Executive Search in Poland– 2019 Outlook
Poland Races Ahead of the Old Soviet Bloc
In September 2018, Poland became the first country from the former Soviet bloc to be graded as a developed economy by Russell Index, run by the Financial Times and Stock Exchange, or FTSE
It joins the list of developed European economies along with Austria, Belgium, Luxembourg, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the U.K.
Poland is the eighth-largest economy in the European Union and the largest in central Europe. The FTSE designation is one the country’s leaders have chased for years in the face of criticism for not making enough progress in developing its capital markets and its market economy.
Poland also meets the World Bank criteria for high gross national income per capita. According to most recent data, Poland ranked 57th in the global ranking with an average gross national income of $12,710 per capita in 2017.
The elevation of Poland is the first time in nearly a decade that a country has been promoted from an “advanced emerging” economy to a “developed” one in the FTSE ranking. The ranking considers various criteria, including the quality of a country’s market, consistency and predictability, stability, market access, and the cost of implementing economic changes.
Poland’s economy has not been this good for years, with growth reaching around 5% in 2018, having shot to an unadjusted 5.1% (5.7% adjusted) in the third quarter despite predictions of a slowdown. Unemployment at slightly over 5% is the second-lowest rate in the 28-member European Union (EU). Poverty and shared prosperity indicators continue to improve in light of surging private consumption supported by a tight labour market and government social programs.
The political overview and future challenges
Despite three years in power, the populist Law and Justice (PiS)party is still seen as the shocking new in Polish politics, and 2019 will be the year of the first real test for the ruling party’s resilience.
With a general election slated to take place in the autumn 2019, it is much too early to predict the actual outcome of the vote but there is one certainty. This is going to be a year of increased political tension and possibly destabilisation.
Poland’s conservative government has pushed controversial reforms that modify the way the constitutional court, public media, the Central Bank, and the anti-corruption agency function, giving the government more control over such institutions.
PiS stands for the poorer people who the liberal parties neglected, and not infrequently demeaned, and this remains the ruling party’s key strength. It gives PiS voting numbers needed for pulling off a strong performance in the election while also keeping the left in check.
The ruling party’s popularity has never dropped below 30% since 2015 and has consistently hovered over 35% since July 2017.
Investment portfolio strong
In what’s shaping up to be one of the flagship investments in 2019, Europe’s largest lithium-ion battery factory, run by Korean company LG Chem, is set to expand its existing plant for batteries for electric cars, at a cost of PLN5.8bn (€1.35bn) while creating 729 jobs. LG Chem has also been reported to be considering a completely new plant in Poland because, it says, demand is exceeding expectations.
Poland has built a reputation as a regional production hub for automotive parts and accessories, counting GM/Opel, Volvo, Fiat and Volkswagen among its veteran investors. German automotive corporation Daimler has started building its first Mercedes-Benz factory in Poland, a €500 million new engine production plant in Jawor.
Judging by the projects which qualified for grants in the years 2007–2013, and looking at where the Polish economy is heading, it seems that the industries to grow most in terms of investments in the years 2019–2020 are going to include:
- Electronics (HI-TEC),
- IT, R&D, aviation,
- Outsourcing / shared services centres/ BPO and ICT
- Food & beverage industry
Where is the downside?
The principal risk threatening economic performance is politics, but its potential impact extends beyond 2019 because of elections taking place only in October.
More immediate risks include a more pronounced slowdown in economic growth in Germany, Poland’s biggest trade partner. Domestically, the yet unclear extent of power price hikes could hit companies, affecting their investment plans.
The Government’s spending plans, which include increases in social benefits and public investment as well as a reduction in the statutory retirement age, could erode the structure of public finances.