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The Warsaw Voice » Business » January 27, 2011
From the Business Editor
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No More ‘Green Island’?
January 27, 2011   
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Although the Polish economy is still growing fast, it seems it will soon lose its leading position in Europe. If the government does not start to bring in reforms, the economy may soon run out of steam and the myth of the “green island” will be shattered.

In 2009, Poland was the only European country to avoid recession—it notched up 1.7-percent growth. In 2010, the Polish economy grew twice as fast, but it probably failed to keep the number one spot. The European Commission predicts that in terms of economic growth, Poland will rank behind Germany, with a growth rate of 3.7 percent, Slovakia (4.1 percent) and Sweden (4.8 percent). The fact that other countries are likely to have higher GDP growth than Poland is no reason to worry, especially as forecasts for Poland are good—this year, the economy is expected to grow at least 4 percent. A reason for concern, however, is that—although the economy is expanding—Poland still has high unemployment and a huge budget deficit. More and more economists in Poland are worried. They warn the government that reforms aimed at solving the problem of public finances should not be delayed.

Foreign commentators and analysts are increasingly critical. They say the Polish government, which gained political capital during the crisis, is now wasting Poland’s chance to ensure a lasting reduction in public debt service costs. Instead of carrying out reforms, the government is going backwards. Many commentators and analysts are disappointed. Moreover, Poland’s image internationally has recently been undermined by the government’s decision to change the rules governing contributions to open-ended pension funds (OFEs).

Critical articles about Poland have also been published by Western media, which until recently referred to the Polish economy using superlatives. One example is the influential British weekly The Economist, which published an article about Poland in January. The Economist said everything seemed to be going fine for the Donald Tusk government, “but behind this cheery facade the edifice is creaking.” The author of the article points out that at 7.9 percent of GDP, the government deficit is four times what it was in 2007 while public debt is just under Poland’s constitutionally mandated limit of 55 percent of GDP, while “the finance ministry appears to be propping up the zloty in order to hold down the value of foreign-denominated debt.” Despite some improvements, such as better roads and rail links from Warsaw, infrastructure in much of Poland is “dire,” according to the magazine.

However, The Economist believes that Poland will not give up plans to reform its economy and that the measures the country needs will be taken soon. Poland will assume the presidency of the European Union in the second half of this year. That will be an opportunity for Poland to present itself as a modern country to an often condescending Western Europe, the magazine said.
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