The Polish press tends to reflect the Polish habit of assuming that things are never as good as they actually are. For probably the first time in recent history Poland, economically at least, is enjoying a period of growth and prosperity much healthier than that of its EU neighbours and business could do more to spread the message internationally. This is the message from government or, rather, that part of government in a position to know.
According to that message, over the last four years Poland’s GDP growth has been the highest in the EU and, even more impressively, the highest among OECD countries. Of course, what is seldom stated is that the percentage GDP growth figures are not always strictly comparable – two per cent growth in a highly developed economy is good; four per cent in a developing economy is not as good – but nonetheless Poland’s economy is ray of light in a dark EU sky. What this means in reality is that if current growth rates continue Poland will by 2026 have a GDP per capita equal to the EU average and by 2029 equal to that of Germany.
Of course, 2026 is a long way a head and much can change in the meantime. Few expected at the time of the collapse of Lehman Brothers that there would be a Euro zone crisis so who is to know what the future really holds. The being said Poland has for once in its history been in the right place at the right time and has a government which has taken broadly the right decisions while enjoying the GDP boosting advantages of being the recipient of large amounts of EU largesse. But what are the difficult decisions ahead?
Poland is obliged to join the Euro in due course under the EU Accession Treaty of 2003. The message is however that Poland has no wish to join this Euro under these conditions and entry to ERM-2 while it clearly does not work as it should – and the larger Euro members are seen as at fault here – is clearly not on the cards. In the meantime, Poland is suffering from the currency fluctuations as the zloty is caught up in the Euro uncertainty surrounding the Euro. In fact, the Poland remains in a relatively strong position with foreign exchange reserves twice those of Sweden (with a similar sized economy) a flexible credit line with IMF and a plan to eliminate the budget deficit in the medium term. And Poland does well on a number of other financial indicators too.
Difficult political decisions are also being taken – for example the recent changes to the retirement ages of certain categories of state employee pension system which also addresses, in part, the demographic issue. There also seems to be a willingness to look at wider issues such as improving university education by encouraging students actually to study rather than to learn and an increased emphasis on technical and scientific subjects. The numbers of children attending pre-school is up from 42 to over 70 per cent enabling more parents to work, leading to increased employment in the economy (despite high rates of unemployment).
Of course there remain some perceived blind spots such as the overly bureaucratic tax system although whether it is in reality so much worse than elsewhere is a matter of debate. One problem is that Poland has an overly legally formulaic approach. On the one hand the state may not look at the intention of a transaction to assess what the tax should be – in the UK HMRC may levy tax where the intention of an otherwise legitimate transaction is part of a wider scheme to avoid tax – but in the other it will provide binding interpretations on the effect of the tax legislation on a particular transaction in advance which bind the tax authority but not the taxpayer. Thirty thousand such interpretations were issued during the last year, something few other countries offer.
All in all, the message from Poland is very positive – and that’s certainly worth repeating.