Poland

Politics:

• Analysis

  Poland politics: Quick View - New cabinet appointment should stabilise gove

  Event

  On December 4th Mr Tusk announced the entry into government of Janusz Piechocinski, the freshly elected leader of the government's junior coalition partner, the Polish Peasants' Party (PSL).

  Analysis

  Mr Piechocinski's appointment as deputy prime minister and economy minister comes just two weeks after his surprise election as the party leader of the PSL, at the party's congress held over the weekend of November 17th-18th. After beating the incumbent, Waldemar Pawlak (who had been party leader since 2007) by a mere 547 votes to 530, a cabinet-wide reshuffle had been widely expected, following Mr Pawlak's immediate resignation from government. However, in a bid to ensure minimal disruption to the work of government at a time of significant slowdown in the domestic economy, the prime minister opted instead for a straightforward replacement of both ministerial posts previously held by Mr Pawlak. As a result, the PSL continues to hold three key posts in the government-agriculture, labour and, critically, the economy-despite earlier speculation that another PSL minister would come to assume responsibility for the economy alongside Mr Piechocinski.

  Mr Piechocinski's nomination by Mr Tusk, which now awaits formal endorsement by the president, comes at a time of uncertainty for the government. Following numerous political scandals involving both coalition parties over the summer months, and rising social and political protest against austerity in October and November, the Civic Platform (PO)-led government has come under increasing pressure to improve its political image and shore up its standing. Mr Tusk's expose speech, delivered in October, was part of a government attempt to reverse faltering popularity ratings in the polls. The latest TNS Polska tracking poll conducted for Gazeta Wyborcza, a newspaper, suggests that PO's political standing is still under threat from its leading right-wing opponent, the Law and Justice (PiS) party. The parties are now tied with an identical popularity rating of 28%, which signifies a drop for PO from an earlier TNS poll, published in mid-November, where the PO had 34%, alongside 23% for the PiS. In stark contrast, the PSL's rating has remained broadly unchanged throughout much of 2012, at around 7%.

  December 04, 2012

• Background

  Poland: Political forces at a glance

  Current government: Poland is a parliamentary democracy. The legislature consists of a 460-seat lower chamber (the Sejm) and a 100-seat upper chamber (the Senate). Both chambers' members are directly elected for four-year terms. The centre-right Civic Platform (PO), led by the prime minister, Donald Tusk, has been in power since November 2007 in a coalition with the agrarian Polish Peasants' Party (PSL). Bronislaw Komorowski, the PO-nominated speaker of the Sejm, became acting head of state in April 2010 after the death of the president, Lech Kaczynski, in an aeroplane accident near Smolensk in Russia.

  The opposition is currently made up of the right-wing Law and Justice (PiS), and the smaller Democratic Left Alliance (SLD), the successor to the communist party. The parliamentary representation of both parties, but particularly of the SLD, was reduced by the death of several members of parliament (MPs) in the aeroplane crash that killed Mr Kaczynski.

  Parliamentary forces
  	% of vote in 2007 election	Seats in Sejm after 2007 election	Seats in Sejm in May 2010
  Civic Platform	41.5	209	203
  Law & Justice	32.1	166	150
  Democratic Left Alliance	13.2	53	40
  Polish Peasants' Party	8.9	31	28
  German minority	-	1	1
  Independent & smaller groups	-	-	23
  Total	100.0	460	445
  Note. At the time of writing, the 15 seats of the parliamentarians killed in the Smolensk air crash in April 2010 were vacant.
  Sources: State Electoral Commission; Sejm.

  Download text file (csv format)

  Next elections: A presidential election was held in October 2005 and a parliamentary election was held in October 2007, two years ahead of schedule, following the collapse of the previous government. Mr Kaczynski's death forced the presidential election scheduled for late 2010 to be brought forward to June, with a possible second-round run-off in July. The next parliamentary election is scheduled for late 2011.

