Warsaw Enterprise Institute challenges Prime Minister Morawiecki: If we are to pass the level of the European average during the coming decade, Poland will have to be much faster in catching up with the most developed European countries.
According to the newest independent report of Warsaw Enterprise Institute (WEI), Poland slows down in its pursuit after the most developed countries. “The Opening Balance of 2018” shows that the gap between the wealthiest European society and Poland still decreases. The rate of this decrease is much slower than in the previous years, however. In the best period, between 2010 and 2015, the distance to Germany diminished by 6.8%, currently we are facing a drop of this dynamics to 2.1%.
For the past three years, WEI has prepared special index called “The Opening Balance”. Its aim is to measure the difference in wealth between rich West European countries and Poland, in the most objective way possible. This-year data have provoked the authors to address Prime Minister Morawiecki and to ask him to ameliorate the current indexes and decrease the prosperity gap faster.
Three fundamental measures of challenges for Poland have been established. The first one is the rate of catching up with the most developed European countries. The second – the probability of crisis deriving from uncontrolled sovereign debt. The last indicator measures the attractiveness of Poland as a resident country by examining Poles’ will of emigration.
Polish GDP per capita compared to German GDP per capita after considering the purchasing power
Sum of the public and private debt in relation to GDP
Number of people temporarily living abroad
Challenge: To overhaul Germany
Measured by Polish GDP per capita compared to German GDP per capita after considering the purchasing power
2016: 59 % (+2.1%)
Challenge: Risk of crisis of insolvency
Measured by the sum of the public and private debt in relation to GDP
2016: 232% (+3 ppts)
Challenge: Quality of life in Poland
Measured by the number of people temporarily living abroad
2016: 2,515,000 (-118,000)
The pursuit after better-developed economies is on, and even though Poland has improved a lot in this regard, others also develop very fast. In the previous year, the dynamics of growth of GDP in Poland was impressive. Nevertheless, the rest of the world, especially the leading countries and our biggest economic partners, mostly Germany, have also moved forward. Poland benefits from the economic upturn. Yet still, when we move forward, the more-developed countries do the same and they enlarge their power. In 1980 Polish GDP per capita after considering the purchasing power parity (PPP) amounted to 42% of the GDP per capita in Germany, then in 1991 it dropped to 28%. Last year, the index reached 59%. No matter how the differences in GDP are expressed: in USD or per capita considering PPP, the trend stays the same. At the beginning of the 90’s, the pursuit after Germany got tougher and is still on. However, after entering the EU it isn’t as intense as before.
To enhance the pace of our catching up with Germany, Poland needs stable pace of growth of investments to a double-digit level. To achieve this, we need: stabilisation of law, simplification of regulations, lowering the costs of running business activity, higher labour activation (especially of women and people in the close-to-retirement age), promoting investment aiming at development and new technologies, stronger cooperation of science and industry.
Despite the quite good shape of our economy and positive evaluations of foreign institutions and rating agencies, the problem of national debt cannot be disregarded by any means. Debt of the government institutions and local authorities, which is the main measure of indebtedness considered by i.a. the European Union, reached 1,016 billion zloty at the end of June 2017, and 1,010.9 billion zloty at the end of the third quarter of 2017. The amount of the debt dropped in relation to the second quarter of 2017 by 0.5% but it is still very high (it was 1,006.3 billion zloty at the end of 2016). We have to bear in mind that a considerable part of our debt is located outside of Poland. It may be especially sensitive in case of any disturbance in the domestic market, as well as in the developed Western markets. Obviously, many countries which are wealthier than Poland have their public debt higher than ours. In the investors’ perspective though, taking the size of their economies into account, their stability and high level of diversification makes them more credible then us. For instance, interest rates on their treasury bonds are lower. Moreover, in the conditions of changing policies of central banks, emerging tensions of various kinds and aversions towards risk, costs of servicing our debt, which is often incurred in foreign institutions, may rise.
Polish households have low level of long-term savings, which results in limited possibility of obtaining capital by companies. It is necessary to augment those savings by developing pension programs (Capital Programs of Employees); and also by consistent educational projects aiming at gradual shift in the structure of households savings – from traditional bank deposits to more active forms of saving money.
Another measure – quality of life in Poland is based on data concerning migration of Poles (immigration minus emigration). A belief that the sum of individual decisions about leaving or returning to the country is a kind of summarise of the opinions of Polish about the relative attractiveness of Poland is a fundament of this measure. According to the national census from 2002 and 2011, number of Poles living abroad raised from around 780 thousand in 2002 to over 2 million in 2011. Yearly estimations of the Central Statistical Office (GUS) state that in 2011, 2012 and 2013 number of Poles living abroad augmented by: 60 thousand, 70 thousand and 66 thousand respectively. At the end of 2013, there were 2,196 million of Poles classified by GUS as “citizens absent due to a temporary leave abroad”. Each year, more people leave and their number is higher than of those who come back. According to GUS, more than 1/3 of Poles living abroad are of age between 25-39. At the end of 2016, there were around 2,515 million of Poles temporarily living abroad, i.e. 118 thousand (4.7%) more than in 2015.
The quality of life in Poland strongly depends on the labour market, accessibility of work and level of wages. High salaries make it possible to come back to the country, or to drop the decision of leaving. Law should be simplified in a way that establishing a company would result in new working places. Income taxes of the least-earning group ought to be lowered. Another issue is revision of the provisions concerning foreigners willing to live and work in Poland. It should be based on introducing a fast administrative path allowing immigrants, especially the ones from Ukraine, to obtain Polish citizenship.