WARSAW, 21 March 2017 – Poland’s economic ascent is remarkable, but further reforms are needed to meet citizen’s expectations for faster convergence with the European Union, says the new World Bank report “Lessons from Poland; Insights for Poland”.
“Poland is an outstanding economic and development success story, moving from middle-income to high-income status in record time,” said Arup Banerji, World Bank Regional Director for the European Union. “If Poland wants to continue its ascent and meet the rising expectations of citizens, it needs to build on its reform successes - such as prudent fiscal policy - but also initiate new reforms around innovation and progressive labor market regulations and institutions.”
How did Poland succeed? After the bold reforms of the transition from communism, Poland got its institutions right – rule of law, property rights, democratic accountability, and basic market institutions. It then used the EU accession process and subsequent EU membership to reinforce them.
A widely-shared vision of a socially responsible market economy provided reform continuity and consistency. Sound macroeconomic policies ensured stability and resilience. Poland was the only European country to record positive growth in 2008—the year of the global crisis—and to completely avoid a banking sector crisis.
Concurrently, the country successfully connected to global and regional markets, while ensuring competition at home. Efficient firms entered the market and created jobs. Workers became more productive thanks to reforms that raised education quality at one of the fastest rates in the OECD countries. Equally impressive were infrastructure improvements, supported by judicious use of generous EU structural funds; the length of motorways has almost quadrupled since the transition.
“Poland’s economic growth was also inclusive for different groups of society, including the poorest, which resulted in poverty reduction from 51% in 2005 to 30% in 2014,” said Emilia Skrok, World Bank Senior Economist and co-author of the report. “Better access to good education and thriving entrepreneurship with regulatory and institutional support from the government enabled social development and advancement for millions of people in Poland.”
Looking ahead, the report provides several insights for Poland. First, better governance is needed to build more trust in government by making public services more client-oriented, transparent, and efficient, and involving citizens more directly in governing and public service delivery.
Second, sustaining a sound economy will now require creating fiscal space to deal with the increasing pressures coming from aging of the population and the inevitable decline of European structural funds for investment, as well as a more uncertain global context in future.
Third, ramping up infrastructure investments will allow citizens to continue reaping the benefits of trade.
Fourth, continuing to grow robustly will mean moving Poland up the global value chain by focusing on the quality of products and services and supporting innovation in a more concerted way.
“It's good that the government gives so much consideration to innovations. Without them further dynamic growth of Polish economy will be difficult to maintain,” said Carlos Piñerúa, World Bank Country Manager for Poland and the Baltic States. “Other potential growth drivers should be kept in mind. The doing business agenda, more client oriented public services such as healthcare and education, and development of financial sector are the areas where Poland may do even better than before.”
Finally, inclusive growth can be further boosted by continuing to expand investment in quality education and healthcare for all; striking a better balance between job security and labor market flexibility; supporting workers between jobs; targeting social spending to aging and vulnerable parts of population; and increasing the progressivity of the tax system.
The report concludes that Poland’s vibrant political institutions need to work on rebuilding a broad consensus on the vision and economic strategy for the country - to meet the challenges of the future, while ensuring the long-term policy continuity that has served the country so well in the past.