Poland: Eastern Europe's Economic Miracle

OPENING CASE govenment debt, andprecipitating a full-blown economic

Crisis hal required the IME and EU to step in with financial
As the great financial crisis of 2008 and 2009unfolded, assistance.
cOuntries across Europe were hit hard. A notable excep A tight monetary squeeze in the early 2000s, which
tion was Poland,whose economy grew by 1.5 percent dur was designed to curb inflation and case Poland's entry
ing 2009, while every other economy in the European into the European Union, headed off the asset price bub
Union contracted, as did the United States. Poland's im
ble, particularly surging home prices that hurt so many
pressive economic performance continued after the crisis.
other economies around the world. Ironically, the Polish
Between 2010 and 201S, Poland's growth rate averaged government had been criticized for its tight monetary po
3.5 percent per annum, the best in Europe. This cOuntry of icy earlier in the decade, but in 2008 and 2009 it served
38 million now has the largest economy among the post the country well. Post 2009, the Government has contin
Communist states of Eastern Europe. How did Poland ued to adhere to a fairly conservative management of
the
achieve this? economy. In 2018, the Government deficit as a percentage
In 1989. Poland elected its first democratic government percent Euro
of GDP was 1.6 percent, safely below the 3
The Goy eurozone. As
after more than four decades of Communist rule. pean Union regquirement for members of the
inflation is low
ernment moved quickly to shift the economy away from of 2018, economic growth remains
strong,
operating rate of 3.7 per
the centrally planned Soviet model it had been at under 2 percent, and the unemployment
market-based eco cent is the lowest since 1989.
under since 1945. Poland embraced
state. Look
nomic policies and quickly implemented them through a None of this is tosay that Poland is amodel
economic
"shock therapy' program. The country
opened its markets ing forward, the country faces several significant
investment, privatized aging. Poland faces a
to international trade and foreign challenges. First, the work force is
Poland to con
many state-owned businesses,
and made it much easier shortage of labor in the coming years. For
immigration.
for entrepreneurs to start their
Own businesses. In 2004, tinue to expand economically, it needs more
the county.
Union giving it easy ac Despite some anti-immigration sentiment in
the country joined the European substantialy more
markets of Western Europe. AI the Polish government has been issuing
cess to the large consumer majority of whom have
an export powerhouse. work permits to immigrants, the
this heiped transform Poland into Government recently
percent of GDP, compared to come from the kraine. Second, the
ExportsS now account for 54 exacerbates the labor
account
comparison, exports lowered the retirement age (which
34 percent in 2004. By way of payments, moves
United Kingdom, and just shortage) and raised social security
for 30 percent of GDP in the which could create fiscal problems
down the road. Third
States. Poland's exports include
12 percent in the United equipment, intermedlate despite substantial privatization after
1990, Poland still has
machinery and transportation several major state-OWned enter
hardwood products, food, amixed economy with
manufactured goods, furniture, the
the two largest banks,
aconsequence of these changes, prises.The government controls
and casual clothing. As groups, as well as impor
Poland recorded the highest
sus blggest insurer, and twodefense
between 1989 and 2018 measured by petrochemical companies. Politi
region. Living standards, tant energy, mining, and
groth in the interference mean that these
tained
purchasing power parity
increased calconstraints and ongoing
GDP pcr capita at managedas they might
neighboring Czech enterprises are not always as well
cormprcd to 1.7 tinesin the of whether further
privatization
2./ tirne5, be and begs the question
Republic. conserva 0s warranted.
also been fiscally
Poland's government has allowing it to ex Anti-migration Govenment s
debt in check, not Sources: Danlel Tilles, "Poland's Notes
tive, keeping public cOuntries did. Blogest Waves of Immigration,"
Overseelng one of Eope's
recession a5 many other Rostowski, "The Secret of Polad's
pand during the Conse romPoland, October 3, 2018; J. I, 2010, p. 15: "Not Likethe
inyestor confidence in the country. Success," The Wull StreetJounal,
February
This led to funds durlng the Economist, April 25, 2009,p. 55; "Ahead of Elections,
there was no large outflow of stark con
NelghboIS," The
Handouts," The Economist, Febru
quently, turmoil. This starnds in Poland's Ruling Parly Offers Huge with Unprece
2008-2009 economic
ary 28, 2019; "Poland's
State Owned Giants Cope
stales, where inves November 29, 2018; World Bank,
happenedin the Baltic dented Turnover," The Economist, Accessed March 22, 2019.
trast to what during 2008
money out of those economies of World Development
Indicators Online,
tors pulled Currencies down, raising the cost
their
and 2009, driving 63