Polish economy surfs the tide of crisis

This is an opinion article by an external contributor. The views belong to the writer.
Polish economy surfs the tide of crisis

New Eurostat data for the second quarter of 2020 shows that Poland is among the top three countries in terms of the mildness of the recession. Polish GDP declined by 7.9%; only Lithuania and Finland (where GDP decreased by 3.7% and 5.2% respectively) performed better.

A recession is not good: it means higher unemployment, a decrease in wages, and possible spikes in inequality and even poverty. From this perspective, Poland seems to be in a much better place than all the other bigger countries in the EU.

During the current global economic slowdown, Poland stands out as a “European growth champion”, to use the phrase coined by Marcin Piątkowski from World Bank. With uninterrupted growth, at an average of 4.2% per year between 1992 and 2019, Poland is steadily catching up with Western Europe and has become the seventh-largest economy in the EU.

In 2009, Poland was the only country not to go under. In 2020, it will not repeat the same trick. However, to quote from the movie “Lawrence of Arabia”, perhaps “the trick is not minding that it hurts.” And it is going to hurt a lot less than in other EU countries.

The latest flash estimates of GDP growth in the second quarter by Eurostat show that EU economy contracted by 14.1%. The Eurozone was hit even harder – the size of its economy fell by 15% compared to the same quarter the previous year.

Spain’s fell by 22.1%, the UK’s by 21.7%, France’s by 19% and Italy’s by 17.3%.

Germany, the EU’s largest economy, was hit less hard by the coronavirus than its neighbours, but still saw its GDP fall by 11.7% in the second quarter, after a decline of 2% in the first.

Germany's previous record for a quarterly GDP drop was 4.7% in the first quarter of 2009, after the financial crisis of 2008.

Before the coronavirus pandemic hit the global economy, Poland was among the fastest-growing economies in the EU. Household consumption, fueled by increases in budgetary spending, a tight labour market with an influx of migrants and rising wages, continued to grow.

Together with low interest rates and investments linked to EU funds, this boosted Poland’s economic growth prospects and made it one of the most interesting places in Europe for FDI.

According to the European Commission’s summer forecasts, the drop in GDP in Poland caused by the pandemic will be the lowest in the EU – just 4.6%. In the Eurozone, it will be 8.7% and, in the EU as a whole, 8.3%.

In 2021, Poland will return on the path of growth. Its GDP is forecast to grow by 4.3%. This projection was made before European leaders decided on a budget of 1.8 trillion euro for recovery and development over the next seven years. Poland will be the third-largest recipient of money, after Italy and Spain, which prompted many economists to revise their growth forecasts for the country.

After the outbreak of COVID-19 in Poland we saw all businesses adapt to the new reality. Many businesses went through crash-courses in digitisation. The biggest restaurant festival in Poland transformed into Delivery Week — the first take-away food festival in Poland. It took them just one week to adapt their online booking platform to home deliveries. This is what many businesses did creating their own platforms or just being online for the first time.

Despite the huge dip in the second quarter, there are reasons to be optimistic. There are signs of the start of a turnaround in the third quarter, including increases in consumer spending.

This view is shared by German newspapers, with Die Welt  writing: “Poland can prove once again how crisis-proof it is. Since joining the EU in 2004, the country has managed to avoid all major European crises: the euro-crisis in 2009, the refugee-crisis in 2015 and now the coronavirus-crisis. Poland holds up when others stumble.”

In an article in German Focus entitled “Poland is the European master of dealing with crisis”, the author states: “The first data suggest that Poland may come out unscathed from the crisis caused by the coronavirus. The country senses an opportunity to be promoted to the premier league of European economies. "

Some areas, including export and corporate investment, are likely to take longer to recover from the coronavirus crisis. Still, the data paints an optimistic picture compared to the morbid scenarios faced by certain other economies. Poland might not emerge as well as in 2009, but it will probably be much less hit by the economic crisis than the rest of Europe. Yet another time it proves to be a surfer of great crisis tides.

Piotr Arak

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