Country brief 2007 Updated March 2008
An upper middle-income country with a population of 38 million, Poland had a gross national income per capita of US$8,190 in 2005 (GNI, Atlas method). Since 1989, the nation has undergone a remarkable political, social and economic transformation. Achievements included uninterrupted economic growth averaging 4.4 percent per annum during 1996-2006 and accession to the European Union (EU) in May 2004.
However, Poland needs to push ahead with structural reforms aimed at sustainable development by consolidating public finances, increasing employment, reducing poverty, improving the business climate, and promoting more effective government.
The poverty rate (based on an international poverty line of $PPP 4.30 per person per year) amounted to 24% in 2005, due in large part to low levels of human capital and joblessness. Recent improvements in the labor market helped reduce the national poverty rate. The unemployment rate declined from 19 percent to 14 percent between 2004 and 2006.
Poland was one of the founding members of the World Bank, participating in the United Nations Monetary Conference in Bretton Woods. After resigning from its membership in the 1950s, it rejoined the World Bank in June 1986. The World Bank's office in Poland opened in 1990 and its first loan to the country was provided the same year. Since then, the World Bank has supported the country's economic transformation through lending, advice, and technical assistance -- loans for a total amount of US$6,255 million for 45 projects have been approved by the World Bank’s Board of Directors.
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Economy
Developments Since Transition
Poland began its transition to a market economy in 1990 under exceptionally difficult macroeconomic conditions, marked by hyperinflation, a high rate of hidden unemployment, a large legacy of external public debt, a high black market foreign exchange premium, and an obsolete state enterprise sector. Polish policymakers liberalized prices, made the Polish Zloty convertible, fixed the exchange rate, lowered import barriers, and started privatization.
Many predicted that Polish enterprises would not be able to cope with market conditions, leading to mass bankruptcy and social upheaval. On the contrary, thanks to competent policy management at the macroeconomic level and thorough restructuring of enterprises, Poland became a frontrunner among European transition countries.
Recent Economic Performance
Poland has clearly benefited from EU membership. While growth slowed sharply in the early years of the 2000s, it recovered to 5.3 percent in 2004. After a temporary slowdown to 3.4 percent in 2005, economic growth accelerated to more than 6 percent in 2006-2007 thanks to robust growth in private consumption, a revival in investment activity, and strong exports. Other macroeconomic fundamentals – inflation and current account deficit – have been very robust, but deteriorated somewhat in late 2007 in line with global inflationary pressures. Poland’s capacity for absorbing EU structural funds is still somewhat limited, but improvements have been recorded in this area.
Challenges Ahead
Despite its recent progress, the country still faces significant economic challenges. The public sector is the bottleneck to more dynamic growth, with areas of major concern being the excessive public finance system, low investment in public infrastructure, and non-competitive sectors in which the government continues to be the main player.
Institutional reform of public finance, completion of privatization, an overhaul of the judicial system, reform of the health sector, reorganization of the education sector, and achievement of nominal convergence on sustainable basis permitting euro adoption are among key priorities.
The broad objectives of the coalition Government, created after October 2007 general election, include rapid real convergence to average EU income levels, equal access to and high quality of public service delivery, reducing the tax burden, making work pay while supporting families and the most vulnerable, and full and efficient absorption of EU funds. The Minister of Finance highlighted six pillars of fiscal policy for coming years: (1) reducing public debt (2) upholding previous decisions to cut payroll taxes (3) rising development expenditure (4) accelerating privatization; (5) economic liberalization, and (6) preparing the Polish economy for euro adoption.
Regarding Poland’s plans for monetary integration, the latest Convergence Program Update 2007 states the Government’s intention to fulfill all Maastricht convergence criteria in 2009, however, 2012 seems to be the earliest possible and optimistic date for adopting the Euro.
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Program to date
- Landmark Projects
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Since Poland rejoined the World Bank in 1986, the Bank has supported the economic transformation efforts of successive governments through policy dialogue, technical assistance related to project preparation, capacity building and institutional strengthening, and financing.
