Poland has tripled the value of its economy in the last 30 years with some of the highest economic growth rates in the world. If the country continues on the right course, it can guarantee accelerated growth in the future.
Today, Poland stands at a critical juncture in its development. The country faces both challenges as well as opportunities moving forward. The decisions made today will determine whether Poland will continue its extraordinary economic growth trajectory or, on the contrary, lose momentum.
A wide-ranging study on the state of the country’s economic financials from McKinsey & Company gives specific recommendations for Poland to continue to prosper, which include a focus on productivity, investments, energy transformation, the labor market, and continuing to build its brand (in a broader sense).
The past several decades of remarkable economic growth after Poland emerged from the dark shadows of the Iron Curtain have culminated in what looks like a plateau. Some of the challenges that Polish society is now facing include population decline, economic slowdown, and geopolitical challenges, with war-ravaged Ukraine just across their southeastern border and next-door Belarus an increasingly hostile neighbor.
Yet if Poland is able to activate a range of growth drivers, then its aspiration to become an almost 2 trillion dollars economy by 2050 is possible, says McKinsey & Company.
“It will be a very demanding task, as even reaching average European levels in some areas would not make it possible for Poland to repeat the success it had in the previous era,” said Tomasz Marciniak, Managing Partner of McKinsey & Company in Poland. “That is not to say that the goal is unattainable: the key to maintaining high growth will be building and maintaining competitive advantages in both European and global markets.”
Productivity
The productivity of the Polish economy is one of the lowest in the EU, both due to sectoral productivity gaps of up to 55%, and the overrepresentation of low productivity sectors in GDP. The energy, agriculture, and industrial production sectors are some of the areas lagging behind to the largest degree.
The accelerated growth starting with the massive political and societal changes of the early 1990s has been slowing down. Sectors with low productivity account for around 25% of the Polish GDP, according to the report. Despite that, Poland also has some significant advantages: For example, the Polish economy is one of the least indebted in Europe.
Investments
Poland has a relatively low share of investment in the GDP (18%), or in other words, investments in physical assets like machinery and buildings, which tend to reflect economic growth and sustainability.
That rate is much higher in other European countries like France, Switzerland, Belgium, and the Scandinavian countries. But these investments as also much higher in Poland’s fellow former-Eastern Bloc neighbors Hungary, Czechia, Romania, and the Baltic countries.
Energy transformation
Innovations in clean energy can soon become an important part of technological progress in Poland, which has seen technology drive the remarkable economic growth of the past few decades. That would need to be part of a wider plan to rid the country of fossil fuels and bring the national energy policy in line with international agreed-upon targets, like the Paris Agreement.
Poland’s share of energy from carbon-emitting sources in the energy mix dropped from 97% in the early 1990s to 79% in 2022. But coal still plays a major role in the country’s energy security, and coal-powered power stations continue to provide the majority of the country’s power. Like with the rest of Europe, Poland saw energy deficiencies due to the war in Ukraine.
Labor market
In order to keep up economic growth, Poland will need to sustain a strong talent pool for the labor market. That can be ensured with improvements in education and expanding training in job skills aimed at the professions of the future and attracting talent with these skills.
Despite having an unemployment rate that is lower than the European average, Poland’s aging society parallels a decline in the working population. While current labor resources are ample when compared to the beginning of the market economy era (27 million working-age people in 2023 versus 25 million in 1990), the declining population will shrink the labor pool to 20 million by 2050.
Building a brand
The report notes that part of Poland’s path forward will need to include a clearly defined and executed brand building strategy aimed at improving the country’s international image. Favorable perception and international credibility are essential to attracting investment, innovation, and talent.
In all six dimensions of governance measured by the World Bank’s World Governance Indicators, Poland ranks in the bottom ten among the EU-30 states (European Economic Area countries). The only categories that saw improvement since 2003 were ‘control of corruption’ and ‘regulatory quality’.
Poland has suffered from a poor image when observed from the rest of Europe partially due to its former ruling government led by the populist Law and Justice party, which was seen as far-right and illiberal by other EU countries.
That is mostly due to concerns about government overreaches such as changes to the judiciary and media laws, which were seen to potentially undermine democratic principles. These perceived shifts led to tensions and debates within the European Union regarding the adherence to shared democratic values.
“Poland’s international reputation, which ranks as one of the lowest compared to that of other EU states, may pose a risk to Poland’s ability to leverage the nearshoring trend and the movement of production from the Far East to Europe and global services back to Europe,” the report notes.
Looking ahead, Marciniak said: “Poland is an undisputed winner of the previous era. Since the era’s onset, Poland has tripled its economy with one of the fastest growth rates in the world. To continue on this growth trajectory Poland needs to face both global and country-specific challenges. Whether Poland lifts its ambition and continues its above average economic development depends on key decisions made today.”
McKinsey & Company is one of the world’s leading strategic consultancies. The consulting firm has been active in Poland in 1993, and now has over 2,000 employees working from offices in Warsaw, Wrocław, and Poznań.
Source link : https://www.consultancy.eu/news/amp/9471/mckinsey-poland-on-the-cusp-of-a-new-economic-reality
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Publish date : 2023-11-08 03:00:00
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