Poland

Politics:

• Analysis

  Poland politics: Quick View - iPad politics

  Event

  On March 8th the coalition government led by Donald Tusk survived a no-confidence motion initiated by Law and Justice (PiS), a right-wing opposition party.

  Analysis

  When the PiS filed its no-confidence motion against the government on February 11th, few expected the elder statesman of conservative Polish politics, Jaroslaw Kaczynski, to support his party's intention to bring down the government with an iPad. During the lengthy debate that preceded the vote, Mr Kaczynski presented members of parliament (MPs) with a speech, pre-recorded on an iPad, by Piotr Glinski, the would-be leader of a new "government of experts", as proposed by the PiS. Mr Glinki's words failed to convince the MPs, however: only 137 of them backed the no-confidence motion, with 236 opposing it in the 460-seat Sejm (parliament). This comes after a confidence motion initiated by the government itself in October 2012, which went in favour of the Civic Platform (PO)-Polish Peasants' Party (PSL) coalition, by 233 votes to 219.

  The strength of the latest vote backing the government was a double victory for Mr Tusk, who had been looking to shore up support for the government since the start of this year, when it had seemed that the economic slowdown was undermining his administration. After opinion polls in January and February showed the PO's lead over the PiS narrowing to a few percentage points, Mr Tusk undertook a mini-reshuffle that brought veteran politician and economist Jacek Rostowski to the helm of government as deputy prime minister and finance minister. This move, designed to unify and stabilise the PO, has paid off. Last week, for example, the justice minister, Jaroslaw Gowin, decided to stay in government following talks with the prime minister, despite his earlier opposition to legislation on civil partnerships for gay couples, which had threatened to split the PO. With Mr Tusk now able to enforce party discipline without dissension, the prospects for PO unity appear improved, particularly as the right-wing opposition has failed to capitalise on its recent gains in the polls.

  March 11, 2013

• 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.

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  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: Janusz Piechocinski (PSL)

  Deputy prime minister & finance minister: Jacek Rostowski (PO)

  Key ministers

  Agriculture & rural development: Stanislaw Kalemba (PSL)

  Culture: Bogdan Zdrojewski (PO)

  Defence: Tomasz Siemoniak (PO)

  Education: Krystyna Szumilas (PO)

  Environment: Marcin Korolec (independent)

  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 (PO)

  Science & higher education: Barbara Kudrycka (PO)

  Sport & tourism: Joanna Mucha (PO)

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

  Treasury: Mikolaj Budzanowski (independent)

  Central bank governor

  Marek Belka

  March 15, 2013

• Outlook

  Poland: Key developments

  Outlook for 2013-17

  • The centre-right coalition government led by Civic Platform (PO), the party of the prime minister, Donald Tusk, has a small yet workable majority in parliament. It is expected to remain in power until the next election, in 2015.
  • Increasing opposition from the right-wing Law and Justice (PiS) party could periodically undermine the authority of the government.
  • The general government deficit, calculated according to EU harmonised (ESA 95) methodology, is forecast at 3.3% of GDP in 2013, shrinking from 5.1% of GDP in 2011 and an estimated 3.5% of GDP in 2012.
  • The Economist Intelligence Unit has revised down its forecast for economic growth in 2013 to 1.4%, because of faltering external demand, sluggish manufacturing performance and weak domestic demand.
  • After moderating further in 2013, owing to declining nominal wage growth and sluggish aggregate demand, the headline rate of inflation is expected to fall to an annual average of 2.2% in 2013-17.
  • The current-account deficit is expected to continue shrinking as a proportion of GDP in 2013, to 3.1% of GDP (down from 3.5% in 2012).

