Forecast

“If you can look into the seeds of time, And say which grain will grow and which will not, Speak then to me, who neither beg nor fear, Your favours nor your hate.” So asks Banquo of the witches in Shakespeare’s Macbeth reflecting our incessant need to try to discover what the future will bring. I don’t know, nor do you, and not does Jan Cienski, Poland correspondent for The Economist, editor of the Central European Financial Observer, and author of From Comrades to Capitalists, a new book about Poland’s transformation over the last 25 years. Not that this stopped him from sharing with the Oxbridge Society of Poland (and you may see his predictions to us from two years ago in The Fortune Teller) his outlook for Poland and the region in 2015.

In Jan’s view, Poland remains one on the best performing economies with GDP growth of 3.5 per cent for the next couple of years a safe prediction. Poland has moved out of the emerging markets to become a core European economy offering higher returns but with similar security. The clouds on the horizon come from both east and west. From the latter, in the shape of flat growth in the Eurozone, the potential impact of Greece leaving the Euro and a failure of Europe to return to the sustainable growth which is key to Poland’s growth and, from the former, the Russian economic and political uncertainty.

It would be unfair to judge Jan’s predictions on the fact that he has a mortgage denominated in Swiss Francs and was sharing his thoughts on the day that the Swiss National Bank ended the peg to the Euro, causing repaid appreciation of the Franc and much wailing and gnashing of teeth in consequence. Jan thinks that despite the large number of Polish households with such mortgages the effect on the wider Polish economy is likely to be limited. Of course – my thoughts not Jan’s – whether it does or not remains to be seen once the dust settles and the politicians get their paws on the problem.

Be that as it may, Jan thinks that Poland has had a good quarter century and that the next ten years will also see strong performance with Poland’s growth rates exceeding those of western Europe. Poland has not experienced a technical recession since 1992 and has passed other west European countries since the Second World War in terms of the longest period without a recession. There is no sign of a recession in the immediate future, either.

The projected EU funding to 2020 will make Poland a normal EU country but problems may arise as this dramatically reduces thereafter. Once the easy growth ends – helped by low wages, a well-educated work force and the momentum of catch up – problems may occur. Poland now has one of the lowest birth rates in world combined with waves of labour migration, the majority of which migrants will not return. To be fair, population is not only a problem for Poland: in the EU as a whole there is an aging population approaching retirement with a labour force which cannot support the weight of the required pension provision.

For 25 years Poland did well as a copy-cat economy and now has a GDP of 70 per cent of the EU average which means that the easy gains have been realised. Looking further ahead, the prospects are less rosy: there are no world class universities, there is no substantial financing of innovation and there is too much bureaucracy. What Poland needs is an agile forward looking government dedicated to continual small improvements, but I wonder whether Polish politicians are capable of delivering this. The danger is that Poland could stall as did, for example, Portugal, and not make the jump to the top league, ending up as a peripheral country within the EU. If Poland is able to build strong international companies and brands, create world class universities, and good condition for innovation, and so on, then it may indeed break though the 70 per cent barrier and become a magnet for migrants from the east.

If anybody can predict Poland’s immediate prospects it is Jan (and I am sure he’d be happy if you were to buy his book) but, as Macbeth found to his cost, it is all too easy to misread prophecies.

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