29 Sept 2017
Poland: Striving for Structural Reform
|Form of government||Parliamentary republic|
|Major Exports (% of total, 2015)||Major Imports (% of total, 2015)|
|Manufactured goods (78.7%)||Manufactured goods (78.0%)|
|Agricultural products (14.2%)||Fuels and mining products (10.9%)|
|Fuels and mining products (6.9%)||Agricultural products (10.3%)|
|Top Three Export Markets (% of total, 2016)||Top Three Import Markets (% of total, 2016)|
|European Union (78.9%)||European Union (59.6%)|
|Russia (2.9%)||China (12.4%)|
|USA (2.4%)||Russia (6.1%)|
Source: Economist Intelligence Unit (www.eiu.com), the World Trade Organisation
Poland is a parliamentary republic. Parliamentary elections are held once every four years. Beata Szydlo of the right-wing Eurosceptic Law and Justice party (PiS) became prime minister in 2015. PiS governs Poland alone in post-communist era, as the party tapped into nationalist sentiment tied to fears over migration, particularly among young voters.
The government increased its control over the media, judicial system and constitutional court. The controversial moves have made domestic politics more polarised and have drawn EU’s concerns to undermine the country’s rule of law and media freedom. In June 2017, the EU launched infringement proceedings against Poland for the refusal of the mandatory refugee resettlement quotas.
With the soured relationship with the EU, Polish government shares similar stances with the US President Donald Trump, on issues such as climate change and immigration. Poland is particularly relieved after Trump endorsed Article 5, which ensures that Nato allies will come to each other's defense in the event of an attack. About 900 US troops are currently in Poland under a Nato operation to reassure the alliance’s Eastern European allies amid concerns over potential Russian aggression. Meanwhile, Poland, with two-thirds of gas supplies from Russia, has been striving to find alternative sources for national security reasons.
|Nominal GDP (USD bn)||545.1||477.1||467.6||482.9||510.5|
|Real GDP growth (%)||3.3||3.9||2.8||3.4||3.2|
|GDP per capita (USD)||14,337||12,552||12,316*||12,722||13,454|
|Budget balance (% of GDP)||-3.4||-2.6||-2.4||-2.9||-2.6|
|Current account balance (% of GDP)||-2.1||-0.6||-0.3||-1.7||-1.8|
|Public debt (% of GDP)||50.2||51.1||54.2||54.6||54.1|
Source: the International Monetary Fund
Poland has the largest economy in Central Europe. Receiving the EU Structural Funds of over EUR 80 billion during 2014-2020, and with its accommodative monetary and fiscal policies, Poland’s near-term growth outlook is positive. Real GDP growth is expected to accelerate in 2017 and remain strong in 2018, with domestic demand remaining the key driver of the economy. Private consumption is forecast to grow strongly by around 4% in 2017, driven by solid wage growth and higher social spending on welfare benefits.
Although Poland joined the EU in 2004, it is not a member of the Eurozone as the zloty is not yet within the Exchange Rate Mechanism. However, The country does not have a target date to adopt the euro. Some politicians objected to the accession as the zloty's sharp fall during the global financial crisis had boosted export competitiveness and played a key role in helping Poland avoid recession. Moreover, the Polish public is hesitant about changing to the euro due to sovereign debt problems of some eurozone members.
With GDP per capita reached 69% of the EU average in 2016, there is plenty of room to catch up with the core of the EU in terms of economic development and living standards. Structural reforms to boost productivity are needed, especially when competitive advantage based on low manufacturing and labour costs is being eroded by rising prosperity. So far, Poland’s investment in research and development has been relatively insufficient, reaching 1% of GDP compared to the EU average of 2.03% in 2015. This shortfall could further threaten Poland’s ability to catch up.
Hong Kong-Poland Trade
Total exports from Hong Kong to Poland increased by 10.4% from HK$9,139 million in 2015 to HK$10,085 million in 2016. The top three export categories to Poland were: (1) telecommunications, audio & video equipment (+56.4%), (2) electrical machinery, apparatus & appliances, & parts (-7.4%), and (3) office machines & computers (+3.8%), which represented 79.3% of total exports to Poland.
ECIC Underwriting Experience
The HKECIC imposes no restrictions on covering Polish buyers. The Corporation’s underwriting experience on Poland has been acceptable, with three payment difficulty cases reported from August 2016 to July 2017, involving jewellery and electrical appliances.