  May 12, 2010

• Structure

  Poland: Political structure

  Official name

  Republic of Poland

  Form of state

  Parliamentary republic

  National legislature

  Bicameral: Sejm (lower house) of 460 members; Senate (upper house) of 100 members

  Electoral system

  Universal direct suffrage over the age of 18

  National elections

  October 2011 (parliamentary); June-July 2010 (presidential). The next parliamentary election is scheduled for late 2015; the next presidential election is scheduled for mid-2015

  Head of state

  President, elected by universal suffrage; currently Bronislaw Komorowski, elected on July 4th 2010

  National government

  Council of Ministers headed by the prime minister, responsible to parliament

  Main political groupings

  Civic Platform (PO), a centre-right movement with many former members of Solidarity parties; Law and Justice (PiS), a right-wing grouping based on a law-and-order platform; Polish Peasants' Party (PSL), a left-of-centre grouping representing farming communities; Palikot's Movement (RP), an anti-clerical liberal party representing, among others, minority groups in Polish society; Left and Democrats (LiD) coalition, a loose grouping including the Democratic Left Alliance (SLD), the direct successor to the Communist Party, which has recast itself as a social democratic movement

  Prime minister: Donald Tusk (PO)

  Deputy prime minister & economy minister: Waldemar Pawlak (PSL)

  Key ministers

  Agriculture & rural development: Stanislaw Kalemba (PSL)

  Culture: Bogdan Zdrojewski (PO)

  Defence: Tomasz Siemoniak (PO)

  Education: Krystyna Szumilas (PO)

  Environment: Marcin Korolec (independent)

  Finance: Jacek Rostowski

  Foreign affairs: Radoslaw Sikorski (PO)

  Health: Bartosz Arlukowicz (PO)

  Interior: Jacek Cichocki (independent)

  Justice: Jaroslaw Gowin (PO)

  Labour & social policy: Wladyslaw Kosiniak-Kamysz (PSL)

  Regional development: Elzbieta Bienkowska

  Science & higher education: Barbara Kudrycka

  Sport & tourism: Joanna Mucha (PO)

  Transport, construction & maritime economy: Slawomir Nowak (PO)

  Treasury: Mikolaj Budzanowski (independent)

  Central bank governor

  Marek Belka

  December 06, 2012

• Outlook

  Poland: Key developments

  Outlook for 2013-17

  • The centre-right Civic Platform (PO) of the prime minister, Donald Tusk, has a small yet workable majority in parliament and is expected to remain in power until the next parliamentary election, in 2015.
  • Increasing opposition from the right-wing Law and Justice (PiS) could serve to undermine the authority of the government.
  • The general government deficit, calculated according to EU harmonised (ESA 95) methodology, is forecast at 3% of GDP in 2013, shrinking from 5.1% in 2011 and an estimated 3.7% in 2012.
  • Real GDP is estimated to have grown by 2.1% in 2012. Economic growth is forecast to slow further in 2013, owing to a recession in the euro zone and weak domestic demand.
  • Inflation is estimated to have fallen to an average of 3.6% in 2012, stoked by the volatility of the zloty. It is expected to fall to an annual average of 2.8% in 2013-17, within the target range set by the central bank.
  • The current-account deficit is expected to continue shrinking in 2012, to 3.3% of GDP, as the impact on imports of weak domestic demand outweighs the impact on exports of weakening external demand.

  Review

  • Recent opinion polls indicate that PO has regained its lead over the right-wing Law and Justice (PiS).
  • Following its policy meeting on November 6th-7th, the monetary policy council (MPC) of the central bank cut the official interest rate by 25 basis points, to 4.5%.
  • In October headline industrial output rose by 7.7% month on month and 4.6% year on year, largely owing to seasonal and working-day effects.
  • Registered unemployment rose in October, reaching 12.5% of the labour force, which takes the headline total to just below the politically sensitive 2m level.
  • Despite a slight acceleration in the monthly rate of consumer price inflation, year-on-year inflation dropped to 3.4% in October.
  • In January-September exports rose by 1.9% year on year, to EUR104.3bn (US$131bn). Imports amounted to EUR111.4bn, 2.6% lower than a year earlier.
  • According to flash estimates, real GDP growth in the third quarter on a seasonally unadjusted basis was just 1.4% year on year, down from 2.3% in the second quarter.

