Poland has emerged in the last two years as Europe’s surprising success story. Where other economies were crumbling under the strain of the global financial crisis, Poland was the only country within the European Union that avoided recession.
The largest country in the CEE is an attractive option for investors, and 2011 is looking good. Poland’s GDP growth rate is expected to reach nearly 3%, foreign investments are on the rise, and the unemployment rate is no longer increasing.
Since 1989, Poland has seen nearly €146bn in foreign direct investment enrich its markets—in 2009 alone, monies invested by the National Bank of Poland totalled €8.5bn, most of which came from EU Member States. During the first half of 2010, Poland saw €6.3bn flow into the country, promising an exceptional economic performance for the entire year.
The country’s economy is strengthened by the positive image it presents to investors. Poland has been ranked one of the best locations for capital investments, and the inflow of foreign market capital is a critical factor enabling the development of regional cities and commercial real estate.
Inflation is finally under control in Poland as well, and for the first time in nearly three years, the inflation rate is likely to fall below the target of 2.5%. In the first half of 2010, the country’s inflation rate gradually decreased to a low of 2.3% in June, the result of a slowdown of skyrocketing electricity prices and the falling value of the Polish zloty. This low inflation, combined with satisfactory GDP growth, persuaded the National Bank of Poland to keep its interest rates low.
Although the zloty has fluctuated considerably, inflation rates are expected to remain slightly below target. This could prompt the Polish central bank to relax its monetary policies, although lower interest rates are unlikely in the near future. Improvements in capital markets have led to an increase in lending and a drop in financing costs, but it is still harder and more costly to obtain debt financing in Poland than it was before the crisis.
Continued economic development in Poland is likely to be hindered by external factors. Consumption levels in highly developed countries, especially in EU Member States, and restrictive fiscal policies may lead to a decline in demand for goods and services. Poland’s status in capital markets remains unstable, despite the successful privatisation of two major companies, and investors are moving cautiously in planning purchases.