country report 2019 poland - european commission · country report 2019 poland joost korte, dg empl...
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Country Report 2019 PolandJoost Korte, DG EMPL
Marc Lemaître, DG REGIO
Benjamin Angel, DG ECFIN
Warsaw, 7 March 2019
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2019 European Semester
Joost Korte, DG EMPL
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Current economic trends in Europe
3
Real GDP and employment growth in the EU
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2019 European Semester
• Country reports published on 27 February
• Analytical parts consulted with the Polish authorities before publication
• Stronger link with the Multiannual Financial Framework
• Focus on investment needs
4
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Stability and Growth Pact
Macroeco
nom
ic I
mb
ala
nces P
roced
ure
5
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6
# Country-specific recommendation Evaluation
1 Ensuring fiscal framework compliance, improving efficiency of public spending.
Limited progress
2 Increasing labour market participation and removing obstacles to more permanent types of employment.
Ensuring sustainability and adequacy of the pension system.
No progress
3 Strengthening the innovative capacity of the economy.
Ensuring effective public consultations in the legislative process.
Limited progress
Poland has made limited progress in addressing the 2018 CSRs
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Economic outlook, investment and sectoral policies
Benjamin Angel, DG ECFIN
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• Poland’s long-run economic prospects depend on economy’s capacity to move towards knowledge-based economy producing advanced products and services
• Increasing investment to support innovation, education and skills development, better infrastructure and cleaner energy are crucial for long-run success
8
Key challenge and investment needs
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Poland is enjoying good economic times
• Uninterrupted fast growth over the last decade; growth to remain solid in the short term
• Household consumption and gradually increasing investment (mainly public) are main drivers
• Best labour market situation in 30 years
• No short-term risks to fiscal sustainability
9
Cumulative GDP growth, 2017-2018E
1
3
5
7
9
11
13
15
IEM
TR
O PL SI
LV
HU
EE
CY
LT
SK
CZ
BG
HR
ES
NL
AT FI
PT
LU
EU
SE
FR
DE
EL
UK
BE
DK IT
%
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Long-term prospects call for structural reforms
• Favourable economic environment offers unique opportunity to address structural challenges:
• Decline in working-age population
• Skill shortages & innovative capacity of the economy
• Investment climate: quality of institutions, policies and regulatory environment
10
Estimated composition of potential growth
-1
0
1
2
3
4
5
08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
TFP Capital Labour
pp forecast
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Role of investment
• Overall, investment has been weak since 2016
• In GDP-ratio terms, in 2009 – 2015 Poland used to be above the EU average, then declined strongly
• Public investment with large role, significant contribution from EU funds
• Private investment remains subdued, especially after 2015
• Low level of corporate investment
• Result of increased uncertainty and certain structural factors
11
Private investment (% GDP)
13
15
17
19
21
23
25
27
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
EU PL DE CZ SK
% GDPforecast
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No short-term fiscal risks
• Narrowing fiscal deficit, driven by: economic cycle, labour market developments and better tax compliance
• Declining public debt ratio
• Less optimistic picture in structural terms
• Short- and medium-term path of the fiscal deficit uncertain following the announcement of a new social and tax package
12
2017/2018 change based on data for 3 quarters
Yearly change of tax-to-GDP ratios, 2016-2018
0.0
0.2
0.4
0.6
2016 2017 2018
VAT CIT SSC PIT
p.p.