  December 06, 2012

Economy:

• Background

  Poland: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	38.2	Population growth	0.0
  GDP (US$ bn; market exchange rate)	513.0b	Real GDP growth	4.3
  GDP (US$ bn; purchasing power parity)	769.7	Real domestic demand growth	4.2
  GDP per head (US$; market exchange rate)	13,436	Inflation	3.5
  GDP per head (US$; purchasing power parity)	20,160	Current-account balance (% of GDP)	-5.4
  Exchange rate Zl:US$ (av)	3.0b	FDI inflows (% of GDP)	3.2
  a Economist Intelligence Unit estimates. b Actual.

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  Background: A Soviet-backed communist regime gained power in Poland after the second world war. The Solidarity trade union movement arose from a peaceful national revolt in 1980. Partially free elections in 1989 led to the formation of the first non-communist government in eastern Europe. Since 1989 governments composed of parties descended from the Solidarity movement have alternated in office with coalitions led by the former communists, renamed the Democratic Left Alliance (SLD). The right-wing Law and Justice (PiS) won the parliamentary election in September 2005, but was unable to form a stable administration, and an early election was held in October 2007. This was won by the liberal-conservative Civic Platform (PO), which formed a coalition with the small Polish Peasants' Party (PSL). A new PO-PSL coalition was formed following a general election in October 2011.

  Political structure: Poland is a parliamentary republic. Parliament consists of two houses, the 460-seat Sejm (the lower house), elected by proportional representation, and the 100-seat Senate (the upper house), chosen in first-past-the-post contests in the regions. The president is elected in a direct ballot and has the right to veto legislation or to send it for review to the Constitutional Tribunal. The Sejm needs a three-fifths majority to override a presidential veto.

  Policy issues: Balancing the goal of public finance reforms with measures to promote economic growth are the main economic policy issues. Euro adoption is unlikely to be a priority in the foreseeable future, given likely problems in narrowing the budget deficit, and increased doubts about the advantages of euro area participation. Poland joined the EU on May 1st 2004, but further domestic reforms will be needed to take full advantage of financial transfers from the EU.

  Taxation: The basic rate of value-added tax (VAT) rose to 23% at the beginning of 2011, where it is scheduled to remain until 2014. The rate of corporate tax was cut from 27% to 19% in 2004. From January 2009 rates of personal income tax are 18% and 32%. Social security contribution rates remain high, despite falling by a cumulative 7 percentage points in July 2007 and January 2008. Indirect taxation (particularly excise duties) has also been introduced in 2012 in a bid to bolster the government's fiscal austerity drive.

  Foreign trade: The current-account deficit narrowed sharply in 2009 as imports plummeted, owing to a contraction in domestic demand. Exports also fell, but benefited among other things from currency depreciation. In 2010 the current-account deficit widened to US$24.1bn (5.1% of GDP) from US$17.3bn (4% of GDP) in 2009 as imports recovered. The current-account deficit widened to US$25bn (4.9% of GDP) in 2011 as domestic demand remained strong.

  Major exports 2011	% of total	Major imports 2011	% of total
  Machinery & transport equipment	25.7	Machinery & transport equipment	21.0
  Manufactured goods classified by material	13.8	Manufactured goods classified by material	11.8
  Food & live animals	10.5	Miscellaneous manufactured goods	11.1
  Miscellaneous manufactured goods	3.7	Chemicals & chemical products	6.4
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  Germany	25.9	Germany	27.4
  UK	6.4	Russia	9.8
  Czech Republic	6.2	Netherlands	5.6
  France	6.1	Italy	5.1

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  December 06, 2012

• Structure

  Poland: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 06, 2012

• Outlook

  Poland: Country outlook

  Poland: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: A two-party coalition government, in power since the parliamentary election in October 2011, holds a small but workable majority in parliament. The coalition comprises the centre-right Civic Platform (PO), the largest party, and the rural-based Polish Peasants' Party (PSL). The PO leader, Donald Tusk, governs as prime minister in a second consecutive term in office. The opposition is divided between the conservative Law and Justice (PiS), the Democratic Left Alliance (SLD), and Palikot's Movement (RP), led by Janusz Palikot. The SLD emerged from the election politically weakened, and it is no longer the dominant party of the centre-left.

