Poland: Economic growth under scrutiny
|An example of successful economic transition, Poland still enjoys fairly favourable prospects despite the expected slowing of growth against a background of less favourable international conditions. Over the medium to long term, there are factors that will weigh on potential growth and weaken a Polish economic model based on competitiveness and low labour costs. The first section of this article analyses the impact of institutions on productivity, which is a major determinant of the differences in standard of living between countries, as illustrated through the example of Poland. The second section examines the question of Poland’s estimated medium-term potential growth, after an analysis of its pathway since the 1990s.
Since the beginning of the 1990s, Poland has conducted a policy of economic liberalisation, which, combined with institutional reforms1 and political stability, has generated uninterrupted economic growth since 1992, at an average annual rate of 4.2%. According to the World Bank’s classification, Poland is an example of a successful transition from a low- to medium-income planned economy (USD 6,600 per capita in purchasing power parity terms, ranking 64th in the world according to the IMF, in 1992) to a market economy highly integrated within the European Union (EU) and global value chains and, since 2009, classified as high-income (USD 32,000 per capita in 2018, ranking 45th).
Per capita income in purchasing parity terms is now close to 70% of the EU-15 average, demonstrating the real convergence between Poland and its European partners. From a low level in the early 1990s, income inequalities expanded rapidly in the first phase of the transition, before narrowing slowly over the past fifteen years. Poland therefore seems to have avoided the ‘middle income trap’, in contrast with countries such as Argentina, Brazil, Mexico, Turkey and even Romania, which are still classified as “Upper middle income” economies
In its first section, this article will analyse the link between institutions and productivity, using an efficient frontier model, drawing lessons for the particular case of Poland. The second section will present an analysis of Polish growth in supply terms from the beginning of its transition to a market economy, and will discuss the constraints on medium-term potential growth incorporating, in particular, the link between institutions and productivity.
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