Economy of Poland

Mother Earth Travel > Country Index > Poland > Map Economy History

The Polish economy grew rapidly in the mid-1990s, but growth has slowed considerably in recent years. The gross domestic product (GDP) grew 4.0% in 2000, but was expected to increase only by about 1.0% in both 2001 and 2002. Slowing growth has boosted unemployment, which stood at 17.4% at the end of 2001. Tight monetary policy and slow growth have helped temper inflation, which was down to 5.5% in 2001. Likewise, Poland's current account deficit, which grew rapidly in the late 1990's, fell to 4.0% of GDP in 2001. The budget deficit remains a source of concern: the slowing economy drove up the deficit to an estimated 5% of GDP in 2001.

Throughout the 1990s the United States and other Western countries supported the growth of a free enterprise economy by reducing Poland's foreign debt burden, providing economic aid, and lowering trade barriers. Poland graduated from USAID assistance in 2000. Poland is currently negotiating entry into the European Union with a target date of 2004.

Agriculture
Agriculture employs 28.4% of the work force but contributes only 3.4% to the gross domestic product (GDP), reflecting relatively low productivity. Unlike the industrial sector, Poland's agricultural sector remained largely in private hands during the decades of communist rule. Most of the former state farms are now leased to farmer tenants. Lack of credit is hampering efforts to sell former state farmland. Currently, Poland's 2 million private farms occupy 90% of all farmland and account for roughly the same percentage of total agricultural production. These farms are small--8 hectares (ha) on average--and often fragmented. Farms with an area exceeding 15 ha accounted for only 9% of the total number of farms but cover 45% of total agricultural area. Over half of all farming households in Poland produce only for their own needs with little, if any, commercial sales.

Poland is a net exporter of confectionery, processed fruit and vegetables, meat, and dairy products. Processors often rely on imports to supplement domestic supplies of wheat, feed grains, vegetable oil, and protein meals, which are generally insufficient to meet domestic demand. However, Poland is the leading producer in Europe of potatoes and rye and is one of the world's largest producers of sugarbeets. Poland also is a significant producer of rapeseed, grains, hogs, and cattle. Attempts to increase domestic feed grain production are hampered by the short growing season, poor soil, and the small size of farms.

Pressure to restructure the agriculture sector is intensifying as Poland prepares to accede to the European Union, which is unwilling to subsidize the vast number of subsistence farms that do not produce for the market. The changes in agriculture are likely to strain Poland's social fabric, tearing at the heart of the traditional, family-based small farm as the younger generation drifts toward the cities.

Industry
Before World War II, Poland's industrial base was concentrated in the coal, textile, chemical, machinery, iron, and steel sectors. Today it extends to fertilizers, petrochemicals, machine tools, electrical machinery, electronics, and shipbuilding.

Poland's industrial base suffered greatly during World War II, and many resources were directed toward reconstruction. The communist economic system imposed in the late 1940s created large and unwieldy economic structures operated under a tight central command. In part because of this systemic rigidity, the economy performed poorly even in comparison with other economies in central Europe.

In 1990, the Mazowiecki government began a comprehensive reform program to replace the centralized command economy with a market-oriented system. While the results overall have been impressive, many large state-owned industrial enterprises, particularly the railroad and the mining, steel, and defense sectors, have remained resistant to the change and downsizing required to survive in an open market economy.

Economic Reform Program
The economic reforms introduced in 1990 removed price controls, eliminated most subsidies to industry, opened markets to international competition, and imposed strict budgetary and monetary discipline. Poland was the first former centrally planned economy in central Europe to end its recession and return to growth in the early 1990s. Since 1992, the Polish economy has enjoyed an accelerated recovery, although growth has recently slowed. The private sector now accounts for over two-thirds of GDP.

