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Poland: Beyond the business cycle


Short-term economic prospects are still positive despite the expected slowdown driven by less benign external conditions.

TRANSCRIPT // Poland: Beyond the business cycle : June 2019


Chart of the Month

François Doux: The Polish economy is going very strong, with 2018 growth of 5.1%, the best performance since 2007.Sylvain Bellefontaine, hello.

Sylvain Bellefontaine: Hello François.

François Doux: Looking at 2019, what is the trend?

Sylvain Bellefontaine: We are trending towards a slowdown, although the first quarter was rather strong, with preliminary growth estimates beating expectations at 4.6% year-on-year.

François Doux: Does this mean desynchronization between a buoyant Polish economy and a somewhat more sluggish eurozone?

Sylvain Bellefontaine: Yes, based on what we have seen in the first quarter of the year, combined with last year’s performance. Desynchronization is the right word, since domestic demand in Poland is still very robust.

Demand is driven by consumption, and by both private and public investment, as part of the stimulus package launched in February, with the approach of the European elections, and legislative elections in October.

François Doux: Let’s look at a few figures on the chart. The unemployment rate is relatively low. What about inflation and growth?

Sylvain Bellefontaine: Growth was 5.1% last year. We foresee a slowdown to about 4% this year. Our biggest concern, however, is Poland’s medium-term prospects. They seem to be calling into question Poland’s economic model, which is based on competitiveness and low labour costs.

François Doux: How is this model being called into question?

Sylvain Bellefontaine: The big problem is the job market and a shortage of labour. Poland is operating at full employment, which has been offset so far by an inflow of non-resident workers, notably Ukrainians. Wage acceleration could also be a problem in the future given the sluggishness of productivity gains. Under this environment, there is also the risk of creating a middle income trap.

François Doux: What is the solution? More innovation? Raising skills?

Sylvain Bellefontaine: Yes, training is one solution. The keys to success are always the same, but that’s what we must strive towards: innovation, research & development, and the automation of certain production processes, to generate enough productivity gains to offset the labour shortage. From a more fundamental perspective, there is also a demographic problem. The country has been in a demographic decline, although it has been relatively slow over the past two decades. This decline must be checked to boost the country’s macroeconomic prospects in the medium and long term.

François Doux: In any case, Polish growth is still solid. Thank you, Sylvain Bellefontaine, for presenting the Chart of the Month. We will be back in a moment for Three Questions on Brexit, with Jean-Luc Proutat.


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