isa july 2014 country report turkey

The ISA July 2015 Poland Country Report1

ISA July 2015 Country Report

Poland


Poland: Key Facts

• Poland’s history has been heavily influenced by its geographical position between Germany and Russia.

• Poland is easily the largest of the countries that entered the European Union in 2004, with a population more than the other nine new members combined.

• Poland balances close ties with the United States, who it sees as a guaranteer of the country’s security, and the European Union with whom it has close economic ties.

• Poland’s economy has bounced back in recent years as foreign investment pours into the country.

• Poland continues to have one of the highest unemployment rates in Central Europe, but unemployment is beginning to fall rapidly.

Overview: Key Facts and Data:

• Official Name– Republic of Poland

• Capital– Warsaw

• Government Type– Republic

• Head of State– President Bronislaw Komorowski (since 2010)

• Head of Government– Prime Minister Ewa Kopacz (since 2014)

• Population– 38,384,000

• Land Area– 304;465 sq. km

• Total GDP (US$)– $526 billion

• Per Capita GDP at PPP (US$)– $22,790

• Currency– Polish zloty


Table of Contents

• Recent Political Events

• Recent Economic Events• Other Recent Events

Current Events: Economic Outlook: • Economic Overview• GDP Growth Forecasts• Key Sector Forecasts• Inflation Forecasts• Foreign Trade Forecasts• Foreign Investment Forecasts• Exchange Rate Forecasts• Outlook for Key Sector• Key Economic Issue• Economic Risk Outlook

• Overview of the Current Government

• Leadership Profile• Summary of the Most Recent Elections• Leading Party #1• Leading Party #2• Leading Party #3• Leading Party #4• Forecast for the Next Elections• International Relations Outlook• Potential Conflict #1• Potential Conflict #2• Military Capabilities• Key Political Issue• Political Risk Outlook

Political Outlook:

• Population Overview

• Population Characteristics• Development of Leading Urban Centers• Key Demographic Issue• Topography and Climate Overview• Environmental Threat Summary• Key Environmental Issue• Demographic and Environmental Risk Outlook

Demographic & Environmental Outlook:


Current Events and Recent Changes Overview


Poland: Recent Political Events and Changes

• In the first round of voting in May 2015’s presidential election, the candidate of the conservative opposition Law and Justice party, Andrzej Duda, surprisingly won the largest share of the vote (34.7%). He faced incumbent President Bronislaw Komorowski, who won 33.7% of the vote, in a run-off election. Former rock musician Pawel Kukiz finished in third place with 20% of the vote. In the second round of voting in Poland’s presidential election, Mr. Duda defeated President Komorowski by a margin of 51.5% to 48.5%.

• The defeat of President Komorowski was a major blow for the governing Civic Platform party which has seen its level of support wane in recent months.

• In June 2015, three government ministers and the speaker of the parliament resigned due to a scandal involving leak tapes of conversations of high-ranking government officials.

• The government announced plans to purchase Patriot surface-to-air missiles from the United States as tensions with Russia continued to rise.

• In June 2015, the United States announced that it would store tanks and other heavy weapons in Poland as part of a new plan for NATO deployments in Central Europe.

Key Political Events and Changes:


Poland: Recent Economic Events and Changes

• GDP growth in Poland accelerated to 3.6% year-on-year in the first quarter of 2015, continuing a run of strong economic results over the past year.

• Poland’s inflation rate was just -0.9% year-on-year in April 2015 as deflationary pressures remained in place.

• The zloty weakened against the dollar, euro and many other currencies in mid-2015, providing a nice boost for Polish exporters.

• Poland’s unemployment rate remained at 7.9% in April 2015.

• Coal miners in southern Poland went on strike to protest against the government’s efforts to restructure the country’s largest coal mining company. Afterwards, the government announced that it would not close the country’s loss-making mines due to the strike.

Key Economic Events and Changes:


Poland: Other Recent Events and Changes

• Poland commemorated the 70th anniversary of the end of the Second World War with a ceremony at Gdansk, where the war started in September 1939.

• In April 2015, Poland blocked a Russian motorcycle gang with ties to President Vladimir Putin from crossing Polish territory to commemorate the 70th anniversary of the end of the Second World War in Berlin.

Other Key Events and Changes:


Poland Political Outlook


Poland: Current Government

• President Lech Kaczynski was killed in a plane crash in Russia in April 2010, along with most of the heads of the country’s armed forces. He was replaced in office on an interim basis by the speaker of the parliament, Bronislaw Komorowski, who won 2010’s presidential election.