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Fiscal sustainability challenges exist
• Ageing population: drag on sustainability
• Pension system adequacy
• Health and long-term care
• The role of effectiveness and efficiency of public spending will be increasingly important
13
Proportion of population aged 65+
0
5
10
15
20
25
30
35
2015 2020 2030 2040 2050
EU PL
%
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Financial sector is overall solid
• Banking sector is overall sound
• Well capitalised and profitable
• Stable modest lending expansion
• FX mortgage loans gradually paid off, but legislation uncertainty remains
• Independent financial supervision is crucial
• The state controls about one third of the banking sector and the largest insurer
• Stronger financial-sovereign links
14
Lending developments
0
2
4
6
8
10
12
14
16
Jan
12
Jul 12
Jan
13
Jul 13
Jan
14
Jul 14
Jan
15
Jul 15
Jan
16
Jul 16
Jan
17
Jul 17
Jan
18
Jul 18
Total privateNon-financial corporationsHouseholdsMortgage credit
% y-o-y
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Investment: innovation
• Poland’s innovation performance remains modest
• Science-business links remain underdeveloped
• Higher education reform addresses some of the challenges
• Innovative activity of firms is hampered by some barriers
• e.g. limited access to highly qualified specialists
15
Poland’s ranking in Innovation Scoreboard, 2010 - 2017
EU BE
BGCZ
DKDE
EE
IE
EL
ES
FR
HR
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO
SI
SKFI
SE
UK
-0.08
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.0 0.2 0.4 0.6 0.8
Absolu
te c
hange E
IS (
2010 -
2017)
Member States EIS 2017
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Investment: transport & ICT
• Road network in Poland has improved significantly with a key role of EU funds
• …but road safety remains a concern
• Progress in modernising the railways is slower
• Fast internet access developed quickly, but broad access to ultra-fast internet is a challenge
16
Network of high-speed roads until 2023
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Investment: clean energy & environment
• Electricity generation dominated by coal
• Including recently built power plants
• Development of RES negatively affected by regulatory changes
• Investment to improve the energy efficiency crucial for containing demand for energy and to limit GHG emissions
• Limited interconnectivity adds to electricity price tensions
• Air pollution remains a concern
17
Gross electricitygeneration by fuel (TWh), 2017
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EU PL
Solid fuels
Renewables
Gases
Nuclear
Other
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Regulatory climate & public administration
• General business environment is favourable
• Compliance with certain administrative requirements is burdensome and may prolong investment processes
• Fast-track legislative procedures without proper public consultation feeds uncertainty
• Rule of law
18
Ease of Doing Business - Poland
60
62
64
66
68
70
72
74
76
78
80
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
DB10-14 methodology
DB15 methodology
DB16 methodology
DB17-19 methodology
in a scale from 0 to 100
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Labour market, education and social policies
Joost Korte, DG EMPL
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Labour market outcomes continue to improve
• Rising employment, accelerating wages
• Unemployment rate at the lowest level in recent history
• Shortage of skilled labour
20
Employment, wages, unemployment rate
-2
0
2
4
6
8
10
12
13Q
1
13Q
3
14Q
1
14Q
3
15Q
1
15Q
3
16Q
1
16Q
3
17Q
1
17Q
3
18Q
1
18Q
3
Employment growth y-o-y
Nominal wage growth y-o-y
Unemployment rate
%
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But some structural challenges persist
• Low participation of certain groups:
• women
• older workers
• people with disabilities
• less-skilled people
• Labour market segmentation
21
* Provisional data
Enrolment in formal childcare,children below the age of 3
0
5
10
15
20
25
30
35
40
PL EU
2016 2017*
%
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Education and skills: strengths and weaknesses
• Good PISA results and low early school leaving
• Low attractiveness of the teaching profession
• Reforms in higher education and VET
• Low participation in adult learning
22
Adult participation in learning
* Provisional data, % of population aged 25 to 64
0
2
4
6
8
10
12
PL EU
2017 2018*
%
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Social protection and healthcare
• Poverty and income inequalities continue to decrease
• Structural challenges in social policy
• Future pension adequacy is a key challenge
• Healthcare affected by low public financing, staff shortages and misallocation of resources
23
Key poverty indicators, general population
0
5
10
15
20
25
30
35
40
45
50
05 06 07 08 09 10 11 12 13 14 15 16 17
At-risk-of-poverty-or-exclusion-rate
At-risk-of-poverty-rate
Severe-material-deprivation-rate
% of population
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Regional dimension
Marc Lemaître, DG REGIO
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Regional dimension
• All regions have been developing fast for the last decades
• Poland's success in the catching-up process is based on polycentric growth
• However, strong disparities persist in spite of the outstanding socioeconomic progress. They are even more pronounced at sub-regional level
25
Change in regional GDP per capita in PPS relative to the EU average (2006-2016),
depending on the 2006 starting point
-40
-30
-20
-10
0
10
20
30
40
0 50 100 150 200
change in % points
% of EU average in 2006
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Regional dimension
• Urban-rural divide remains wide
• Large cities are the primary drivers of development while smaller cities struggle to adapt to rapid economic and technological transitions
• While disparities result from long-lasting structural issues, a targeted policy may help to reduce them
26
Urbanisation rate and regional GDP in PPS per capita, 2016
0
20
40
60
80
100
120
40 50 60 70 80
% of EU GDP average in 2016
% of population aged over 15
years living in urban areas
Poland