As a result of Poland's growth and investment-friendly climate, the country has received over $50 billion in direct foreign investment since 1990. However, the government continues to play a strong role in the economy, as seen in excessive red tape and the high level of politicization in many business decisions. Investors complain that state regulation is not transparent or predictable; the economy suffers from a lack of competition in many sectors, notably telecommunications. In early 2002, the government announced a new set of economic reforms, designed in many ways to complete the process launched in 1990. The package acknowledges the need to improve Poland's investment climate, particularly the conditions for small and medium-sized enterprises, and better prepare the economy to compete as an EU member. The government also aims to improve Poland's public finances to prepare for eventual adoption of the euro.

Foreign Trade
With the collapse of the ruble-based COMECON trading bloc in 1990, Poland scrambled to reorient its trade. As early as 1996, 70% of its trade was with EU members, and neighboring Germany today is Poland's dominant trading partner. While membership in the EU is Poland's primary goal, it has fostered regional integration and trade through the Central European Free Trade Agreement (CEFTA), which includes Hungary, the Czech and Slovak Republics, and Slovenia.

Most of Poland's imports are capital goods needed for industrial retooling and for manufacturing inputs, rather than imports for consumption. Therefore, a deficit is expected and should even be regarded as positive at this point. Poland, a member of the World Trade Organization, has been steadily lowering tariffs in line with its WTO and EU commitments. Most products from EU countries now enter Poland duty-free; while Poland will apply the EU's common external tariff to goods from other countries (including the U.S.) upon EU entry, it continues to maintain higher tariffs in advance of accession. The Polish government has agreed to lower tariffs on selected U.S. products to address this differential. Most Polish exports to the U.S. receive tariff benefits under the Generalized System of Preferences (GSP) program.

GDP: purchasing power parity - $327.5 billion (2000 est.)
GDP - real growth rate: 3.8% (1999 est.), 4.8% (2000 est.)
GDP - per capita: purchasing power parity - $8,500 (2000 est.)
GDP - composition by sector:
agriculture:  3.8%
industry:  36.6%
services:  59.6% (1999)
Population below poverty line: 18.4% (2000 est.)
Household income or consumption by percentage share:
lowest 10%: 3%
highest 10%: 26.3% (1996)
Inflation rate (consumer prices): 8.4% (1999 est.), 10.2% (2000 est.)
Labor force: 15.3 million 17.2 million (1999 est.)
Labor force - by occupation: industry 25%, agriculture 25%, services 50% (1999 est.)
Unemployment rate: 11% (1999 est.)
Budget:
revenues: $31.6 billion
expenditures: $34.8 billion (1999 est.)
Industries: machine building, iron and steel, coal mining, chemicals, shipbuilding, food processing, glass, beverages, textiles
Industrial production growth rate: 4.3% (1999)
Electricity - production: 134.351 billion kWh (1999)
Electricity - production by source:
fossil fuel:  96.43%
hydro:  3.16%
nuclear:  0%
other:  0.41% (1999)
Electricity - consumption: 120.007 billion kWh (1999)
Electricity - exports: 8.43 billion kWh (1999)
Electricity - imports: 3.491 billion kWh (1999)
Agriculture - products: potatoes, fruits, vegetables, wheat; poultry, eggs, pork
Exports: $27.8 billion (f.o.b., 1999), $28.4 billion (f.o.b., 2000)
Exports - commodities: machinery and transport equipment 30.2%, intermediate manufactured goods 25.5%, miscellaneous manufactured goods 20.9%, food and live animals 8.5% (1999)
Exports - partners: Germany 36.1%, Italy 6.5%, Netherlands 5.3%, France 4.8%, UK 4.0%, Czech Republic 3.8% (1999)
Imports: $40.8 billion (f.o.b., 1999), $42.7 billion (f.o.b., 2000)
Imports - commodities: machinery and transport equipment 38.2%, intermediate manufactured goods 20.8%, chemicals 14.3%, miscellaneous manufactured goods 9.5% (1999)
Imports - partners: Germany 25.2%, Italy 9.4%, France 6.8%, Russia 5.8%, UK 4.6%, Netherlands 3.7% (1999)
Debt - external: $57 billion (2000)
Currency: zloty (PLN)

SOURCES: The World Factbook, U.S. Department of State

Mother Earth Travel > Country Index > Poland > Map Economy History