Economic Growth in Poland - Coursework Example

The economic growth in Poland Name Professor Institution Course Date Introduction Poland has had one of the best performing economies in Europe in the past decade. Poland’s economy has been so stable that among all European countries, the county was the only one unaffected by the recession of 2008. Since 2000, the country has been among the best economic performers, emerging 6th in Europe and 21st globally as per 2012 (Bielicki, 2005). While the country fails to compete among the very top global economies, it continues to post positive economic trends on an annual basis. This rate of growth and stability in economy has been contributed by a variety of factors among them; economic liberalization, low debt levels, robust domestic demand, and a flexible currency. This paper will provide an in-depth discussion of the factors that have made Poland among the best and fastest growing economies in the EU since 2000. The issues that have limited the country’s maximal economic growth will also be identified. The trends in Poland’s economic growth since 2000 have been generally favorable. However, this rate has not been consistent and there have been appropriate adjustments made by government to maintain a favorable trend. For instance, the economy which had been heavily reliant on industry and manufacturing has recently been relying on the service sector (Bradley, 2008). Such adjustments help in maintaining an upward trend in economic growth amid changing global economic trends. Since 2000, the country has also joined the EU, a factor that has further boosted financial stability due to the EU funding, which it has been receiving since 2004 (Bradley, 2008). Poland is therefore at a favorable position to adjust to changes that affect the global economic climate, therefore remaining at a favorable position economically compared to a majority of the other EU members. Robust domestic demand has been one of the factors that have favored the Poland’s economy since 2000. Favorable consumption by the Polish government, the private sector, and the citizens has been on the rise, positively impacting on the country’s economic situation year on. Bradley (2008) stipulates that this has been the largest contributing factor to the country’s economic growth especially since 2002. Thanks to the high domestic demand, business conductance in the country has been among the best in the region. This has had a direct positive impact on the country’s economy, only being limited by a challenged transport system which would ensure flawless performance of businesses operating within the country (Bradley, 2008). Economic liberalization is the other factor that has acted to benefit Poland’s economy over the past decade. Liberalization was done to reduce involvement of government in the affairs of foreign investors. Powerful foreign investors have therefore been able to conduct business within the country freely and have been efficient in improving the economic situation. Further, the government offers investors state aid in the form of a considerable CIT tax (Kutan, 2005). The Polish government also offers foreign investors such incentives as competitive land prices and real estate tax exemption (Kutan, 2005). Investors are therefore quick to consider Poland as a top destination for conducting business whenever they venture in Europe. International business has really benefited from economic liberalization in the country. This translates to positive results on the country’s economy. The culture of liberalization was adopted in the 1990s, but its impact on the economy was not felt until the 2000s (Darvas, 2008). During the same time that the government adopted a liberalized economic system, it also transformed the banking sector to favor competition. This entailed privatizing some banks, recapitalizing the remaining banks, and introducing a variety of legal reforms (Seleny, 2013). This favored foreign banks that heavily invested in the country’s banking sector, reaching a banking capital of nearly 70% in a period of 10 years (Seleny, 2013). In a bid to protect the country’s economy during the recent financial crisis, the government regulated lending and increased interest rates (Seleny, 2013). This strategy was partly responsible for the situation whereby the country’s economic situation remained unchanged by the crisis that affected all nations in the euro zone. It is thus apparent that government’s minimal involvement in foreign business within the country, while making important policy changes during crisis has favored the country’s economic growth. Maintaining low debt levels has significantly favored Poland’s economy, especially in times of crisis. Minimal reliance on other nations by the government ensures that emphasis is placed upon the returns from trade as well as an efficient taxing system. Kutan reports that private debt has as well been managed effectively within the country (Kutan, 2005). This implies that citizens are encouraged to pool revenue from entrepreneurial projects with minimal reliance on banks so as to keep private debts low (Orlowski, 2005). Low debt levels, coupled by high revenue