Background information

Poland, with its population of over 38 million inhabitants, is the largest member of the European Union among all the countries of Central and Eastern Europe. In terms of GDP, Poland is the 8th biggest economy in the EU and the 22nd biggest economy in the world (GDP in current prices).^1.)

Poland’s accession to the European Union in 2004 was an important milestone in the dynamic development of the country. Adaptation of Polish legislation and administration to the EU standards as well as an influx of structural funds from the Community (nearly 67 billion euro by 2013)^2.)  has provided a major stimulus for economic growth. Poland has been taking full advantage of its opportunity, preparing for challenges of the common European market.

Population (m) 2010 (Source: Eurostat)

Stable demographic situation and increase in society’s wealth

In terms of the number of inhabitants, Poland is the 34^th largest country in the world and the 6th largest country in the European Union.^3.)  In 2010, Poland recorded a positive birth rate, its population increased by more than 36 thousand as compared to 2009.^4.)

Poland is viewed by the United Nations as a highly developed country due to Poland’s Human Development Index (HDI), which takes into account factors such as life expectancy, mean years of schooling of 25 year olds and expected years of schooling of children in school age, as well as GNI per capita adjusted for purchasing-power parity.^5.)

Gross National Income

In recent years Poland became a regional growth leader increasing its GDP by 5.1% in 2008, 1.6% in 2009 and 3.9 in 2010.^6.) Due to the stable foundations of the Polish economy, consistent fiscal and monetary policy, no direct involvement in risky sub-prime loans, and low – as compared to the EU average level – percentage of mortgages taken out by Polish consumers (18.2% of GDP^7.)), Poland proved less susceptible to the economic turmoil than other EU countries. Owing to this Poland recorded positive economic growth (3.9%) in 2010.

GDP growth in selected countries in % (Source: Eurostat)

In the 2nd quarter of 2011, Poland’s economy maintained its high level of GDP rise (4.3%) and remained one of the fastest growing economies in the European Union. Poland is therefore efficiently and quickly catching up, in terms of economic status, with the other EU countries.^8.) Poland’s GDP per capita in 1995 was 43% of the average of EU countries, it was 48% in 2000, and 62% in 2010.^9.)

GDP forecasts for 2011 are equally promising for Poland. According to key European financial institutions, Poland is expected to reach an economic growth ranging from 4% (forecast by the analysts of OECD) to 4.2% (forecast by the World Bank). Their common opinion confirms Poland’s good condition and prospects for further economic development.

Foreign Direct Investment

Compared to other CEE countries, Poland is doing very well in terms of Foreign Direct Investment. Between 2004 and 2009, direct investment in Poland totalled USD 94 bn (compared to Lithuania’s USD 8 bn, Slovakia’s ca. USD 18 bn, Czech Republic’s USD 42 bn, Romania’s USD 53 bn, and Hungary’s USD 32 bn in the same period).^10.) In 2010 the inflow of foreign direct investment was USD 9.7 bn, which ranked Poland first in the region.^11.)  The significant level of foreign direct investment confirms the investors’ trust and the fact that they see Poland as a safe place for doing business. This is due to Poland’s good geographic location, internal social and economic stability, and membership in the European Union.

The economic slowdown has reinforced the tendency of global corporations to cut their operational costs. In particular, companies from the business outsourcing sector (BOS) see Poland as a place especially suitable for doing business. According to the Polish Information and Foreign Investment Agency (PAIiIZ), the decisive factor why the BOS companies choose Poland as the place for investments is the availability of highly educated and relatively inexpensive professionals with good knowledge of foreign languages.
 

Foreign Direct Investment 2004-2009 in USD bln (Source: UNCTAD)

Strong internal market and stable international trade

Poland is the biggest market in Central and Eastern Europe. As compared to other countries in the region the Polish market is much bigger (38 million potential customers), far more absorbent and diverse.

The constantly growing internal demand has been stimulated by young high-earning people entering the market. People born during the baby boom of the early 1980s are now 25-30 years old and create demand for, among other, housing and household goods and services, i.e. construction, renovation and decoration services, household appliances, etc.

