World economies
POLAND is classified as a high-income economy by World Bank. Its 38 million consumer market is one of the biggest in Europe. Emerging as a dynamic market over the past 25 years it ranks as the sixth-largest economy in the EU.
In 2016, Poland’s real growth slowed to 2.5 per cent compared to the previous year. The economy expanded 5.1pc year-on-year in the fourth-quarter of 2017 compared to a 4.9pc in the previous period, boosted by fixed investment, government spending and household consumption.
The International Monetary Fund and the World Bank reported 2017 real GDP growth of 3.8pc compared to 2.6pc in 2016. But according the OECD and European Union, Poland’s economy expanded 4.6pc in 2017, well above IMF estimates, and in line with the government forecast, driven by domestic demand and higher economic activity.
Growth momentum is likely to be sustained in 2018. Real GDP growth is forecast to remain strong at 4.2pc in 2018 and 3.6pc in 2019. The growth composition is expected to remain similar to 2017, with domestic demand providing the strongest contribution.
Private consumption is projected to be supported by faster wage growth and record-high consumer confidence. Investment is expected to continue a gradual recovery, driven by a strong rebound of public investment.
Fitch predicts that growth will be driven by strong household expenditure, reflecting wage surges and an economy near full employment. This will boost core inflationary pressure. The ratings agency forecasts inflation to average 2.8pc in 2018 and 3.1pc in 2019.
Labour market bottlenecks and rising unit labour costs would be the main sources of inflation pressure. In 2017, Polish fiscal deficit at 1.7pc of GDP was under control because of the strong economic growth at 4.6pc.
However, the government reduced the retirement age as of October 2017 and tried to introduce new taxes and boost tax compliance to offset the increased costs of social spending programs to relieve upward pressure on the budget deficit.
Fitch expects the fiscal deficit will widen to 2.2pc and 2.5pc in 2018 and 2019, respectively, due to the government’s fiscal expansionary policy. However, public debt ratio will remain broadly stable at 51.8pc of GDP in 2018 and fall to 51.1pc in 2019.
But Moody’s has lowered its estimate of the 2018 budget deficit to 1.8pc of GDP from 2.7pc. In 2019, the budget deficit is to reach 2.3pc of GDP. Inflation is seen reaching 2.7pc by end 2018, rising to 3pc in 2019.
The public debt estimate was also revised down to 51.6pc of GDP in 2018 from 53.5pc. In 2019, debt-to-GDP ratio will further decrease to 50.9pc. But according to some private sector economists, the deficit is likely to widen in coming years.
Despite a successful performance so far a coherent set of policies is needed to respond to current challenges, including managing one of the most rapidly aging societies in Europe, leveraging technological change, and putting people at the centre of government strategy.
According to the World Bank, the Polish economy is expanding rapidly and living standards continue to rise.
To sustain this trend Poland needs address: remaining deficiencies in its road and rail infrastructure, business environment, rigid labour code, commercial court system, government red tape, burdensome tax system, diversification of Poland’s energy mix, the outflow of educated young Poles to EU member states, and persistently low fertility rates.
Indicators of scientific research quality are below those in the leading OECD countries, and business research and development investment remains weak.