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rfmcdonaldOver at The Globe and Mail, Doug Saunders argues--with good reason--that Poland's economy is one of the strongest in Europe thanks to foresighted planning.
Why is Poland doing well? A strong aversion to debt can be thanked.
It's worth noting that, with growth in 2009, 2010, and 2011 projected to be 0.5, 1, and 3% in Poland versus -4.5, 0.5 and2% in the Eurozone, Poland's rank in European Union national GDPs per capita will rise significantly. It would have been much nicer if Poland's convergence with EU levels hadn't been precipitated by economic catastrophe, but still.
The streets of Warsaw and Gdansk are lively places full of free-spending shoppers and securely employed workers, even as Poland's neighbours beg for international bailouts amid catastrophic failures.
The World Bank says the economy of this nation of 38 million will grow by 0.5 per cent this year, 0.9 per cent next year and 3.5 per cent in 2011 – making Poland one of the few countries that will avoid a recession entirely and marking it as one of the most successful of medium-sized countries.
The rest of Europe, meanwhile, is facing economic decline and Poland's eastern neighbours are averaging catastrophic rates of 4-per-cent shrinkage.
Last month, Warsaw announced the latest in a long string of surprising economic results: Poland's current account balance – the difference between imports and exports – showed a surplus of €342-million ($555-million), far better than the €79-million deficit that had been forecast, indicating that Europeans are eagerly buying lower-priced Polish products.
Why is Poland doing well? A strong aversion to debt can be thanked.
Poland avoided the boom-and-bust economy. While other countries were allowing their banks and corporations to leverage themselves into illusory prosperity – and amassed high levels of public debt in expectation of future revenues – Poland reined in its banks and firms, and experienced modest but stable growth for most of the past decade.
“Poland didn't go through quite the same degree of boom that some of its neighbours have, so we haven't seen the same sort of blowout in current account imbalances and financing leading to real estate booms and massive increases in credit in Poland as we saw in some of the other countries,” Mark Allen, the IMF's Poland representative, said in an interview. “Also, fiscal policy here in Poland has stayed under control, and debt levels have remained low. That is not as true in some of the other countries which have experienced crisis.”
[. . .]
Poland's relatively prudent approach to fiscal and banking matters, and to private sector debt financing, probably dates back to the final decade of Communist rule, which ended 20 years ago. The Communist leadership relied heavily on bank debt and foreign loans, and fell into a severe fiscal and monetary crisis in the final years of the 1980s – an Eastern Bloc credit crunch that was far worse than the global one today, and affected several neighbouring countries, bankrupting dozens of huge state-owned industries and plunging millions into joblessness.
The result is a deep aversion to large-scale debt that remains today, 20 years after Poland made a comparatively quick transition to a market economy.
It's worth noting that, with growth in 2009, 2010, and 2011 projected to be 0.5, 1, and 3% in Poland versus -4.5, 0.5 and2% in the Eurozone, Poland's rank in European Union national GDPs per capita will rise significantly. It would have been much nicer if Poland's convergence with EU levels hadn't been precipitated by economic catastrophe, but still.