Another positive phenomenon is the long-term trend in increasing wealth in the society, resulting in improvement of household conditions.

Over the six years following Poland’s accession to the European Union, Poland has consolidated its position on the European market and reinforced trade relations with its EU partners. In 2010, 78.8% of the Polish exports each year went to the EU market, whereas import from EU was 59.1%.^12.) The exports to the EU countries combined with a strong internal market gives a true picture of the Polish economy, which is more resilient to global economic turmoil than the economies of most European countries.

Exports and Imports, FOB in EUR m (Source: PAIiIZ, data after three quarters)

Polish labour market

Upward trends in the economy brought gradual improvement on the labour market. A great advantage of the Polish labour market is the large number of young, well-educated and experienced workforce. According to the Eurostat, the official unemployment rate in Poland in January 2005 was 18%, and it dropped to 9.6 % in 2010.^13.)

Unemployment rate in % (Source: Eurostat)

Polish economy growth stimuli in the coming years

Over the next few years, the Polish economy will be influenced primarily by the economic situation in Europe and worldwide. However, there are a number of factors which place Poland in a more favourable light not only among the countries of the region, but also in Europe as a whole.

One of these factors is the inflow of EU funds. By 2013, the total amount of EU funding in Poland may reach EUR 67 bn. These funds are to be used on improving infrastructure, education, etc. The organisation of the EURO 2012 football championships to be held in Poland and Ukraine is another big stimulus for the country’s economy. This major international event means not only the inflow of cash from fans which will be visiting Polish hotels, restaurants, tourist attractions, etc. This also means accelerating the work on transport infrastructure.

Polish capital market. Warsaw as the regional financial centre in Central and Eastern Europe

Today, the Polish capital market is the most dynamically developing market in Central and Eastern Europe. Each year the capitalisation of the Warsaw Stock Exchange increases. According to the World Federation of Stock Exchanges, WSE capitalization amounted to USD194 bn at the end of September.^14.)

Polish capital market stands out in terms of the number of stock flotations. In QIII WSE was a regional leader. January-September 2011 there were 61 IPOs on the WSE (main and alternative market). In terms of the IPO value, WSE took seventh place in QIII 2011. The total value of offers amounted to EUR 1,464 m. In the same period in 2010 the total IPO value amounted to Eur 600 m, which means 2.5-fold increase year to year.^15.)

In the “The Global Financial Centres Index 9” ranking by Quatar Financial Centre (March 2011), in the regional financial centre category Warsaw ranked higher than cities such as Moscow, Budapest and Athens.

Key global financial institutions already know that the Polish market is too important to be disregarded. Therefore large investment banks, such as JP Morgan, HSBC, BNP Paribas, Credit Suisse, UBS, Deutsche Bank, Royal Bank of Scotland, or Goldman Sachs, already have their local branches located in Warsaw.
 

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^1.)  International Monetary Fund,
^2.)  Ministry of Regional Development, Polska. Narodowe Strategiczne ramy odniesienia 2007-2013 wspierające wzrost gospodarczy i zatrudnienie. Narodowa Strategia Spójności, p. 116, Warsaw, May 2007 (Document available in Polish version only)
^3.)  Central Statistical Office, Informacja o sytuacji społeczno-gospodarczej kraju. Rok 2010, p. 9 (Document available in Polish version only)

^4.)  Ibidem.
^5.)  The Human Development Index,

^6.)  Eurostat, Real GDP growth rate – volume,

^7.)  EMF, Residential debt to GDP ratio,

^8.)  Central Statistical Office, Wybrane kwartalne wskaźniki makroekonomiczne,(Polish data),
^9.)  Eurostat, GDP per capita in Purchasing Power Standards
^10.)  UNCTAD, Inward and outward foreign investment flows,
^11.)  Ibidem.
^12.)  Główny Urząd Statystyczny, Informacja o sytuacji społeczno-gospodarczej kraju. Rok 2010, str. 69

^13.)  Eurostat, Unemployment rate,
^14.)  World Federation of Stock Exchanges, Domestic market capitalization, September 2011
^15.)  PricewaterhouseCoopers, Ankieta IPO Watch Europe, III kwartał 2011 r.