• The center-right coalition government was re-elected in October 2011, with most of the government’s highest-profile leaders maintaining their positions.

• In November 2013, Prime Minister Tusk made a major cabinet reshuffle in order to boost his government’s falling support levels. The biggest change was the replacement of Finance Minister Jacek Rostowski with Mateusz Szczurek.

• In September 2014, Prime Minister Tusk was selected to be the next president of the European Council, thanks in large part to strong backing by German Chancellor Angela Merkel. He resigned as prime minister a short time later.

• Afterwards, parliamentary speaker Ewa Kopacz was named as the new prime minister.

Overview: Key Members of the Government:

• Head of State– President Bronislaw Komorowski

• Head of Government– Prime Minister Ewa Kopacz

• Minister of Foreign Affairs– Grzegorz Schetyna

• Minister of Finance– Mateusz Szczurek

• Minister of Economy– Janusz Piechocinski

• Minister of the Interior– Teresa Piotrowska

• Minister of Justice– Cesary Grabarczyk

• Minister of Defense– Tomasz Siemoniak

• Minister of the Treasury– Wlodzimierz Karpinski

• Minister of Agriculture– Marek Sawicki


Profile of European Council President Donald Tusk

Donald Tusk became prime minister of Poland following the victory of his Civic Platform party in 2007’s parliamentary elections.• He led the Civic Platform to another victory in 2011’s parliamentary elections, where the party won a majority of seats in the parliament.• In winning 2011’s parliamentary elections, he became the first prime minister in post-Communist Poland to win re-election.• In September 2014, he stepped down as prime minister after he was selected to be the new president of the European Council.

Mr. Tusk first entered politics in the late 1970s and early 1980s when he became a leader of the youth wing of the Solidarity movement in his hometown of Gdansk.• After the fall of communism in Poland, he was one of the founders of the free market Liberal Democratic Congress and he entered parliament in 1991.• In 2001, Mr. Tusk and some of his allies founded the Civic Platform party and became the leader of the party in 2003.• In 2005, he was defeated in the second round of the country’s presidential election by Lech Kaczynski.

During his political career, Mr. Tusk has advocated free market reforms for Poland that included lower taxes and incentives for foreign investors in Poland.• In terms of foreign affairs, Mr. Tusk has continued with his predecessors of strengthening ties with both Poland’s European neighbors and with the United States.

Background:


Poland: Most Recent ElectionsParliamentary Elections – October 2011

Poland’s center-right government won re-election in October 2011’s parliamentary elections, becoming the first government to win a second consecutive term in office in Poland since the fall of Communism in 1989. • Under the leadership of Prime Minister Donald Tusk, Poland’s center-right government has remained very popular in recent years as the Polish economy has outperformed nearly all of its European counterparts.

As expected, Prime Minister Tusk’s Civic Platform party won a solid victory in 2011’s parliamentary elections, winning 39.2% of the vote and 206 of the 460 seats in the lower house of the Polish parliament. • Meanwhile, the Civic Platform’s junior coalition party, the agrarian Polish People’s Party, finished in fourth place with 8.4% of the vote and 30 seats in the parliament. • The country’s main opposition party, the conservative Law and Justice party, finished in second place with 29.9% of the vote and 157 seats. • The biggest surprise in the election was the emergence of the anti-clerical Palikot’s Movement party that was the best performer on Poland’s political left, winning 10.2% of the vote and 40 seats in the parliament.

Summary of the Last Elections: Results:

Source: Polish election authority


Poland’s Leading Political Forces:Civic Platform (PO)

The Civic Platform first swept to power following their massive victory in the 2007 parliamentary elections.• The party has been contesting the leadership of the political right in Poland with the Law and Justice in recent years.• Under the leadership of Donald Tusk, the party has soared to new heights in terms of popularity, winning re-election by a wide margin in 2011.

History:

• The PO is one of the only right-leaning parties in Poland to be staunchly pro-European Union.

• In terms of economic, the party supports promoting foreign investment and has flirted with the idea of a flat tax for Poland.

• The Civic Platform has taken a strong stance against corruption in Polish government.

Key Policies and Stances:

The Civic Platform’s surge in popularity has been the result of its ability to fight corruption while promising major economic improvements in Poland.• If the Civic Platform-led government fails to bring more economic growth or to effectively deal with corruption, it could follow in the footsteps of previous leading parties and see a quick loss of support.

Outlook:



Poland’s Leading Political Forces:Law and Justice (PiS)

Despite winning its largest-ever share of the vote, the Law and Justice party was swept from power in the 2007 parliamentary elections.• Nevertheless, the Kaczynski brothers, the leaders of the party, remained extremely influential, with Lech Kaczynski serving as the country’s president until his death in 2010.