  ELECTION WATCH: Poland faces three important elections during the forecast period. An election to the European Parliament is scheduled for mid-2014. The next general election is scheduled for late 2015. The possibility of voter weariness with the PO by 2014-15 could facilitate Mr Tusk's decision to run for the presidency in 2015.

  INTERNATIONAL RELATIONS: Poland's presidency of the EU ended in December 2011. The government will seek to increase Poland's influence within the EU, advocating deeper European integration. In March 2012 Poland (alongside 24 other EU members) signed the new EU fiscal treaty encouraging budgetary responsibility. Poland appears to be supportive of the German stance on fiscal austerity. It also favours new pan-European initiatives proposed by the European Commission, such as the creation of a banking union. The government will lobby hard to preserve the flow of EU funds to Poland in the EU budget for 2014-20, although it is highly unlikely to secure as much as it did in the previous budget round.

  POLICY TRENDS: Economic policy in the immediate future is likely to be preoccupied with demonstrating fiscal prudence in order to bolster market confidence and demonstrate creditworthiness. This will be important to facilitate the continued servicing of loans without resorting to the flexible credit line (FCL) with the IMF, which is worth US$29.5bn. Although this credit line is due to expire in early 2013, it is likely to be extended. However, with the recent announcement of fiscal loosening in the short term, the government's main preoccupation will be to encourage domestic stimulus for economic growth by supporting investment in the first instance. As a result, investor sentiment has shifted more in favour of the growing Polish economy than previously, despite deepening recession in the euro zone.

  ECONOMIC GROWTH: The economy grew by an estimated 2.1% in 2012 (down from 4.3% in 2011), owing to the euro zone recession. External and internal demand will continue to weaken in 2013, with negative implications for exports, industrial production and employment. However, the weaker zloty should help to keep exports competitive, and net exports are expected to continue contributing positively to headline economic growth in 2013. Around 27% of Polish exports are bought by Germany, but Germany has avoided recession thus far, and the Economist Intelligence Unit also expects Poland to avoid recession.

  INFLATION: In 2011 inflation was outside the target range of the National Bank of Poland (NBP, the central bank) of 1.5-3.5%. In the short term inflationary pressures are expected to persist, as a result of high global commodity and fuel prices, even though disinflationary trends are already apparent across the EU amid waning consumer demand and softening energy price inflation. Inflation is estimated to average 3.6% year on year in 2012, in part owing to Poland's sensitivity to the price of oil, and a weaker zloty against the US dollar and the euro. In 2013 lower international commodity prices will aid disinflation, as will zloty appreciation and inflation-targeting by the NBP. These factors are forecast to keep inflation below 3% in 2014-17.

  EXCHANGE RATES: Amid volatility on international currency markets, the zloty was hit especially hard in the first half of 2012, depreciating sharply against the US dollar and the euro. The zloty stabilised at the start of the third quarter, following injections of liquidity into the European banking system by the European Central Bank (ECB, the euro area's central bank), which improved financial market sentiment. However, the zloty has started to weaken in the fourth quarter, in anticipation of further interest rate cuts as the slowdown in the domestic economy deepens.

  EXTERNAL SECTOR: The winding down of large infrastructure projects related to the Euro 2012 football championships, strong export performance and dampening consumption growth in 2012 have allowed the trade deficit to moderate to an estimated 2.5% of GDP. The income deficit will remain relatively large, but the transfers surplus will be higher than historically, owing to inflows of funds from the EU. The current-account deficit is forecast to average around 3.2% of GDP annually in 2013-17.

