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The Warsaw Voice » Special Sections » September 2, 2011
Privatisation in Poland: Investor’s Guide
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Poland’s Economy Still Solid
September 2, 2011   
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Poland has coped with the effects of the global crisis much better than other countries. In 2009, with a growth rate of 1.7 percent, it was the only country in the European Union to avoid recession. In 2010, Poland’s economic growth accelerated to 3.8 percent. A similar rate of growth is expected this year.

In the first quarter of this year, Poland’s GDP grew 4.4 percent, in what was one of the best figures in Europe. According to the Economy Ministry, domestic demand was the main factor driving the Polish economy last year and in the first half of this year. Households spent more on consumption and companies continued to rebuild their inventories.

According to the government’s Central Statistical Office (GUS), sales in industry this past July were 1.8 percent higher than in July last year. Compared with July last year, sales rose in 19 of 34 industries. The most rapid increase occurred in metal production, at 18.8 percent, followed by the production of metal goods at 15.6 percent, and the furniture sector at 15.5 percent.

Sales in construction companies continued to increase rapidly. They were 16.4 percent higher than in July last year, but 4.5 percent lower than in June this year. All segments of the construction industry reported growing sales in both year-on-year and month-on-month terms, which shows that the industry as a whole has been booming. Sales in civil engineering companies rose by 27.2 percent compared with May last year. In the first seven months of this year, output in the construction and assembly sector was 19.9 percent higher than in the same period last year.

The crisis has done little harm to Poland’s retail sector. Preliminary data by the Central Statistical Office shows that between January and May this year, exports totaled 55.2 billion euros at current prices and were 18 percent higher than in the same period last year. Imports were worth 60.5 billion euros, going up 17.3 percent. Germany was the chief recipient of Polish goods, accounting for 26.1 percent of Poland’s overall exports, followed by France and Britain, each with 6.6 percent. Imports to Poland mostly came from Germany (21.9 percent), Russia (11.5 percent), and China (8.8 percent).

Paradoxically, the overall image of the Polish economy improved as a result of the global financial crisis. The main reason is that Poland was among the few developed countries that did not slide into recession. As a result, financial markets started to see Poland as a large European country with a growing economy rather than merely a part of the Central and Eastern Europe (CEE) region.

Increased interest in Poland among foreign investors additionally improves the country’s image. Last year foreign investment in Poland totaled 7.5 billion euros, according to preliminary data by the central bank. Importantly, multinational corporations are no longer choosing Poland as a location for new projects in Europe exclusively because of its large market and relatively low labor costs, but also because of its well-educated labor force. Apart from the increased number and value of investment projects, investors’ preferences have also changed, with a noticeable drop in the proportion of investment in manufacturing—although this still dominates—and more investment in highly specialized services and research and development, especially in telecommunications, IT, machine building and aviation.

On the downside, economic growth has been accompanied by growing inflation. In the first half of this year, it reached 4.2 percent, food prices being the main contributing factor.

The biggest problem of the Polish economy is the state of the country’s public finances. Poland’s public deficit grew to 7.9 percent of GDP in 2010, while government debt reached 55 percent of GDP.

But the risks associated with the state of public finances have not had an adverse impact on the prospects of the Polish economy. Most forecasts show that in 2011 Poland will still be one of the fastest growing economies in Europe. The Economy Ministry projects that Poland’s GDP will grow by 4.2 percent this year. The growth of the Polish economy will be determined by external factors. The most important will be a strengthening of positive trends and expectations of an improvement in global economic conditions. The economy will still be driven by industry and construction.

Foreign experts have a high opinion of the Polish economy. The European Commission projects that in 2011 Poland’s GDP will grow by 3.9 percent and that the economy will strengthen further in 2012, in the wake of an improvement in global economic trends and a rise in foreign direct investment. Employment is expected to grow by 1.3 percent in 2011. Public investment is expected to accelerate as the UEFA Euro 2012 soccer tournament approaches. However, public investment will be hampered by measures the government needs to take to reform public finances, experts say.

JP Morgan predicts that since economies across the EU have slowed down, economic growth in Poland in the latter half of this year will not exceed 2.5 percent, 1.5 percentage points less than in the first six months. In total, however, the country’s GDP is expected to grow 3.8 percent this year. The World Bank, in turn, projects a 4 percent GDP growth rate for Poland in 2011 and 4.2 percent in 2012. According to the World Bank, the Polish economy will be driven by consumption and private investment.
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