Economy of Poland

By | April 29, 2022

According to cheeroutdoor, Poland was the first among the CEE countries to begin systemic transformations in the economy at the turn of 1989–90 and, having overcome the economic crisis, was the first to not only restore the pre-crisis level of GDP production by 1996, but also significantly improved its structure. During the years of reforms, Poland has built an economy with a predominant share of the private sector and a rapidly developing institutional infrastructure of a modern market economy.

In the summer of 1989, the government of Mazowiecki-Balcerowicz developed an economic reform program (the “Balcerowicz Program”, named after the Minister of Finance L. Balcerowicz, who headed a group of economists and developers), adequate to the state of the Polish economy and society. The following main goals were set in the program: stabilization of the economy, incl. the fight against inflation, and the transformation of the economic system, i.e. transition from socialist to market economic system. The basis of economic policy was the use of monetary and financial instruments. In the media, tough financial measures were called “shock therapy”. There was a broad liberalization of the economy, incl. the bulk of prices, foreign trade, a single rate of the Polish currency and its partial convertibility were introduced,

The formation of an open economy began, the streamlining of economic relations on the basis of the convergence of the system of domestic prices in Poland with the Western one, an influx of Western goods and foreign exchange was ensured, and Western capital began to be attracted. An element of the systemic transformation was the change in the dominant form of ownership through the privatization of state property.

The specificity of the privatization policy in Poland is that mass privatization is carried out later than in other CEE countries. In Poland, a system of participation certificates (vouchers) was carefully thought out, efficient enterprises were selected, and national investment funds were created for almost 2 years to manage privatized property. As a result, mass privatization began only in 1996 and continued through St. 2 years old

The process of privatization in agriculture was limited, since the changes in ownership affected only land previously owned by state farms and cooperatives (about 15% of agricultural land). Approx. 1.7 thousand subjects of state ownership, this process was completed in 1995. The main form of use of privatized land is rent. The land market is underdeveloped.

In 1999, the Polish government embarked on long-term systemic reforms. We are talking about the restructuring of power and financial relations between the center and local authorities, as well as the reform of the pension system, health care and education.

A specific feature of the transformation policy is the high role of the state in this process. The state became the main subject of market transformations, and the main economic levers (money, loans, interest rates, etc.) remained in its hands.

From Ser. 1990s the forthcoming accession to the EU began to exert a growing influence on the socio-economic processes in the country. Forms and methods of implementing economic policy are brought into line with EU regulations and standards, adapted to the requirements of the EU and the country’s legislation.

At the initial stage of the transition to market relations, there was a significant decline in GDP (1990-91 – 17.8%). From 1992, the economy began to recover, and until 1999, Poland was one of the most dynamically developing European countries (in 1994-97, the average annual GDP growth rate was 6.2%). In 2001, the volume of GDP exceeded the level of 1989 by almost 34% and the level of 1991 by more than 55%. After 1998, in connection with the implementation of the policy of balance, economic growth rates decreased to 1–1.2% (2001–02).

In general, during the years of economic transformations in terms of purchasing power parity of the currency, per capita GDP increased from $4,466 in 1991 to $8,763 in 2000.

The structure of GDP has also changed by form of ownership: in 1989, the private sector produced approx. 20%, and in 2000 – 63.2% of GDP.

Processes of transformation of property to con. 2001 covered approx. 80% of state-owned enterprises operating in 1990. The private sector employed approx. 74% of all workers in the national economy. Private ownership dominates agriculture, retail and construction. In exports and imports, the share of private enterprises amounted to approx. 84%. The private sector produces approx. 72% industrial output. It accounts for almost ½ of all national economic fixed assets, and its share in total capital investments exceeds 65%. Small and medium-sized enterprises produce St. 50% of all gross value added, and in terms of share in production and employment, these enterprises are approaching EU standards.

Profound changes and high dynamics of the development of the Polish economy led to an increase in the share of Poland in the production of world GDP from 0.3% in 1990 to 0.5% in 2000.

In the course of market transformations, the macrostructure of GDP production has changed (2000): industry 37%, agriculture, forestry and hunting 4.8%, construction 8.9%, trade and repair services 17.3%, transport, communications and warehousing 6.9 %, servicing public needs and services to the population 25.1%.

As the economy transforms, the structure of employment also changes (2000): industry 20.6%, construction 5.4%, agriculture, forestry and fishing 28.3%, transport, communications and warehousing 5.1%, trade and repair services 13.7%, servicing public needs and services to the population 26.9%. The distribution of employment among enterprises of various forms of ownership has changed. In the private sector in 1990, 45.1% worked, and in 2001 74.9% of all employed.

