality to be bound more to political and financial battles on influence, rather than based on true arguments. Still, escalating the conflict might eventually pose a threat to the stability of the economy and further EU funds being utilized in Poland. One most note though, that the slower development in Poland would turn to be a huge problem to the western investors and suppliers of modern solutions, incl. machinery, as over 80% of the EU funds are eventually “making their way back to the West” through purchases of technology, service, management and consulting.

After the recent meeting of Jean Claude Juncker with the Polish PM Mateusz Morawiecki, an agreement seems to be the most likely outcome. Regardless of that, the World Bank and the International Monetary Fund have increased their expected growth rates for Poland in 2018. Local governmental plans, including the to-come “Constitution for business” should create even a more business friendly environment for entrepreneurs and generally a better ground for sustainable growth.

On the other hand, a challenge mentioned nowadays by a number of Polish managers of businesses is that qualified workforce becomes more difficult to find. The <3% unemployment rate in the industrial zones is a fact, not undermined by the presence of over 1million immigrants from the Ukraine. Noticeable though, that low unemployment leads eventually to needs of automation and digitalization – thus progressing into Industry 4.0. According to the data of Siemens Finance, the digital revolution in Poland can bring in the coming years over 1 billion dollars profit to the Plastics sector.