  Review

  • On March 8th the government survived a no-confidence motion initiated by Law and Justice (PiS), the leading opposition party.
  • In late February Mr Tusk announced his choice of candidates in a mini-cabinet reshuffle, in which the minister of finance, Jacek Rostowski, became deputy prime minister.
  • The monetary policy council (MPC) of the National Bank of Poland (NBP, the central bank) cut its benchmark interest rate by 50 basis points, to 3.25%, after its policy meeting on March 5th-6th.
  • Year-on-year growth in consumer prices slowed to 1.7% in January, from 2.4% in December, as prices of food and fuel moderated.
  • Headline retail sales volumes rose on a non-adjusted basis by 2.4% year on year in January, following a decline of 3.6% in December.
  • Seasonally and working-day adjusted industrial output grew by 1.5% year on year in January, but fell on a monthly basis, by 2.1%.
  • Real GDP grew by 0.2% in the fourth quarter of 2012, and by 1.1% year on year. For 2012 as a whole, real GDP growth grew by 2%.

  March 15, 2013

Economy:

• Background

  Poland: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	38.1	Population growth	0.0
  GDP (US$ bn; market exchange rate)	490.0	Real GDP growth	3.4
  GDP (US$ bn; purchasing power parity)	802.0	Real domestic demand growth	2.5
  GDP per head (US$; market exchange rate)	12,868	Inflation	3.8
  GDP per head (US$; purchasing power parity)	21,064	Current-account balance (% of GDP)	-4.8
  Exchange rate (av) Zl:US$	3.3b	FDI inflows (% of GDP)	2.6
  a The 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. Partly 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 election in September 2005, but was unable to form a stable administration, and an early vote 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 after the 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 start of 2011. The rate is scheduled to remain there until 2014, but is likely to stay in place for longer because of fiscal constraints, according to recent statements by the central bank. The corporate tax rate 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) was increased in 2012 in a bid to bolster the fiscal austerity drive.

  Foreign trade: In 2011 the current-account deficit widened in nominal terms to US$25bn (4.9% of GDP, up from 5.1% of GDP in 2010 or US$24.1bn), as domestic demand remained strong and as infrastructure projects related to events in 2012 increased, in line with a rise in the transfers surplus. Goods exports rose strongly in 2011, to US$195.2bn, but imports also increased, to US$209.3bn, resulting in a slight widening of the trade deficit, to US$14.1bn. In 2012 the current account deficit narrowed to US$17.4bn (3.5% of GDP) as weaker domestic demand significantly reduced the import bill.

  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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  March 15, 2013

• Structure

  Poland: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 15, 2013

• Outlook

  Poland: Country outlook

  Poland: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: A two-party coalition government, in power since the general election of 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, is serving his second consecutive term as prime minister. The opposition is divided between the conservative Law and Justice (PiS), the Democratic Left Alliance (SLD) and the left-liberal Palikot's Movement (RP), led by Janusz Palikot.

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

  INTERNATIONAL RELATIONS: The government will seek to increase Poland's influence within the EU, advocating deeper European integration. In March 2012 Poland signed the new EU fiscal treaty encouraging budgetary responsibility. Poland appears to be supportive of Germany's conservative stance on fiscal austerity. It also favours new pan-European initiatives proposed by the European Commission, such as the creation of a banking union, but it has yet to present a definite view on other more contentious pieces of legislation such as the EU's financial transaction tax. The government lobbied hard to preserve the flow of EU funds to Poland in the EU budget for 2014-20, as agreed in Brussels on February 8th. Poland is expected to retain its strong commitment to enhanced European integration and is due to hold talks on euro adoption during 2013. Co-operation with regional peers in the EU is also expected to increase over the forecast period, particularly in the military sphere, as part of Poland's membership of the Visegrad Group consortium, which it will continue to head throughout 2013.

  POLICY TRENDS: Economic policy in the near term is likely to be preoccupied with demonstrating fiscal prudence to bolster market confidence and 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 now worth US$33.8bn (up from US$29.5bn), after an extension to 2015 was granted in February 2013.

  ECONOMIC GROWTH: The economy grew by 2.2% in 2012, on the European System of Accounts ESA 95 basis, down from 4.3% in 2011, because of a combination of lacklustre domestic demand and recession in the euro zone. External and internal demand will weaken further in the first quarter of 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 to contribute positively to headline growth this year. A positive impulse may also come from a slight recovery in fixed investment as the government's investment programme takes effect in key areas such as construction, which undermined economic growth in the second half of 2012.