History:

• The party’s main platform is promising tough new measures to tackle the rising crime problem in Poland.

• The party was in favor of European Union membership, but has deep reservations about further EU integration.

• The party favors economic reforms for Poland, although not to the degree of their more right-wing allies.

• The party supports a number of socially conservative platforms.


Many see Law and Justice as the true heirs to Solidarity’s leadership of Poland’s Right. • With a conservative program and a popular anti-crime stance, Law and Justice appeals to mainstream Poles in a way that more right-wing parties cannot emulate.• Moreover, if the Civic Platform stumbles while in power, Law and Justice could takeover the leadership of the political right.

Outlook:



Poland’s Leading Political Forces:Palikot’s Movement (RP)

Palikot’s Movement was founded by Janusz Palikot, a former high-ranking member of the Civic Platform after he resigned from that party in 2010.• In its first national election in 2011, the party won ten percent of the vote to become the third largest party in the parliament.

History:

• Palikot’s Movement is best-know for its support for the withdrawal of the Roman Catholic Church from public life in Poland.

• In fact, the party is easily the most socially liberal party in Poland.

• The party supports the implementation of a flat tax.


It remains to be seen if the party can build on its success in the 2011 elections of if it will gradually fade away.• With the political left in Poland remaining in disarray, Palikot’s Movement has an opportunity to consolidate its new-found leadership position on the left.

Outlook:



Poland’s Leading Political Forces:Polish People's Party (PSL)

The PSL has finished in fourth place in the past two national elections.• With the demise of some smaller right-wing parties in recent years, the People’s Party has been able to be the junior member of the governing coalition since 2007.

History:

• The party continues to support protectionist economic policies.

• The PSL is being forced into a more populist stance due to the success of the rural right-wing parties.

• The support of Poland’s huge rural population remains the hallmark of the party.


By forcing a split with the Democratic Left, the PSL has acknowledged the growing popularity of the right-wing parties among its rural voting base. • Whether or not the PSL will be successful in moderating their rural voters or if the party itself will become more populist remains to be seen.

Outlook:



Poland’s Leading Political Forces:Democratic Left Alliance (SLD)

The Democratic Left Alliance was swept from power in the 2005 parliamentary elections.• The party split over infrastructure development and EU membership while in power.• Since being swept from power in 2005, the SLD has suffered two further election defeats in 2007 and 2011.

History:

• The SLD favors strengthening ties with the West through cooperation in the EU and NATO.

• It favors a generally free-market approach to Polish economics.

• Consolidating Poland’s leftist-parties has resulted in the SLD moving more towards the center.


The party’s success in consolidating various political groupings left it as the dominant force on Poland’s political left. • However, the party is in danger of completely dissolving following its crushing defeats in the last three elections and the emergence of the center-left Palikot’s Movement.

Outlook:



Poland: International Relations Outlook

Key International Disputes:

• Large areas of western Poland once contained a sizeable German population and belonged to Germany until 1945. Both sides have demanded reparations for damages during the Second World War.

• Poland and the Czech Republic have in the past disputed control over a couple of small areas along their border.

• Western areas of Belarus and Ukraine once belonged to Poland and still have ties with Poland.

International Relations Outlook:

• Poland will maintain close political ties with the United States as security issues will continue to play a large role in determining Polish foreign policy.

• Nevertheless, Poland will continue to cultivate ties with the European Union, while serving as a bridge between the EU and the US.


Poland: Historical Maps

Map: Partition of PolandMap: Polish-Lithuanian Commonwealth

At its peak in the early 17th century, the Polish-Lithuanian Commonwealth

controlled much of modern-day Poland, Belarus, Ukraine and the Baltic states.

In the latter part of the 18th century, Poland was partitioned in three stages between the Russia, Prussia and the

Habsburg Empire.


Poland: Historical Maps

Map: Poland After WWIIMap: Poland Between WWI and WWII

After its independence after World War One, Poland was situated to the east of

modern-day Poland, controlling much of modern western Belarus and Ukraine.

In the wake of the Second World War, Poland was shifted westwards, annexing

large areas of eastern Germany, but ceding its eastern territories to the USSR.


Potential Conflict: Russia

Main Disputes:

• Poles still fear Russian intentions in Central Europe, particularly in the wake of Russia’s 2014 intervention in Ukraine.

• The unclear future of Russia’s Kaliningrad region is a source of instability between Russia and Poland.