  December 07, 2012

• Forecast

  Poland: Country forecast summary

  Country forecast overview: Highlights

  • The senior ruling party, the centre-right Civic Platform (PO), remains the strongest party. It rules in a coalition with the agrarian Polish Peasants' Party (PSL). The two parties have a small but workable parliamentary majority, but political and popular opposition is growing.
  • The right-wing Law and Justice (PiS), the main opposition party, retains a strong popular following. However, until the PiS re-establishes its political standing and legitimacy in the eyes of its core voter base, it is unlikely to pose a significant threat to the ruling coalition.
  • The PO-led government is expected to continue in its efforts to balance good relations with the EU with a robust defence of Poland's national interests. Poland will remain one of the US's principal European allies, despite reduced enthusiasm for NATO-led military missions. Relations with Russia are expected to normalise.
  • The Economist Intelligence Unit does not expect the zloty to enter the EU's exchange-rate mechanism (ERM2) until 2016 at the earliest. Poland will be unable to comply with the Maastricht budget deficit criterion before 2013.
  • Economic growth is estimated to have slowed to 2.1% in 2012, owing to contractions in external and domestic demand. The economy is expected to rebound after 2014, following a further slowdown in growth in 2013, with real GDP growth estimated at 1.7%, as fiscal austerity and softening domestic demand continue to constrain growth.
  • Consumer price inflation remained high in 2012, above the threshold set by the National Bank of Poland (NBP, the central bank), at an estimated 3.6%. Fiscal policy will be tightened in 2013-14 in order to meet the criteria for eventual euro adoption. A forecast slowdown in inflation in 2013-14 may allow some room for monetary flexibility.
  • The current-account deficit is estimated to have narrowed to 3.3% of GDP in 2012 (from 4.9% in 2011) as dampened consumer demand and investment spending reduced the import bill. We forecast smaller annual deficits in 2013-17, averaging 3.2% of GDP.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	2.1	1.7	2.5	3.3	3.7	4.2
  Consumer price inflation (av; %)	3.6	3.4	2.8	2.7	2.6	2.5
  General government budget balance (ESA; % of GDP)	-3.7	-3.0	-2.8	-2.1	-1.6	-1.4
  Current-account balance (% of GDP)	-3.3	-3.1	-3.3	-3.5	-3.0	-2.9
  Short-term lending rate (av; %)	8.6	8.1	7.5	6.8	6.6	6.6
  Exchange rate Zl:US$ (av)	3.27	3.21	3.15	3.03	2.86	2.79
  Exchange rate Zl:€ (av)	4.20	4.05	3.95	3.75	3.60	3.51

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  December 06, 2012

View detailed map

Country Briefing

Land area

311,889 sq km, of which 61% agricultural, 30% forest

Population

38.2m (April 2011 official estimate)

Main towns

Population in '000, December 2009

Warsaw (capital): 1,714

Gdansk: 457

Krakow: 755

Szczecin: 406

Lodz: 742

Bydgoszcz: 358

Wroclaw: 632

Lublin: 349

Poznan: 554

Katowice: 309

Climate

Temperate. The central European location yields a climate in which warm summers and cold winters are the norm. The average temperature during the year is about 5-7°C. The hottest month is July, with an average temperature in the range of 16-19°C. In the winter the coldest temperature is in January. June and July are usually the wettest months of the year

Weather in Warsaw (altitude 106 metres)

Hottest month, July, 15-24°C (average daily minimum and maximum); coldest month, January, minus 5-0°C; driest month, January, 23 mm average monthly rainfall; wettest month, July, 76 mm average monthly rainfall

Language

Polish

Measures

Metric system

Currency

Zloty (Zl)

Fiscal year

Calendar year

Time

One hour ahead of GMT/BST

Public holidays

January 1st (New Year's Day); Easter Monday; May 1st (Labour Day); May 3rd (Polish National Day, Proclamation of 1791 Constitution); Corpus Christi (June 7th in 2012); August 15th (Assumption); November 1st (All Saints' Day); November 11th (Independence Day); December 25th-26th (Christmas)

March 23, 2012