The growth of capital investments in 1990-2000 was 224.9%, while investments in the field of financial intermediation (1345%), in trade and repair services (651%), in servicing public needs (512%), in the field of transport and communications grew at a faster pace (371%), construction (357%), hotel and restaurant industry (345%), education (241%) and utilities (288%).

For 10 years, investment in the extractive industries has practically not changed (an increase of 1.0%), and the cost of fixed assets here has decreased by 24.7%. In the manufacturing industry, investments increased by 74.2%, and fixed assets – by 37.2%, in energy, water and gas supply by 84.4 and 48.8%, respectively. Investment in agriculture decreased by 59.5% and in 2000 amounted to 40.5% of the 1990 level, but the value of fixed assets was maintained at the 1990 level.

A significant factor in the economic development of Poland during the period of systemic changes was foreign direct investment (FDI), the total volume of which in 2001 amounted to 56.8 billion dollars, which puts Poland in first place among the CEE countries. The main share of FDI in 2001 (41.2%) was directed to industry, to the financial sector (23.1%), to trade and repair services (11.4%), to the development of transport, warehousing and communications (10.7%). %). The main investors, which account for St. 75% of incoming FDI: France, Germany, the Netherlands, Italy and the UK.

During the years of reforms in the structure of industry, the share of extractive industries decreased to 5.2% (2001) against 8% in 1995, the share of manufacturing increased to 83.5%, and industries providing production and supply of electricity, gas and water increased to 11.3%.

Significantly reduced the share of the public sector; if in 1990 this sector accounted for 82.6%, then in 2001 it accounted for 23.9% of sold industrial products. At the same time, the share of the public sector in the manufacturing industry decreased especially significantly: from 76.5% in 1990 to 11.5% in 2001. In the extractive industry, this share decreased from 97.6% to 74.3%. In energy, water and gas supply – from 98 to 91.5%.

During the years of transformation, due to the outstripping pace of development, the role of such industries as woodworking and furniture production, the pulp and paper industry, printing, the production of computers, radio, television and other electronic equipment, medical instruments, and vehicles has sharply increased.

In the structure of sold products, the main role is played by: food (20%), chemical products (5.6%), vehicles (5.4%), metal products (5.0%), coke and oil products (4.9%), products from non-metallic raw materials (4.6%), machinery and equipment (4.3%), goods from rubber and plastics (4.0%), textile and clothing products (approx. 4%), furniture (3.7% ), printing (3.3%), wood products (3.1%).

The main feature of Polish agriculture is the preservation of its predominantly private nature (80-85% of production and agricultural land) throughout the entire period of socialist development, and the predominance of small and medium, mostly unproductive, peasant farms is characteristic.

In 2000, agriculture (including forestry and hunting) produced 4.8% of GDP and employed 28% of the country’s total working population. The degree of food self-sufficiency in Poland is quite high (in 2000 it was over 80%).

Poland is a grain-producing country, and among European countries – one of the leading producers of rye. It occupies an important position in the world in the production of potatoes, sugar beets and other crops.

Livestock breeding is traditionally developed in the country, especially cattle breeding (cattle) and pig breeding. In terms of meat production in general, Poland ranks 16th in the world (1.2% of production), 7th in Europe (5.6% of production). In addition, Poland is among the top ten world milk producers (10th in the world and 2.5% of production), 6th in Europe (5.8% of production). Horticulture and commercial vegetable farming are well developed.

The share of agricultural products in exports is only 4.6%. In Europe, Polish meat delicacies are also widely known, especially from pork, specifically Polish ham, raw and boiled-smoked sausages, etc.

The transport network plays a traditionally important role in the development of the national economy of the country, which is associated with the transit position of Poland.

The total length of railways is 22,560 km (2000), 59.5% of them are electrified. Transportation of goods in 2000 amounted to approx. 186 million tons, incl. 82 million tons – hard coal, 16.2 million tons – crushed stone and gravel, 13.9 million tons – metals and products from them, 13.4 million tons – metal ores. 360,687 thousand passengers were transported. (2000).

The length of paved roads is 250 thousand km, incl. with improved coverage 206 thousand (2000). Only 0.2% of paved roads belong to the motorway class. A radical reconstruction of the latitudinal highway connecting the eastern and western borders of Poland has begun.

Transportation of goods by road in 2000 amounted to 1083.1 million tons, passengers 954 515 thousand people. At the same time, the transportation of passengers by public transport decreases and increases by individual transport. The share of the latter increased from 9% in 1989 to 28% in 2000.

The length of main pipelines is 2278 km (2000), the volume of transportation is 44,342 thousand tons (2000). Pipeline transport serves mainly the supply of Russian oil to Polish refineries and its transit to Germany.

The length of inland waterways is 3813 km, cargo transportation by inland water transport is 10.4 million tons, passengers – 1265 thousand people. (2000). The main flow of cargo transportation is concentrated on the Odra River. The role of river transport in the total volume of cargo transportation is small (less than 1%).