The World Bank’s mission in Poland is to support the country’s efforts to bring greater economic well-being to its people. The starting point is the overarching goal of steering the economy on a path of high and sustainable growth through the improved competitiveness of firms and regions, to contribute to the recovery of employment, and to promote strong social cohesion with the aim of reaching a per capita income equal to two-thirds of the EU average by 2013.
The World Bank is helping the Government complete its unfinished reform agenda, adjust public finances, improve infrastructure, and enhance Poland’s ability to maximize the benefits of EU accession.
The Bank is also supporting the country’s efforts to develop a knowledge-based economy, and enhance education and health care through analysis, advice and financing. The strategic directions of the World Bank’s involvement in Poland are reflected in the Country Partnership Strategy (CPS) for 2005-2007.
NB: Lending is per fiscal year, July 1-June 30
Active Portfolio by Sector as of June 2006
(US$ millions)
The Country Aggregate Report provides more lending data for Poland
Impact On the Ground
The World Bank’s partnership with Poland has provided tangible, lasting results. For example:
Through micro-credit grants and labor redeployment schemes, the Rural Development Project created more than 22,000 off-farm jobs and indirectly created three times more.
Read more- Poland is better prepared to respond to natural disasters. A population of about 2.5 million people living in the Odra River Basin will be protected against loss of life and damage to property caused by severe flooding. This aim would be achieved by reducing the extreme flood peaks through storage in a dry polder on the Odra River just upstream of Raciborz town; and by increasing the flood carrying capacity of the Odra River channels through and around Wroclaw, implemented within the Odra River Basin Flood Protection project.
- Rural jobs have been created. The World Bank helped create new jobs outside of agriculture in rural areas through the opening of business incubators under the Rural Development Project. Bank assistance also contributed to improving rural infrastructure, rehabilitating local roads, and constructing water treatment and sewage plants, as well as water supply and sewage networks. According to government reports, 23,000 new jobs were created, and the project also helped establish 3000 small- and medium-sized enterprises (SMEs) through microloans.
- Infrastructure has been rehabilitated. Three Bank-financed roads projects are supporting Poland’s efforts to improve the national road network. The percentage of roads in good condition has increased from below 37 percent in 2003 to about 50 percent in 2005 as part of a joint effort with the government and international financial institutions to eliminate the large road maintenance backlog. Efforts to support this include a Third Road Maintenance and Rehabilitation Project.
- The energy sector has been reformed. Bank-financed projects in the 1990s strengthened energy policy and supported sector reforms by developing energy laws and regulations and by establishing the Energy Regulatory Office and an electricity exchange. In the coal mining sector, the World Bank has been supporting the implementation of the government’s reform program since 1999.
- Health sector reform was initiated. The World Bank provided just-in-time advice and technical assistance for drafting of a new law on Health Care Services Financed from Public Funds. Following the approval of this law, the World Bank has been providing technical assistance to support its implementation.
- The business environment has been improved through an assessment of the investment climate and the identification of administrative barriers to entry, operation, and exit. Specifically the barrier to contract enforcement have been indentified.
- Public procurement has been improved. Following on the recommendations of the Country Procurement Assessment Report in 2000, changes were made to the Public Procurement Act. As a result, public procurement became more transparent and efficient, while the discretion of public officials was greatly reduced.
- An anti-corruption program was initiated. following the World Bank’s 1999 report on corruption. Anti-corruption advocacy work by a group of respected individuals in civil society has led to the adoption of a package of laws to deal with corruption, including asset disclosure, financing of political parties, and public access to information.
- NGOs and civil society have been supported. A Small Grants Program supported by the World Bank improved the capacity of Polish NGOs to address such issues as alleviating poverty, fighting corruption, protecting the environment, ensuring gender equality, and empowering marginalized and vulnerable groups.
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External Affairs Officer:
Jacek Wojciechowicz
jwojciechowicz@worldbank.org
NGO and Small Grants:
Malgorzata Dworzynska
mdworzynska@worldbank.org
Warsaw Financial Center, 9th floor
53 Emili Plater Street
00-113 Warsaw Poland
Tel: (48-22) 520-80-00
Fax: (48-22) 520-80-00
Website: www.worldbank.org/pl
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