• A closer union between Russia and Belarus would extend Poland’s border with a new “Russia”.

• Poland’s wholehearted embrace of NATO is mainly in response to the perceived threat from Russia.

Best- and Worse-Case Scenarios:

• Best Case Scenario– Russia moves to cultivate stronger ties with the

European Union and NATO and this eases Polish fears of future Russian aggression.

• Worst-Case Scenario– Russian moves to regain influence in the countries of

Central Europe and this stokes Polish fears of future Russian aggression.


Potential Conflict: Germany

Main Disputes:

• The descendants of Germans forced out of western Poland are seeking compensation for their losses.

• Following the Second World War, Poland was shifted westwards and former German areas were incorporated into Poland

• Poland fears that Germans will buy cheap Polish land in former German areas in an attempt to regain control there.

Best- and Worse-Case Scenarios:

• Best Case Scenario– Germany’s and Poland’s European Union

membership leads to a further normalization of relations between the two neighbors.

• Worst-Case Scenario– Calls for reparations from both sides lead to a serious

deterioration in relations between Germany and Poland.


Military Spending

Strengths and Weaknesses

Poland’s military is easily the largest of the Central European countries that joined NATO in the wake of the fall of communism in that region.• Poland was a leading contributor in the US-led wars in Iraq and Afghanistan.• Poland and the United States have developed very close military ties in recent years.

Poland’s military continues to undergo a major modernization program.• Polish military spending equals that of the rest of Central Europe combined.• The number of active Polish troops has been reduced to below 120,000, down from the more than 400,000 active troops that Poland had in the 1980s.

Outlook

Poland’s military capabilities, combined with its potential, have made it a key ally of the United States in Europe. • Meanwhile, despite the improved political climate in Central Europe, many Polish people remain wary of Russia and Germany, hence the desire for close defence ties with the United States.

Source: SIPRI


Poland: Political Risk Outlook

• Poland’s domestic political risk levels have receded in recent years as the domestic political climate has moderated and as regional tensions have faded.

• However, its external political risk levels have risen in recent years together with Russia’s growing assertiveness in East Europe and the conflict in Ukraine.

Current Political Risk Ratings:

Low Risk………………High Risk

Political Risk Outlook:

ISA Risk Ratings– 0.0 to 1.9 = Low Risk– 2.0 to 3.9 = Low to Moderate Risk– 4.0 to 5.9 = Moderate Risk– 6.0 to 7.9 = Moderate to High Risk– 8.0 to 10 = High Risk


Poland Economic Outlook


Poland: Economic Overview

Poland’s economy has proved to be quite resilient in the face of the major economic crisis in Europe.• Despite a slightly downturn during the height of Europe’s economic crisis, growth returned in recent years and Poland has outperformed nearly all other European economies in recent years.• Poland has benefitted from the fact that it has the largest domestic market in Central Europe and that it had enacted painful reforms that strengthened the domestic market in the long-run.

Heavy industry, mining and agriculture are the traditional pillars of the Polish economy.• However, these sectors have struggled over the past two decades due to foreign competition.• Today, it is Poland’s service sector that is realizing the most growth, thanks to rising demand levels on the domestic market in Poland.

Economic Summary: Economic Performance Comparisons:

Per Capita GDP at PPP

Avg

. A

nn

ua l

GD

P G

row

th 2

0 10 -

2014

Size of the circle indicates the size of the economy

Source: ISA Economic Forecasts


Poland: Wealth Comparisons

Per Capita GDP at PPP (US$)

Poland has the potential to become one of Europe’s most important markets, and if GDP growth can beat expectations, this will become a reality in the coming decades. In the

meantime, Poland’s market potential remains constrained by relatively low levels of purchasing power.

Key Wealth-Related Issues and Trends

Poland has steadily closed the gap with the wealthier countries of Central Europe.

Moreover, per capita GDP levels have surpassed those of emerging markets in

other regions.

Solid GDP growth, coupled with a lack of population growth, will lead to more

increases in wealth levels.

Source: World Bank


Keys to Economic Growth in Poland

Improvements in Poland’s Poor Infrastructure

Key Factors

More Success at Attracting Foreign Investment

The Pace of Economic Reform, Including a Modernization of Polish Heavy Industry

Domestic Spending

Poland’s economic performance has

improved greatly in recent years, with Poland

outgrowing most other European economies.

Poland’s economy will continue to realize solid, but not spectacular, economic growth over the forecast period. If Poland could further develop its export industries, then

economic growth would improve. Moreover, Polish consumers, with more purchasing power, can be a major force for economic growth as well.