The volume of cargo transportation by sea is 22.8 million tons, passenger transportation is 625 thousand people. (2000).

28 thousand tons of cargo and 2880 thousand people were transported by air. The share of foreign carriers in air transport is approximately 1/3. In 2000 Poland had 47 aircraft with 4823 seats. Aircraft served 68 airlines, incl. 58 – foreign.

The communication sector is developing dynamically. In 1990, there were 8.6 telephone subscribers per 100 inhabitants, and in 2001 it was already 28.4.

Since 1992, the rapid development of cellular and mobile telephone systems has begun. In 1994, the number of their subscribers per 100 inhabitants was 0.1, and in 2001 it was already 24.9. In terms of the level of development of this type of communication, Poland was among the leading European countries.

Informatization processes are developing extremely dynamically. At the beginning In 2001, the Internet accessibility index (the number of computers connected to the Internet per 100 inhabitants) was 1.4 compared to 3.3 in the EU.

The internal trade system is being rebuilt quickly and efficiently. In 1990-2000, the number of stores increased by about 2 times, and the total number of retail outlets on the con. 2000 reached approx. 860 thousand. As a result, the indicators of servicing the population have improved: in 1990, one retail outlet served approx. 81 inhabitants, and in 2000 45 inhabitants.

The total volume of retail trade is PLN 345.6 billion, incl. sales of food products PLN 291.8 billion (2000). Sale of goods in wholesale trade PLN 440.2 billion (2000).

The number of public catering enterprises is 88.1 thousand, of which 96% are in the private sector (end of 2001).

The structure of the trading network is changing. In large cities, an increasing part of the market is moving to super- and hypermarkets with a predominance of foreign capital. Private small and medium-sized trading firms often cannot compete with these giants and go bankrupt.

Exchanges of agricultural products, a new form of trade for Poland, are developing dynamically. They are already operating in Warsaw, Poznan, Lublin and Radom.

The formation of an open economy and the increase in the competitiveness of Polish products predetermined the growth of Poland’s foreign trade turnover. So, in 1990-2001, the volume of Polish exports increased 2.5 times, and imports – 5.4 times; the volume of imports per capita increased from 257 to 1301 US dollars, and the share of Poland in world imports increased from 0.3 to 0.8%; per capita exports increased from $376 to $934, and Poland’s share of world exports increased from 0.4% to 0.5%.

Since 1991, Poland’s foreign trade balance has been negative: in 1991 – approx. 1 billion dollars, in 1998 – 18.8 billion dollars, and in 2001 – 14.2 billion dollars.

Industrial restructuring and modernization require large-scale purchases of machinery, equipment, vehicles and supporting materials. The share of these commodity groups (at constant prices, according to the OECD classification) in Polish imports increased from 29.7% in 1995 to 38.4% in 2001. The share of imports of fuels, raw materials, lubricants and chemical products decreased over the years from 28.3 to 22.9%, and the share of food products – from 7.2 to 4.2%.

In exports, the share of machinery, equipment and vehicles increased in 2001 to 29.8% against 20.5% in 1995, the share of fuel, raw materials, lubricants and chemical products in 2001 was 15.3% against 21.2%, the share of foodstuffs remained virtually unchanged (ca. 9%).

The geographical structure of foreign trade has fundamentally changed. In 2001, the share of exports to developed countries was 75.1% (including 69.2% to EU countries), and 18.3% to CEE countries. The geography of imports was formed similarly. The share of developed countries in it is 69.9% (including EU countries – 61.4%), CEE countries – 18.2% and developing countries – 11.9%.

Poland’s main trading partners: in exports – Germany (34.4%), France and Italy (5.4% each); in imports – Germany (24.4%), the Russian Federation (8.8%) and Italy (8.3%) (2001).

Much attention is paid to the development of tourism. In 2001, the number of places in hotels and other places of accommodation was approx. 640 thousand. In 2001, 14.2 million people were accommodated in them, incl. 3.2 million foreign tourists.

In 2001, the most intensive entry traffic was observed at the border with Germany (50.5% of the total number of entries), the Czech Republic (15.1%), Ukraine (10.4%), Belarus (8.5%), Slovakia (4.3%) and Russia (3.2%).

Credit and monetary relations are built on the basis of a two-tier banking system. The Central Bank (National Bank of Poland – NBP) received the status of an independent one, and commercial banks were created on the basis of sectoral state banks.

The NBP formulates and implements monetary policy, creates an institutional environment for the financial stability of the banking sector, and determines the principles and mechanisms that ensure monetary settlements in the economy. In 1998, the Monetary Policy Council was established as an NBP body responsible for its development.

