Poland: 3 factors make the country the crisis master of Europe in the pandemic

Robust economy: First financial crisis, now pandemic: 3 factors make Poland the crisis master of Europe

Wednesday, June 3rd, 2020, 6:37 pm

The first figures suggest that Poland’s economy could come through the corona crisis lightly. The economy already proved to be robust in the 2008 financial crisis. Now the country senses its chance to rise to the top league of European economies.

This moment already existed when European economists looked to Warsaw with great astonishment. That was in 2009, when the consequences of the financial crisis caused the continent’s economies to slide into recession in rows. Poland was spared. Much more: in the year one after the bank collapse, the economy grew by 1.3 percent, and in the following year even by 3.6 percent. The continuation of a never-ending boom that has catapulted the country from Europe’s poorhouse into the middle class over the past two decades.

Since 2009, the country between the Oder and the Vistula has also been a crisis expert. In fact, it appears that Poland can do the same in the current pandemic downturn; at least there is first evidence of this.

At the beginning of May, the EU Commission published a forecast of the economic impact of the corona pandemic, in which it anticipates a pan-European decline in economic output of 7.5 percent, but only shows a slump of 4 percent for Poland. The Polish economy is expected to have fully recovered from the shock in 2021, the forecast says.

Figures that also give Jadwiga Emilewicz, Poland’s Minister for Economic Development from the coalition party “Understanding”, cautiously optimistic about the future. Unemployment has not increased as dramatically as feared (currently 5.8 percent), production and trade are getting off to a good start with the corona easing, she said in an interview with the “ARD”.

Several factors make Poland’s economy resistant to crises

But what makes Poland’s economy so robust, so crisis-resistant? In an interview with FOCUS Online, Ernst Hillebrand, head of the Friedrich-Ebert-Stiftung (FES) in Warsaw, explains that three, in particular, three factors are responsible for the relatively positive outlook in the crisis: a mixture of political measures and historically evolved structures.

The country’s economy is broadly based. “No sector accounts for more than 15 percent of the share in foreign trade,” says Hillebrand. In addition, the corona-stricken tourism industry is of little importance to the economy. Sectors such as the Polish chemical and IT industries in turn benefited from the pandemic. The different pillars help against the one-sided export dependency.

In addition, Poland’s nationally conservative PIS government generously nurtured its own economy with government aid at an early stage. If one includes credit guarantees, the stimulus measures amount to 13 percent of GDP – in other words, around 70 billion euros. “This prevented bankruptcies and a major loss of jobs – similar to what has been the case in Germany up to now,” says Hillebrand.

In addition to the low public debt, which is below 50 percent in Poland, the EU also contributes to the solid economic situation. In the past EU budget period alone, Poland received around 80 billion euros in subsidies, and a further 37.7 billion euros from the recently approved 750 billion corona relief package migrate from Brussels to Warsaw. Hillebrand describes the EU’s structural aid as “pain-free investment”, which in Poland has been put into infrastructure projects in recent years and does not represent a burden on the state treasury.

Social policy boosts the domestic economy

At the same time, the Polish government has ensured that the domestic economy is not too dependent on the drip of exports. An active social policy was mostly used as a means, in the context of which, for example, child benefit and pension benefits were expanded.

Measures that particularly boost the domestic market and are also reflected in the high private consumption share of the gross domestic product of 58 percent. In Germany the share is “only” 52 percent. In this context, the strong export orientation and the high current account surplus are always the subject of criticism. Things are different in Poland: “The fact that the government has been taking domestic demand seriously for a long time now makes the Polish economy less vulnerable and more robust in this global crisis,” says FES employee Hilebrand

Poland: The opportunity in the corona crisis

For the country in the heart of Europe, however, the turbulence of the global economy not only offers the opportunity to profile itself again as a skilled crisis manager, but also in the end may even actually be a winner. It is no different to understand when Minsterin Emilewicz speaks of “real deglobalization processes” in the wake of the crisis and the “reorganization of local value chains”.

What she is concerned with is clear: a lower wage level than in Western Europe, highly qualified specialists and the geographical location have always made Poland attractive for foreign investments. Latest example: Microsoft. The software giant invested a billion dollars in a large “cloud” data center in the middle of the pandemic.

The number of investments from abroad is unlikely to decrease in the coming years, says Adrian Stadnicki from the Eastern Europe Association of German Business. “The headquarters of European companies are currently discussing how and whether to adjust the supply chains. The main issue is to diversify them in order to be more broadly positioned in the event of a renewed global crisis. We therefore believe that there will be increased investments in the region in the future. ”

This could be another important step for Poland on the way to Europe’s top economies. “The country and the economy are hungry,” says Stadnicki.

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