Who's Number One now?
13/6/12 20:24![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
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talkpoliticsLong before the Euro'2012, the European champion in economic prosperity was already known. The title unequivocally goes to Poland. And this time not by some whimsical gifts from the referees; not even through the regular hooligan riots against rival fans (Russia, anyone?) This time Poland's title is completely deserved. Heep heep hooray!
The Warsaw Business Journal wrote an editorial entitled Eastern Europe's Reputation On The Line, stating "For the first time since communism collapsed over two decades ago, ordinary people from all the continents on earth will be hearing daily news about Poland and watching Polish cities on their TV screens. The impression they get during those three weeks is likely to be the one that will remain in their minds for a long time to come".
One fact works in Poland's advantage. It's that probably no one seems to have any big expectations from the Poles, much less from the Ukrainians. So... Warsaw, along with the rest of them Polish host cities can only give us nice surprises, and possibly help wipe the dust off the old stereotypes about the region as a grim post-communist place from the James Bond movies.
And it's not like there isn't a thing Poland could boast about. At a time when the EU is shaking in a debt crisis, Poland is experiencing something like a small economic Renaissance. It's all about new stadiums, new roads and the whole new infrastructure that has experienced a major face-lift for the soccer tournament (21 billion euros being spent for the organization of the event, of which 2/3 for building transportation facilities and just 5% for the sports facilities themselves). That's the visible side of Polish success.
This success becomes particularly visible when compared to the other Eastern European countries. And not just the other co-host Ukraine that's drifting further apart from EU, and knocking at IMF's door for aid, and being boycotted by most European leaders due to accusations of human rights abuses (the strange case of Yulia Tymoshenko). In contrast, Poland is the top kid on the class, including countries like Hungary, the Czech Republic and Slovakia. The former is also among the IMF clients by the way (already having queued twice for loans), while the latter two are seriously affected by the Euro stagnation that's strangling their exports.
The secret Polish recipe that allowed the country to keep floating above water during the severest recession three years ago, is the fact it has remained seemingly unscathed by the Euro drama, and of course the large domestic market of 38 million consumers. That looks like a promising buffer against the storms that rage across the rest of the Old Continent. So Poland looks far more resistant to possible collapses on the international markets, as trade accounts for 40% of its GDP. Which is considerably less than the other open economies in Central and Eastern Europe. Ironically, in this case the more introvert an economy remains, the more immune it is to global turbulence.
Poland is also stable due to its relatively solid banking sector. And because of the smart fiscal policies of a series of governments, regardless of their political stripe. The country was one of the first to include the "debt brake" option in its Constitution. Also the fact that the government has backed up more than 70% of the loan funds that'll be needed for this year - that's important too.
Another key ingredient in the growth cocktail is the relatively stable influx of foreign investment (11.2 billion euros for last year), and the 67 billion euros of structural funds from the EU for the 2007-2013 period (any new member is entitled to such funds). So it turns out Warsaw's task to put its public accounts in order was largely aided by the funding coming from Brussels, and besides it had a disciplining(sic?) effect. Because all new Eastern European recruits have access to the Euro funds, but it was in Poland that the way those were used had the biggest effect. For example, according to calculations by the Ministry of Regional Development, the cohesion funds have contributed to a 5.6% GDP increase for 2011 alone, and for the 2013-2015 period they're expected to create employment worth of 1.2 million new jobs. And for a country the size of Poland, that's really huge.
One more factor matters for Poland's stability, and that's of course the proximity to Germany, the biggest and most vital European economy. The strongest sectors in Polish exports are chemistry, electronics and machine construction - all things that normally form the backbone of the powerful German industry and make Germany the number 2 exporter in the world after China. The strong German export is also expected to keep propping up the Polish industrial export. A bonus stimulus could come from the weaker Złota as well.
All this has helped Poland register a remarkable 4.3% growth for 2011. And the latest EC estimates suggest that it'll be the European champion in economic growth this year again, with 2.7%. It may look modest at first sight, but in the context of an Euro recession and stagnation in almost all other countries in the region, that's something truly exceptional.
But we'd be silly if we're to get too jubilant. Although it's more stable than the rest, still there are signals that Poland is not completely immune to economic contagion coming from the Euro-zone. The crisis there is already starting to affect exports, 2/3 of which goes to countries within the Euro club. And if Greece quits the Euro, the shockwaves will pour into Germany as well, and surely Poland won't remain unscathed.
Meanwhile, unemployment keeps hovering above 13%, and that's starting to affect consumption, while the investment mini boom around this Euro'2012 championship will soon be over. Actually part of the most ambitious intentions were cut in their embryonic stage, for a lack of funding. As early as last year, 50 road projects had to be abandoned, and the plans to build 3000 km of new highways were cut down to 1800 km.
Analysts think the only way the Polish economy could continue shining, is boring reforms and further liberalization. For example the country is number 1 in EU in terms of number of regulated professions - a huge number of 380. And every attempt to open the labor market to competition is met with severe pushback from labor. Donald Tusk's government already went through one serious test that cooled its reformist enthusiasm - the recent rise of the pension age to 67 years for both men and women. It was met with mass protests, burning of MPs' effigies in front of Parliament, and harsh criticism from the opposition that the government was committing a "barbarous act". There was a risk that the bill would be shot down at a popular referendum. But then the cabinet caved in on this issue. And that's just one of the many important issues that need to be dealt with.
The good news is that, at least for now, even without having addressed those, Poland's European title in economic growth still looks undisputed.
(no subject)
Date: 13/6/12 18:03 (UTC)(no subject)
Date: 13/6/12 18:06 (UTC)Oops, Kosovo and Moldova (http://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_growth_rate_(latest_year)#Central_Europe) are doing well too! ;-)
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Date: 13/6/12 18:08 (UTC)(no subject)
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Date: 13/6/12 19:58 (UTC)But yeah, all the Russians in the shop were very agitated with that field goal about 20 mins ago.
(no subject)
Date: 13/6/12 18:21 (UTC)Good post, although anyone saying that Poland is boring or ugly clearly hasn't been there. It's one of the most beautiful countries I've traveled in, good lord, some
places are downright breathtaking, like their ancient forests.
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