The level of monetization increased from 22.1% of GDP in 1990 to 43.5% in 2001. The structure of the money supply also changed: the share of cash decreased from 20.6% in 1990 to 11.4% in 2001, the share of deposits in national currency increased from 48.0 to 72.8%, and the share of foreign currency deposits decreased from 31.4 to 15.8%.

Until 2000, the NBP regulated the formation of the exchange rate with varying degrees of rigidity, and then Poland switched to a floating rate system, in which it is formed under the influence of supply and demand in the market. Gold and foreign exchange reserves PLN 120.7 billion (approx. US$40 billion) (end 2000).

The main function of the NBP is to fight inflation. Since 1998, inflation in Poland has not exceeded 10% and has a downward trend (in 2001, the average annual inflation was 3.6%, and in 2002 – 0.8%).

In con. 2001 there were 71 commercial and 642 cooperative banks. Private capital dominated in 64 banks, incl. in 48 banks – foreign capital.

The formation of the stock market began with the creation in 1991 of the Warsaw Stock Exchange. In 2001, securities of 225 joint-stock companies were listed on the stock exchange, the level of capitalization amounted to PLN 134.6 billion. (33.7 billion dollars).

A significant decline in recent years in the growth rate of the economy, as well as the start of major social reforms in 1999, led to the destabilization of public finances, incl. and the state budget. Poland’s budget is approx. 40% of GDP. In 2001, its deficit exceeded PLN 32 billion, or 4.5% of GDP against 2% in 1999. Its growth is explained by the growth of hard public spending (subventions and grants, public debt servicing, etc.). Their share in the expenditure part of the budget was 71% in 2001.

The main source of financing the state budget deficit is proceeds from the sale of securities (bonds and bonds). In 2001 they amounted to PLN 28.9 billion. Privatization proceeds, which had previously been a significant source of financing the deficit, amounted to only PLN 6.5 billion. (24% of the 2000 level).

The ratio of public debt to GDP in 2001 was 43.2%, incl. domestic debt increased to 25.6%, while external debt decreased to 13.7% of GDP. In absolute terms, Poland’s external debt fell from $45.4 billion in 1993 to $24.8 billion in 2001.

The tax policy is based on a gradual reduction in income tax rates for individuals and legal entities, while simultaneously abolishing (limiting) the previously existing benefits and exemptions.

There are noticeable changes in the revenues of the public finance sector: the share of income from indirect taxes is growing from 15.4% in 1990 to 27.6% in 2001, while the income from taxes on legal entities is decreasing from 28.3% to 4.7%. The share of proceeds from taxes on individuals is growing rapidly (from 9.6% in 1990 to 19.3% in 1998).

The structure of expenditures in the public finance sector has changed: the share of budget expenditures has significantly decreased (from 45.2% in 1991 to 26.3% in 2000); the share of commune budgets increased (respectively 11.7% and 23.2%); the share of insurance funds remained almost unchanged (approx. 35%). In public spending, the share of subsidies for the fulfillment of state orders was constantly decreasing (from 24.7% in 1989 to 15.9% in 1990 and to 0.8% in 2001).

In Poland, the real incomes of households are growing dynamically: in 2000, compared with 1993, by 22%. Families’ expenditures on food decreased (in 1990-2001 from 50.6 to 31.6%), the share of expenditures on electricity and gas bills (from 6.6 to 15.4%), as well as on rent, increased significantly.

In 2001, the average monthly gross wage in the national economy was PLN 2062. (approx. 515 US dollars), and in industry – PLN 2119. In 1994-2001, there was an increase in real wages in the national economy by about 3.4% on average per year.

However, during the years of reforms, large-scale open unemployment has arisen in the country, which has led to sustainable changes in the labor market. In 1990-2001, the working-age population increased by about 2 million people, while employment in the national economy decreased from 16.5 million to 15.3 million people. The number of pensioners increased from 7.1 to 9.3 million people. The average monthly pension outside agriculture in 2001 was PLN 1106. (approx. 276 USD), the average monthly pension of peasants is PLN 713. (approx. US$180).

The share of the unemployed in the total economically active population in 1990-2002 increased from 6.5 to 18.3% and reached 3.2 million people. Unemployment most affects women, especially young people, people with insufficient professional qualifications and a low level of education. This problem is acute in the countryside, where unemployment is St. 2 million people (including hidden unemployment is 0.8-1.2 million people). Socially dangerous is the high unemployment among young people under the age of 24, which is St. 29%.

The financial situation of the unemployed is deteriorating: in con. 2001 80% of the unemployed did not receive benefits. The ratio of unemployment benefit to the average wage is 27-37% (depending on the length of service, age, duration of the period of unemployment and region of residence).

The income differentiation of the population has increased: in 2001, the level of income of 20% of families with high incomes was almost 6 times higher than the income of 20% of the poorest families.

Economy of Poland