World Clock

Saturday, 26 February 2011

The Remarkable Rise of Poland - An EU Success Story

Although most of the media attention during the last two years has focused on the peripheral nations of the EU such as Portugal, Ireland & Greece an economic powerhouse is gradually emerging out of the financial crisis. The country I am referring to is Poland.

While the rest of the EU was going through a severe economic recession, Poland's economy grew at an impressive rate of 1.7%. Even though the recession in the EU is all but over, Poland continues to outpace its neighbours, growing at an annual rate of 3.9% according to the latest GDP figures, the EU average is a meagre 1.5%.

The reason for Poland economic success in the last few years is due in part to a rising consumption rate (presently 3X the EU average), a remarkable demographic profile, with a population that has a 'can-do' attitude to life.

Although Poland has been a stand-out story, it has not managed to achieve this on it own, since its accession to the EU the unemployment rate has plummeted 20%, with the current rate standing at around 8%. This is compared to 9% in the US and an EU average of 10%.

Perhaps the single most significant financial policy from Poland's perspective was the bold step of devaluing its currency the Zloty. Alongside this decision Poland also took a stand not to adopt the Euro until 2015, which in the light of hindsight proved to be a excellent decision given the Eurozone's current economic woes at present.

Poland managed to survive the global economic downturn largely unscathed. This was in part because their economy is domestically driven, similar to that of India. Thus Poland relies less on exports in order to drive its economic growth. Due to Poland's above average consumption rate coupled with the fact that the the economy is 60% driven by domestic activity, prevented the economy from been plunged into recession.

Also migration as result of its entry into the EU has played a major role in driving economic growth. Statistics show that flights into its main airport at Warsaw bare this out. Around a decade ago, 200,000 passengers per year were travelling in and out of the cities airport, today figures are closer to 2m. Wages, alongside the living standards of the majority of the population have also risen.

During the course of past 20 years ties with its dominant European neighbour Germany have also strengthened, this has been especially true in the last 2 years. This has become even more apparent as Germany and Poland have both subscribed to and committed to economic austerity as a consequence of the financial crisis.

Finally, the strength of the Polish constitution should also be taken into account, as it includes debt limits and a banking sector is subject to strict controls, which have prevented Polish citizens from borrowing money in foreign currency. A situation that has nearly crippled country such Hungary.

For the opinion of Polands' former Prime Minister Jan Bielecki & why Poland navigated way around the recession please view the video link below.

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