  INFLATION: In 2012 inflation remained outside the NBP's 1.5-3.5% target range, at an annual average of 3.7%. Despite high global commodity and fuel prices, persistent disinflationary trends in the domestic economy are expected to dampen inflationary pressures in the short term. In 2013 lower international commodity prices will also aid disinflation, as will the central bank's monetary policy, which is predicated on inflation-targeting. As a result, inflation is expected to slow to around 2% in 2013, despite the prevalence of external risk, such as upside volatility to international oil prices. Following a significant slowdown this year, inflation is set to stabilise thereafter at an annual rate of 2.2%, well within the NBP's target range, in 2014-17.

  EXCHANGE RATES: Amid volatility on international currency markets and jittery investor confidence in 2012, the zloty went through bouts of depreciation against both the US dollar and the euro. The zloty experienced bouts of weakening once again at the start of 2013 as economic growth faltered, and as speculation was fuelled by further monetary easing on the part of the central bank.

  EXTERNAL SECTOR: The winding-down of large infrastructure projects related to the Euro 2012 football championships, resilient export performance and dampening consumption growth allowed the current-account deficit to moderate to 3.5% of GDP in 2012 (down from 4.9% of GDP in 2011).

  March 11, 2013

• Forecast

  Poland: Country forecast summary

  Country forecast overview: Highlights

  • The senior coalition partner, the centre-right Civic Platform (PO), remains the strongest party. It governs with the agrarian Polish Peasants' Party, and together the two parties have a small but workable parliamentary majority.
  • The right-wing Law and Justice, the main opposition party, retains a strong popular following, and it is strengthening its anti-government stance. However, until the party 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 coalition.
  • The PO-led government is expected to continue its efforts to balance good relations with the EU with a robust defence of 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, and the government has already started holding discussions about possible entry dates and the likely Maastricht criteria Poland will be able to meet in the short term.
  • The risk of fiscal slippage remains high, as the real economy is expected to slow further this year. As a result, we do not expect the budget deficit to shrink to meet the EU target of 3% of GDP before 2014.
  • Economic growth slowed to 2% in 2012, owing to contractions in external and domestic demand. A further slowdown is forecast in 2013, with real GDP growth projected at 1.4% (revised down from 1.7% previously), as fiscal austerity and softening domestic demand continue to constrain growth, before the economy rebounds from 2014 onwards.
  • Consumer price inflation remained just above the threshold set by the National Bank of Poland (the central bank), at 3.7% in 2012, but is expected to fall in 2013 as aggregate demand remains weak and the labour market softens further.
  • Fiscal policy will be tightened in 2013-14 to meet the criteria for eventual euro adoption, which will help to bring down inflation, as will disinflationary trends arising from the economic slowdown in 2013.
  • The current-account deficit narrowed to 3.5% of GDP in 2012 (from 4.9% of GDP in 2011) as dampened consumer demand and investment spending reduced the import bill. We forecast annual deficits throughout 2013-17, averaging 3.3% of GDP.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	2.2	1.4	2.7	3.2	3.8	4.2
  Consumer price inflation (av; %)	3.7	2.1	2.5	2.4	2.2	2.2
  General government budget balance (ESA, % of GDP)	-3.5	-3.3	-3.0	-2.7	-2.4	-1.9
  Current-account balance (% of GDP)	-3.5	-3.1	-3.4	-3.5	-3.3	-3.1
  Short-term lending rate (av; %)	8.6	8.1	7.5	6.8	6.6	6.6
  Exchange rate Zl:US$ (av)	3.26	3.05	3.05	3.07	2.98	2.78
  Exchange rate Zl:€ (av)	4.19	4.05	4.00	3.90	3.75	3.51

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  March 15, 2013

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)

January 17, 2013