Poland: GDP Growth Outlook

• Poland’s economy has withstood the European economic crisis better than most of its neighbors thanks to resilient levels of demand inside Poland.

• However, growth slowed in 2012 and 2013 as Europe’s crisis spread northwards.

• Higher levels of growth returned in 2014 and 2015, as in most of the rest of Central Europe.

Chart: GDP Growth Rates Current Outlook:

• GDP growth will remains trong over the near-term as domestic and export demand both rise at a faster pace.

• Stronger growth will return later in the forecast period, although the growth rates of the pre-crisis period are unlikely to be reached at any point in the coming years.

Future Outlook:

Source: ISA Economic Forecasts, national statistics


Poland: Key Economic SectorThe Mining Industry

Poland had to restructure its mining industry over the past two decades in order to be able to compete with foreign mining industry.• Tens of thousands of jobs were lost in the modernization process and many mines went out of business.• Nearly 110,000 people are still employed in Poland’s mines, down from 420,000 during the communist era.

Poland needs to spend huge sums of money to retrain miners for new jobs.• Money is also needed to solve the environmental issues surrounding the mines.

Summary:

Poland’s huge mining sector is proving to be a massive burden for the country’s economy and is not attracting the levels of foreign investment that were hoped for. • With unemployment already painfully high, additional restructuring is likely to be resisted by much of Poland’s mining workforce.

Outlook: Source: EIA, BP


Poland: Key Economic SectorThe Automotive Industry

Poland’s once-booming automotive industry has suffered a series of setbacks over the past decade.• Poland has suffered from inconsistent performances by the major foreign investors in the country’s automotive industry.• In addition, major foreign investments have gone to other Central European countries as many of the world’s leading carmakers have chosen to build car factories elsewhere in the region.• However, the country’s industry has benefitted from the strong growth on the domestic automotive market in recent years.

Summary:

The Polish car market should begin to rebound in the coming years after a number of difficult years. • Nevertheless, the threat posed by the collapse of much of the industry in Europe poses many challenge for the automotive sector in Poland.• As for the industry, the government must do a better job if it hopes to attract future investments.

Outlook:

Source: OICA


Poland: Industrial Production Growth Outlook

• Industrial production slipped in recent years as export demand slackened.

• Earlier growth had been driven by manufactured exports, with domestic demand starting to grow as well.

Chart: Industrial Production Growth Rates Current Outlook:

• Industrial production growth will be weak over the near-term due to relatively low levels of export demand.

• Moreover, without a significant pick-up in foreign investment in the manufacturing sector, long-term industrial production growth will be limited.

Future Outlook:



Poland: Inflation Outlook

• Inflationary pressures have been rather high in recent years, pushed upwards by high levels of demand and higher energy prices.

• Inflation rates fell sharply in recent years, with deflationary pressures gaining hold.

Chart: Inflation Rates Current Outlook:

• Inflationary rates will remain very low over the near-term as the threat of deflation remains in place.

• Moreover, Poland will be better insulated from the threat of external price pressures than most other countries in the region.

Future Outlook:



Poland: Foreign Trade Overview

Chart: Current Account Balance Chart: Leading Trade Partners

Poland was expected to become a major exporter of manufactured and agricultural products following the opening of the country to foreign investment. Unfortunately,

Poland has seen this distinction go to its neighbors to the south. The result is a current account deficit that is likely to grow as the economy continues to expand.



Poland: Foreign Investment

Poland has lagged behind other Central European countries in terms of per capita foreign investment, despite Poland’s economic success in recent years.• Poor labor relations and a lack of investment incentives from the government had hurt Poland’s attractiveness to foreign investors, not to mention the country’s poor infrastructure.

Poland’s relatively large domestic market is a key factor in attracting foreign investment.• Poland’s population is four times larger than any other Central European country, giving it a sizeable domestic market.• Its location provides it with access to northern and western Europe.

Chart: FDI Inflows Foreign Investment Climate:

The attractiveness of Poland’s domestic market has been a key catalyst for attracting more foreign investment to Poland.• Moreover, Poland has the potential to realize more foreign investment growth in the wake of the recent economic downturn thanks to the relative stability of the local economy.

Outlook For Future Foreign Investment:

Source: UNCTAD

The ISA July 2015 Poland Country Report

Regional Foreign Investment

Per Capita FDI inflows in Central and East Europe are among the highest in the world as manufacturers continue to invest heavily across the region. While countries in Central Europe are unlikely to realize major increases in foreign investment, some countries in

other areas of the region have much room for growth.