from exports accelerate growth in economy. This has been the case in Poland over the last decade. As Szapáry (2008) reports, Poland is the only country, alongside Czech Republic that has managed to maintain low debt levels in the Europe. The country promises to maintain this trend in the next years, even as the EU banking sector struggles in an unprecedented financial crisis (Orlowski, 2005). Another reason behind a favorable economic growth for the country in the past decade is a strong currency. The Polish zloty has been trading in a fairly competitive manner over the past decade, to the benefit of the economy (Seleny, 2013). While the value currency has shown slow growth since the recession, it has still stiffened against most world currencies. Financial analysts report that the country’s reluctance to adopt the Euro has acted to the benefit of the country’s benefit (Seleny, 2013). Polish leaders have recently been quoted suggesting that due to the European debt crisis, it would be best for the country to keep using the zloty until the economy and labor markets are flexible enough (Seleny, 2013). This is an indication that the country could strategize on further strengthening its currency before subsequently adopting the euro. This would favor the country’s economy further, at a time when the euro zone crisis remains unresolved. Appropriate governance has also had its role to play in favoring the rate at which economic growth has been felt. The Polish government has been known to institute and implement policies to the benefit of the citizens (Savva, 2010). It is this approach that facilitated liberalization of the country’s economy in the 90s, thus facilitating economic growth in the 2000s. Recently, PM Donald Tusk’s government was effective in managing public finances, protecting the country during the recession (Seleny, 2013). It is up to the citizens to vote in good leadership in future in order to protect the future of the country’s economy. With Poland’s economic growth showing such an impressive trend since 2000, it would be important to determine why the country fails to compete among the top tier developed nations like the US. Savva (2010) notes that unemployment has been a major issue for the country and that it has in a way limited the country’s economic capacity. GDP per capita has also been quite low throughout the 13 year period. Statistically, unemployment rate is generally above the EU average while GDP per capita is below the EU average. Infrastructure has also been an issue in the country. The rail and road infrastructure is not sufficiently developed to enhance the movement of goods for trade that the already able economy favors (Weresa, 2008). Underdevelopment in the agricultural sector has also had its impacts on economic growth. The country fails to exceed expectations in agricultural output, considering its strategic location and as a hub of trade in Europe. Other issues include a burdensome taxation system, a rigid labor code, and corruption. With these issues being addressed, the country could emerge as the best performing economies, not only within the EU, but also globally. Conclusion Since 2000, Poland has slowly emerged as one of the best economies in Europe. Robust domestic demand is seen as the largest contributing factor to economic growth since 2002. Other factors, including economic liberalization, maintenance of low debt levels, a strong currency, and good governance have also played a significant role in improving the country’s economy. However, such challenges as unemployment, poor infrastructure, a low GDP per capita, underdevelopment in agriculture, and corruption have hindered the country’s progress. Considering that the strengths outdo the minor weaknesses, it is evident that the country’s economy could only get better. It is upon the citizens to vote in good leaders in future, so as to protect the country’s economy. References Bielicki, T., Szklarska, A., Kozieł, S., & Ulijaszek, S. J. (2005). Changing patterns of social variation in stature in Poland: effects of transition from a command economy to the free-market system. J. biosoc. Sci, 37, 427-434. Bradley, J. (2008). National and Regional Development Policy: Comparing Ireland and Poland. Gospodarka Narodowa, (1-2), 1-15. Darvas, Z., & Szapáry, G. (2008). Business cycle synchronization in the enlarged EU. Open Economies Review, 19(1), 1-19. Kutan, A. M., & Yigit, T. M. (2005). Real and nominal stochastic convergence: Are the new EU members ready to join the Euro zone?. Journal of Comparative Economics, 33(2), 387-400. Orlowski, L. T. (2005). Monetary convergence of the EU accession countries to the eurozone: A theoretical framework and policy implications. Journal of Banking & Finance, 29(1), 203-225. Savva, C. S., & Aslanidis, N. (2010). Stock market integration between new EU member states and the Euro-zone. Empirical Economics, 39(2), 337-351. Seleny, A. (2013). The political economy of state-society relations in Hungary and Poland: from communism to the European Union. Cambridge University Press. Weresa, M. (2008). Poland Competitiveness Report. World Economy Research Institute, Warsaw School of Economics. Read More