Executive Search in Poland – 2021 Outlook
Poland Weathers Pandemic Better Than Most
Poland has emerged as a dynamic market over the past 25 years and has become a major actor within Europe, being the tenth-largest economy in the EU. The country performed well during the 2014-19 period, with the real GDP growth rate generally exceeding 3%, driven by private consumption. In the second quarter of 2020, however, the spread of COVID-19 and the restrictions that followed caused a real GDP contraction of 8.9% quarter-on-quarter.
Nevertheless, the country’s reacted well in Q3, with increases in industrial production, exports and household consumption, thus resulting in an overall GDP loss of 3.6% for the year 2020, less than the EU average. As foreign demand should increase, the Polish economy is expected to return to growth this year (+4.6%) and in 2022 (+4.5% – IMF forecasts), though much will depend on the global economic and sanitary recovery.
Overall, the Polish economy has several advantages: it uses resources from the European Structural Funds efficiently and has a resilient banking system and a strong domestic demand, coupled with its strategic position between Eastern and Western Europe (and Russia). To date, Poland faces several systemic challenges, which include a rigid labour code, the deficient road and rail infrastructure, a weak commercial court system and a burdensome tax framework.
The unemployment rate has been structurally low (just above 3%), though more than one in four employees have temporary contracts, twice the EU average. However, the situation is expected to worsen due to the long-term effects of the COVID-19 crisis: while governmental support measures helped to contain unemployment (3.8% in 2020), the IMF forecasts the rate to increase to 5.1% this year and 4.9% in 2022.
Poland Economic Outlook
As elsewhere, the No. 1 story in Poland in 2021 will be the recovery from the coronavirus pandemic. Poland, which emerged pretty much unscathed by the previous global crisis — the financial meltdown of 2007-2008 — appears to have weathered the first wave of the pandemic well.
Poland’s well-diversified economy should take credit for the relatively mild impact of the coronavirus crisis so far, analysts say. Poland is the least exposed country to tourism in the OECD, while also having big agri-food and business services sectors, both relatively resistant to the crisis.
Poland’s surging exports of durable consumer goods also helped, especially in the second half of the year. Finally, the country has attracted a good deal of investment in industrial branches — automotive being a case in point.
Last but not least, the government quickly stepped in with substantial help, even if its efficiency is being questioned now by many businesses.
Polish industrial exports grew rapidly in the second half of the year. Before the pandemic, there was a lot of foreign direct investment in promising sectors, e.g. in the new automotive industry. Now it is paying off. All this was combined with relatively aggressive and effective relief efforts.
The initial predictions of a recession of -6% or even deeper have been gradually revised with each new dataset from the real economy once the shock of the first lockdown began subsiding in May. The current consensus is that the recession will take place — avoiding it completely was never on the cards — but it will be mild, not even -3% in 2020, some analysts venture to say.
Leading Polish banks expect the recovery in 2021 to be at least 3%, with the forecast average as high as 4.1%. A slightly sharper picture of how solid the economic rebound will be should emerge sometime in late January or February when it will become clear how well — or how badly — the authorities have handled the national vaccination programme.
Poland’s growth could also be helped by the influx of new money from the EU budget for the years 2021¬2027, although 2021 may well be a preparation year of planning to take advantage of the funding, so its real impact may not show until 2022.
Politically, this could be another year of tension and unrest, especially if economic recovery is sluggish or otherwise impeded by the pandemic taking unexpected turns, such as the emergence of new strains of the virus. That might make the tripartite coalition government, led by Law and Justice (PiS), vulnerable to street protests.
Contact the author Iwona Szybka at iwona-szybka@cornerstone-group.com
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