Source: UNCTAD


Poland: Foreign Investment by Sector and Investors

Chart: Foreign Investment by Country Chart: Leading Foreign Investors

France’s large investments in Poland’s telecoms and retail sectors have made that country the single largest investor in the Polish economy in recent years. Meanwhile,

some foreign investors are fearful that the current right-wing, populist government could drive away foreign investment from strategic sectors of the economy.


Poland: Exchange Rates

Chart: Exchange Rate with the Euro Chart: Exchange Rate with the US Dollar

The relative strength of the zloty had worried Polish exporters, who despaired over the strength of the zloty against other major currencies in recent years. Nevertheless, a

strengthening of the Polish economy holds the possibility of further appreciation periods before Poland eventually adopts the euro.

Source: ISA Economic Forecasts, OANDA

Source: ISA Economic Forecasts, OANDA


Cost of Living Comparisons

0 20 40 60 80 100 120

Krakow

Moscow

Prague

Warsaw

Paris

Frankfurt

London

Milan

Stockholm

Cost of Living (London = 100)

Cost of living levels in Warsaw have grown much faster than those in most other areas of the country and are today among the highest in Central Europe. Elsewhere, cost of

living levels have remained fairly low, particularly in comparison with provincial cities in West Europe.

Global Cost of Living Comparisons

0 50 100 150

Delhi

Krakow

Mexico City

Beijing

Dubai

Moscow

Warsaw

New York

London

Tokyo

Cost of Living (New York = 100)

Regional Cost of Living Comparisons

Source: US State Department

Source: US State Department


Poland: Domestic Consumer Market Outlook

Consumer Market Overview:

Poland’s consumer market has undergone a massive transformation over the past two decades. Nevertheless, purchasing power levels remain well behind those of West Europe and have fallen behind many areas of Central Europe as well, inhibiting the growth of the domestic consumer market.

Consumer Market in the Region:

Consumer Attitudes:

Polish consumers have embraced a wide range of new consumer goods and services in recent years, although consumers in rural areas remain generally conservative.

Domestic Consumption Patterns and Trends:

The consumer market in Poland has grown significantly in recent years, but this growth has been uneven as some areas have grown far faster than others.

Domestic Consumer Market Outlook:

Poland’s consumer market is expected to grow at a steady pace in the coming years as wage levels continue to rise.

Source: Eurostat


Fiscal Policy Overview

• Poland’s fiscal deficit rose sharply between 2007 and 2010 as the government did little to cut spending despite lower levels of government revenues.

• However, recent austerity measures have reduced the budget deficit, although it remains near 3% of GDP.

Chart: Fiscal Balance Current Outlook:

• The fiscal deficit will fall slowly over the coming years as the government does more to curb spending levels.

Future Outlook:



Poland: Labor Force

Poland’s high unemployment remains one of the most serious economic issues facing Poland today.• Some areas of Poland have unemployment rates above 15%, although other areas of the country have seen a sharp decline in unemployment over the past few years.• South-western and northern areas of Poland have the most severe unemployment problems.

Poland’s work force is highly skilled and well educated.• Productivity rates have been rising steadily, but still trail those of West Europe.• Strikes and industrial actions remain above the European average.

Chart: Unemployment Rate Labor Force Overview:

Poland’s unemployment rate has fallen from its highs during the previous decade as economic growth remains strong and the workforce shrinks.• Despite the decline in unemployment, many Poles will remain without work, but many sectors of the economy are beginning to experience labor shortages.

Outlook For the Labor Force:



Poland Regional Economies

As the largest country in East-Central Europe, Poland has a number of diverse economic regions. While a few areas such as Warsaw, Poznan and Krakow have seen economic expansion in recent years, areas where traditional industries predominate,

such as Silesia and the Baltic Coast have suffered from a lack of investment.

The Silesian region is Poland’s leading

heavy industry and mining center.

The three coastal cities of Gdansk, Gdynia and

Sopot are Poland’s shipping industry hub.

The primeval forests of north-eastern Poland hold significant tourist

potential.

The area around Warsaw remains the focal point of foreign

investment.


Key Infrastructure Issue in PolandPoland’s Appalling Road Network

Poland has one of the worst road networks in all of Central Europe.• Whereas the Hungarians and the Czechs have built large highway networks over the past two decades, Poland’s network is limited to a few relatively short highways at present.

Investment in Poland’s road network has been held back by a number of factors.• Small landowners often refuse to sell their land to the government.• Foreign investors are leery of East European road-building projects which relay upon tolls.• The Polish government has been unable to come up with the promised funds.

