Background information

Poland, with its population of 38 million inhabitants, is the largest country in Central Eastern Europe. In 2008, it had a 40 percent share of the GDP generated by the new European Union members (including Bulgaria and Romania).

Poland’s accession to the European Union in 2004 was an important milestone in the dynamic development of the country. Approximation of Polish legislation and administration to the EU standards as well as an influx of structural funds from the Community (nearly 67 billion euro by 2013) has provided a major stimulus for economic growth. Poland has been taking full advantage of its opportunity, preparing for challenges of the common European market. The main sectors of the economy are services (64% of GDP) and industry (32% of GDP). Agriculture makes up the remaining 4 percent.

Stable demographic situation, increase in society’s wealth

Poland is the sixth largest country in the EU. In 2009, Poland recorded a positive birth rate, its population increased by more than 37 thousand as compared to 2008.

 

Poland has been successively reducing the gap separating it from the 15 ‘old’ EU countries. In 2000, Poland’s GDP per capita was USD 4.473 and in 2009 it rose more than four times to reach USD 18.072. Our country has also recorded a stable increase in consumer expenditure at an average annual rate of 5 percent.

source: "World Economic Outlook Database, October 2009

Gross Domestic Product

Due to the stable foundations of the Polish economy, consistent fiscal and monetary policy, no direct involvement in risky sub-prime loans, and low - as compared to the EU average level - percentage of mortgages taken out by Polish consumers (13% of GDP), Poland proved less susceptible to the economic turmoil than other EU countries. In 2009 Poland was the only country which reported a GDP growth of 1.8%.

source: Data from Central Statistical Office as of 31.05.2010 and Eurostat as of 12.05.2010. 

In the Q1 of 2010, when European economies showed a slow recovery, Polish economy reported a stable growth and was a leader among the EU members with a GDP growth of 3%.

GDP forecasts for 2010 are still very promising for Poland. Key European financial institutions estimate that Poland will report a GDP growth from 2.5% (The World Bank recommendation) to 3.1% (OECD recommendation). According to the European Commission Poland and Slovakia will be European leaders as far as GDP growth in 2010 is considered. 

Foreign Direct investment

A significant level of foreign direct investment (FDI) is a sign of confidence that the foreign investors see Poland as a safe place for doing their business. In order to proof this it is worth quoting the results of the “2008 European attractiveness survey” conducted by Ernst & Young among 834 managers representing 41 countries and 5 major economic sectors, which were asked about the best places for investments or development projects. Poland was the undisputed first place winner with 18% of votes, outstripping such countries as Germany, Russia and France. Due to the still relatively low labour costs and highly qualified young workers, Poland is the leader in attracting direct foreign investment. In 2006 it was EUR 15.7 billion, a year later it was EUR 16.7 billion and in 2008 it was EUR 12.1 billion. In 2009 the FDI in Poland ammounted to EUR 8.6 billion.

The economic slowdown has reinforced the tendency of global corporations to cut their operational costs. In particular, companies from the business outsourcing sector (BOS) see Poland as a place especially suitable for doing business. According to the Polish Information and Foreign Investment Agency (PAIZ), the decisive factor why the BOS companies choose Poland as the place for investments is the availability of highly educated and relatively inexpensive professionals with good knowledge of foreign languages.

Strong internal market and stable international trade

Poland is the 6th largest market in the EU and the 32nd market in the world. It is also the largest market in Central Eastern Europe. As compared to other countries in the region the Polish market is much bigger (38 million potential customers), far more absorbent and diverse.

Despite the unfavourable situation on global markets, Poland as the only European Union country has managed to achieve economic growth. This growth was especially due to the positive personal consumption rate of 2.3 percent and an increase in investments (after two years of decline) by approx. 2 percent year on year in the last quarter of 2009.

The constantly growing internal demand has been stimulated by young high-earning people entering the market. People born during the baby boom of the early 1980s are now 25-30 years old and create demand for, among other, housing and household goods and services, i.e. construction, renovation and decoration services, household appliances, etc.
Another positive phenomenon is the long-term trend in increasing wealth in the society, resulting in improvement of household conditions.

Over the five years following Poland’s accession to the European Union, Poland has consolidated its position on the European market and reinforced trade relations with its EU partners. During that period, nearly 80 percent of the Polish exports each year went to the EU market which accounted for 60-70 percent of the Polish imports. The exports to the EU countries combined with a strong internal market gives a true picture of the Polish economy, which is more resilient to global economic turmoil than the economies of most European countries. In the boom period, export was the driving force behind the Polish economy, but now, in the period of global economic slowdown, the Polish economy is based primarily on the strong internal market.

 

Polish labour market

A great advantage of the Polish labour market is the large number of young, well-educated and experienced workforce. According to the Central Statistical Office (GUS), the official unemployment rate in Poland in January 2005 was 20 percent, and it dropped to 8.9 percent by December 2009.

For comparison purposes, presented below is a harmonised unemployment rate calculated according to the Eurostat methodology, the data as of 11 May 2010.

 

Polish economy growth stimuli in the coming years

Over the next few years, the Polish economy will be influenced primarily by the economic situation in Europe and worldwide. However, there are a number of factors which will reduce the impact of the global economic crisis on the Polish economy and place Poland in a more favourable light not only among the countries of the region, but also in Europe as a whole.

One of these factors is the inflow of EU funds. By 2013, the total amount of EU funding in Poland may reach EUR 67 billion. These funds are to be used on improving infrastructure, education, etc. The Polish economy and internal demand will also benefit from the reduction of maximum income tax rate from 40% to 32%.

The organisation of the EURO 2012 football championships to be held in Poland and Ukraine is another big stimulus for the country’s economy. This major international event means not only the inflow of cash from fans which will be visiting Polish hotels, restaurants, tourist attractions, etc. This also means accelerating the work on transport infrastructure.