Macroeconomy of Poland - Research Paper Example

Poland macro economy The economy of Poland is the six largest in the European Union, with a high growth rate of 3.0% (Krugman, 22). The economy of this country is based on the liberalization policies, where the government engaged in privatizing small and medium enterprises in the 1990s, an aspect that has greatly contributed to economic growth and stability. The annual GDP for this country by 2007 was $622.0 billion, where this rate has been constantly growing, with the average quarterly GDP growth rate for this country being at 4.25 %, as of year 2011. The industrial base of this country is centralized around petrochemicals, machinery, fertilizers, electronics, car manufacture, and shipbuilding (Batara, 12). However, the industrial base of this country was highly affected during the World War II, thus most of the resources has been used to reconstruct this. Until the 1990s, the economy of this country was centralized. However, from then on, the government has been trying to decentralize this and adopt a free market system of economy, which has served to steer the economic growth of this country to the present state. This notwithstanding, there are many other sectors of the economy which have remained resistant to change, which is highly desirable for a free market economy (Krugman, 26). The banking, the pharmaceutical, and the agricultural industries are the main sectors of the country’s economy. The living standards of the people in Poland is lower, compared to the rest of the countries in Western Europe, with the purchasing power parity, an index that compares the prices and the living standards of countries being $16,300 (Schwab, 57). Though by 2003, 17% of Poland’s population was observed to be living below the poverty line, it is estimated that the country will have attained the living standards for developed countries by year 2025 (Krugman, 24). Employment in Poland is mostly sector based, where the services sector has employed the highest, at 55% of the Poland’s labor force, while the Agricultural sector has accounted for 26% of employments. However, the unemployment rate in this country still ranks high, with 11.4$ of the total population of this country rated as unemployed by the year 2007(Batara, 17). This country has established stable trade relations with the rest of the world, where it cooperates with other countries such as China, Japan, and Canada who are its major trade partners. This country provides Canada with the second largest market in central and eastern Europe, where in 2005, Canada exported a total of $266.7 million worth of goods to Poland and in turn imported goods worth 532.6 million (Krugman, 34). These countries and other European countries have established many investments in Poland, in the sectors of transportation, technology, and security. However, there are various challenges that face this country, regarding its economy. Among those challenges is the aligning of the countries fiscal and monetary policies, towards adopting the euro. Another challenge facing the country is its labor force, where the country has a high rate of unemployment and low labor participation in the economic growth (Batara, 25). The country also suffers from a poor business environment, where the economy is dominated by major public sector investments, whose failure to privatize has hindered the favorable local and foreign investments into the country. Paramount of these challenges is the poor infrastructure for the agricultural sector, which this country possesses. The sector lacks ample investment, has surplus of labor and has a shortage of small firm’s investment (Schwab, 60). The banking system in Poland is large, ranked as the biggest in east and central Europe (Batara, 28). The sector is highly developed, an aspect that has been contributed by the privatization of some banks by the government in the period 1992-1997. During this period, the government also restructured other banks and added more capital and infrastructure to them while at the same time putting in place policy reforms that greatly supported this sector (Krugman, 38). Thus, the banking sector in this country is one of the most competitive, where there are many cooperative, domestic, and foreign investment banks operating in this country. Foreign investment in these banks is huge, accounting for over 50% of the total capital held by the banks. The banks played a greater role in fighting off the financial crisis in 2009, through the application of suitable policies such as reducing the lending, while raising the interest rates. This went a long way in helping the country overcome the financial crisis, ensuring that it was not badly hit, as happened to other countries in the world (Schwab, 75). The future of the economy of Poland is promising. This is because, the county is constantly establishing vital political and economic relations with other countries to enhance its trade and investments, serving to spur the c economic growth even further. The country is strengthening its bilateral trade relations with its major trade partners such as Japan, where the two countries are collaborating towards enhancing the peaceful use of nuclear energy (Batara, 30). The economy of this country is promising, based on its good performance in the recent years, notably 2009 and 2010, where the country emerged as one the fewer countries, which were not affected by the global financial crisis. Additionally, the country is working towards incorporating its workforce more into economic contribution, while constantly improving the standards of living of its citizens, where it is predicted that by the 2025, the country will have achieved the developed countries standards of living for all its citizens (Krugman, 41). Cultural solidarity is yet another aspect that makes the future of the Poland economy promising, in that the country greatly prides its culture of dressing, art, literature, and cuisine, which have become an attraction to the rest of Europe. The country is achieving urbanization at a fast rate, with 60% of the country’s population living in cities currently (Schwab, 91). The economic reforms that the government is introducing, more so based on privatization of the major sectors of the economy is another aspect that will see the economy of this country flourish in the future. The country has an advantage of being Europe’s largest democracy. This way, its current transitions to a market economy will highly attract more investment from other countries, thus steer its economic growth even further (Batara, 32). Works cited Batara, Simatupang. The Polish Economic Crisis: Background, Causes, and Aftermath. Contributors. Routledge, 1994. 11-33. Print. Krugman, Obstfeld. International Economics, Theory, and Policy, 5th edition. Massachusetts, 2000. 22-47. Print. Schwab, Klaus. The Global Competitiveness Report 2010-2011. World Economic Forum, 2011. 56-106. Print. Read More