The longer it takes for Poland to modernize its transport infrastructure, the longer it will take for the country to adequately compete for new foreign investment into the region.

Until then, drivers trying to cross the country will continue to be frustrated.

Proposed Polish Highway Network


Forecast Assumptions and Risk

Assumptions: Risks:

The Polish Domestic Markets Remains StrongWe expect the Polish domestic market to develop into one of the key markets in Europe in the coming years.

Domestic Demand WeakensWith export demand in Europe and East Europe forecast to remain weak, a slump in domestic demand would have a major impact on the Polish economy.

Rollback of Economic ReformsPolitical forces in favor of rolling back some economic reforms continue to enjoy support in Poland and, if they can gain more influence, could harm Poland’s international competitiveness.

Uneven Global Economic GrowthEconomic growth will be strong in the United States and most “New World” economies, but Europe and Japan will continue to struggle. Growth in emerging markets will be steady, if unspectacular.

Natural Resource Prices Trend DownwardsThe fall in oil and other natural resource prices over the past year will not be reversed as demand levels remain weaker in China and many other emerging markets, as well as in Europe and Japan.

A Meltdown in the Middle EastThe potential for the level of political unrest in the Middle East and North Africa to become much worse is very high as conflicts of varying intensities wage across the region.

Deflationary Pressures in Developed EconomiesA number of developed economies in Europe and Asia will face high levels of deflationary pressures that will persist over the longer-term in many of these regions’ weaker economies.

A Strong US DollarThe US dollar will retain most of its recent gains against other currencies around the world as the US economy records strong growth and investors continue to seek safe havens for their investments.


Poland: Economic Risk Outlook

• Poland’s economic risk levels have fallen in recent years, despite the fact that much of Europe has been in an economic crisis.

• Poland’s expanding domestic market has been a key to the fact that the country’s economic risks are as low as they are know.

Current Economic Risk Ratings:


Economic Risk Outlook:



Poland Demographic and Environmental Outlook


Poland: Population Overview

Chart: Working-Age PopulationChart: Total Population

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2000 2010 2020 2030 2040 2050

Working-Age Population

Working-Age Non-Working-Age

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

1950 1970 1990 2010 2030 2050

Total Population

Poland’s workforce is forecast to decline in the coming decades, like in most of its neighboring countries. As a country which receives relatively little immigration, this is

an alarming situation for Poland’s developing economy and could lead to labor shortages in some areas of the economy.

Source: US Census Bureau



Population Growth By Ten-Year Age Increments

Total Population By Age-Group

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

80+ 794,000 1,271,000 1,569,000 2,056,000 3,060,000 3,032,000

70-79 2,326,000 2,436,000 2,811,000 4,149,000 3,365,000 4,205,000

60-69 3,327,000 3,618,000 5,239,000 4,163,000 5,082,000 5,261,000

50-59 4,138,000 5,895,000 4,616,000 5,548,000 5,709,000 4,117,000

40-49 6,282,000 4,870,000 5,793,000 5,931,000 4,258,000 3,906,000

30-39 5,028,000 5,936,000 6,051,000 4,332,000 3,957,000 3,861,000

20-29 6,033,000 6,135,000 4,386,000 3,994,000 3,886,000 3,250,000

10-19 6,222,000 4,453,000 4,043,000 3,920,000 3,268,000 3,111,000

0-9 4,496,000 4,079,000 3,945,000 3,283,000 3,118,000 3,037,000

2000 2010 2020 2030 2040 2050

Poland’s declining birth rate and aging population will lead to major changes for Polish society. Within 20 years, one-third of Poland’s population will be more than 60 years

old.



Composition of Poland’s Population

Following the westward shift of Poland’s borders in 1945, and the mass migrations that followed, Poland has become ethnically homogenous.

• Much of Poland’s western areas once contained a large German population.

• Likewise, many Poles lived in what is today Belarus, Ukraine and Lithuania.

Polish is the official language of the country.

• The small ethnic minorities continue to speak their own language.

• Many Poles can speak English, German or Russian.

The Roman Catholic Church exerts a great deal of influence over Poland.

• It is a focus of Polish nationalism and conservatism and the church is very involved in Polish politics.

• The fact that former Pope John Paul II was a Pole has greatly enhanced the church’s position in Poland.

Religions

95.0%

5.0%

RomanCatholic

Other

Ethnic Groups

0.5%

0.6%

97.6%

1.3%

Polish

German

Ukrainian

Belarusian

Languages

0.5%

0.6%

97.6%

1.3%

Polish

German

Ukrainian

Belarusian


East Europe Population Trends by Country

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

1950 1970 1990 2010 2030 2050

Total Population

Russia Ukraine PolandRomania Serbia-Montenegro BelarusCzech Republic Hungary BulgariaOthers

-50% -40% -30% -20% -10% 0%

Others

Serbia-Mont.

Belarus

Czech Rep.

Hungary

Bulgaria

Romania

Poland

Ukraine

Russia

Contribution to Regional Population Growth (2000-2050)

No region in the world is experiencing the level of population decline as East Europe. Russia and Ukraine alone will see their collective populations decline by nearly 30

million people by 2050. This will have a major impact upon the economies and social structures in the region.




Poland: Leading Urban Centers

• The industry-rich Silesian region, centered around Katowice, contains Poland’s largest population concentration.

• However, Warsaw remains the administrative and commercial heart of the country, while Krakow has retained its position as the leading cultural center of Poland.

Chart: Largest Urban Centers Summary:

Source: World Gazetteer


Key Demographic Issue in PolandThe Impact of Poland’s Westward Shift in 1945

Josef Stalin, with the agreement of the Allies, shifted Poland westwards at the end of the Second World War.• The USSR regained Russia’s Czarist-era frontier.• Poland was compensated with lands taken from Germany.

Most ethnic Germans living on the land given to Poland were expelled.• There are some claims, in Germany, for compensation to be given to these expelled Germans• Poles today fear that Germans will try to buy this land back piece by piece now that Poland is a member of the European Union.

It is unlikely that a modern-day German government would attempt to retake the lands it lost in 1945 to Poland. However, many Polish have genuine fears of just such an action

on the part of the Germans. As for the eastern lands which Poland lost, few Poles remain, making a land-grab a very small likelihood.


Poland Immigration and Emigration

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1950-59 1960-69 1970-79 1980-89 1990-99

Immigration and Emigration

Immigration Emigration

Poland’s improving economic health, coupled with the economic crisis in much of West Europe, has resulted in a sharp decline in Polish emigration levels. Moreover,

many previous emigrants from Poland have been returning home due to better employment prospects in Poland.

Polish emigration has been steady since the last great emigration wave at the end of the Second World War.• Previously, most Polish emigrants made their way to the United States and Canada.• Following Poland’s membership in the European Union, emigration of Poles to Britain, Germany and other western EU member states rose sharply.

Many West Europeans fear that a wave of Polish workers will move westwards in order to find better jobs.• Germans are most fearful as over 75% of emigrants from Central and Eastern Europe who emigrated within Europe in recent years moved to Germany.


Poland: Topography and Climate

• The northern two-thirds of Poland are covered by the North European Plain.

• This area is generally flat with large forests and lakes covering much of the eastern half of this plain.

• The land rises in the south to reach the Tatra Mountains along Poland’s southern border.

• Poland has a continental climate, with greater extremes in the eastern half of the country.

• The Baltic Sea has a moderating effect upon the temperatures along the coast, while farther inland summers can be very hot and winters can be cold and snowy.

Topography and Climate:

Poland’s Silesia region is one of the most polluted areas in Europe.• It is part of the “Black Triangle” that extends into eastern Germany and the northern Czech Republic.• The situation has improved since the fall of Communism.

The nine countries which border the Baltic Sea have committed to reducing pollution levels in that sea.• Many industrial sites line the Baltic coast.• Many doctors recommend not to eat the fish caught in the Baltic Sea.

Poland has some of Europe’s most pristine forests.• They are mostly located in the northeast of the country near the border with Belarus.• The forests are home to the European bison.

Key Environmental Issues:


Key Geographic Issue in PolandPolish Nature

Poland contains some of Europe’s last remaining primeval forests.• These forests are located in the northeast section of the country.

The forests are home to one of Europe’s largest concentrations of wildlife.•This includes the famous European bison.• The bison is the largest remaining land mammal in Europe.• The bison were eliminated from the wild in 1919 but have been reintroduced in recent years.

Europe is perhaps the world’s poorest region in terms of wildlife, so Poland’s primeval forests and their bison population represent a bridge to a past where wildlife once

thrived across much of Europe.


Poland: Demographic and Environmental Risk Outlook

• As Poland’s population declines, risk levels will likely rise to higher levels.

Current Risk Ratings:


Demographic Risk Outlook:


• Poland’s environmental risk levels are typical for the Central European region as many of the countries there face the same environmental challenges.

Environmental Risk Outlook:


ISA July 2015 Country Report

Poland

isa july 2014 country report turkey

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