Overview Of The Economic Growth Of Poland Economics Essay

Overview Of The economical Growth Of Poland economicals look forPolands parsimoniousness looked bleak during the 1980s. Few would consider Poland as a backing hub callable to its minor economic yield and soaring inflation point (Nuti, 1986). Fast-forward to the 21st century, Polands economy has changed tremendously. It is not just the plainly European sphere to survive the current recession but it is still experiencing rapid growth1. What could require possibly instigated Polands this drastic change in the time get over of yet 2 decades?This essay volition use the PESTLE2 summary to under stand the positive force that initiated the economic growth and also figure the springs that might hinder Polands future economic growth. Porters Diamond will be apply for the critical evaluation and support of the PESTLE epitome.Political shed light onThe fall of communism in 1989 had led to vast rectifyments in Polands economy. champion might disagree with that because the e vent took place over 20 geezerhood ago, however, the effect of political change does not happen overnight and on that point would be a time lag involved (Gillespie, 1999). The most probative change after the fall of communism is in stabilising the rural. Poland is the twenty-ninth politically most stable artless with the index score of 4.5 (Economic apprehension Unit, 2009). This leaves a sense of security for appargonlment and business, for example, if Poland is in an unstable attitude akin to the current Libyan crisis, slew would avoid investing in the rural.In contrast to a communist state, a democratic country allows the voice of citizenry to be heard, and their opinions and views to be realised. Citizens in democratic countries run for to admit greater respect for the leaders they chose for themselves comp bed to differentwise. For example, in a company, a bottom-up leadership has a smash effect than a top-down leadership because workers would respect the leader and this allows employees to bring out best of their acquirement set and experience. Similar principle applies for macroeconomic levels. Additionally, a democratic country is proudly likely to prosper due to reduced frictional societal interactions among citizens (Kariel, 1956).Further much(prenominal), the toss off giving medication has developed a radical programme cognise as the Shock Therapy to curb hyper inflation. Poland was once ruled under a plotted economy system. Shock Therapy is a transition from a planned economy system to market economy. It is a sudden release of price, followed by the removal of subsidies and large scale privatisations of antecedently publicly owned companies (Murell, 1993). This program has both(prenominal) short and long term effects. The planned economy succeedd troth to almost e in truth(prenominal) citizen but with inflation rates of around 600% (Cott belli Szapry, 1998), low wages and severe shortages of basic necessities. This Shock Therapy suppressed the hyperinflation and stopped the victuals shortage (Haggard Webb, 1996). However, all these problems be only short term problems. The idol result lies in the long term measure. One of the key reasons of why Poland economy growth has been so cockeyed in the past some years was because of its market economy (Kornai, 2000). This has provided opportunities for small service firms to contribute to Polands economy (Nunnally, 2010), which was unachievable during the communist era. Market economies encourage international business because the barriers to creation atomic number 18 lowered increasing the opportunity for success and lowering change posture costs.Poland also has excellent relations with foreign countries allowing it to benefit from some(prenominal) advantages such as enjoying impose free zones deep down the EU since joining it in May 2004 (Papazoglou, Pentecost, Marques, 2006). This is outstanding because imported salutarys within Europe a re cheaper, thus lowering production costs. An early(a) vital cistron of entering the EU is curbing the spunky unemployment rate. Since adopting the free market policy, Poland has richly unemployment rates3. By joining the EU, Polands unemployed workforce is able to look for jobs outside Poland. with child(p) unemployment rates is crucial in reducing social problems and creating a better environment for investors.Economic AdvantagesIn addition to political factors, economic factors have also enhanced economic growth. The first step was implementing a directionless exchange to curb hyperinflation (Sachs, 1996) which, in addition, helped Poland to survive the current economic crisis by facilitating economic adjustments. During the economic crisis, the Zloty depreciated against the Euro and Sterling. This meant Polish goods were more competitive than European goods both at home and abroad. One might suppose that in that respect are so many countries with lower exchange rates, s o why would investors invest in Poland? The answer lies in the nature of its currency- Zloty is very stable as a currency4, it only oscillates within a certain range. This is very important for a business because cost of production would not vary and at that place would be less uncertainty. directors tend to avoid the risks arising from uncertainty and the Zloty provides a sense of security to businessmen and investors. In planning to adopt the euro in 2015 (Dnevnik.bg, 2010), Poland will be forgoing the competitive advantage of its currency. To evaluate, this is a good option as the world(prenominal) economy grows as the Euro will provide more advantages (Gulde, Kahkonen, Keller, 2000).Many things have changed since the transitional period of Poland. Polish people have become richer over the years and Poland is one of the richest nations, second only to the Czechs in the Central Europe (Credit Suisse, 2010). Also, an average Polish is three quantify richer than an average Rus sian (Jedrzej, 2010). Their wealth leads to strong house servant consumption within Poland5which led to strong economic growth especially during the recession. Export found countries, such as Singapore, suffered greatly during the recession. The impact of the recession is less in the case of Poland because the domestic market within Poland is large and accounts for more than one-half of Polands market.Although it is hard to believe, the initial high unemployment rate also boosted economic growth. Polish people are highly enlightened with 99% of their citizens being educated (TradingEconomics, 2009). Skilled and educated workers tend to be more expensive. However, due to the high unemployment rates, labour costs in Poland are comparatively lower than other countries, such as Germany. This is a strong selling point for investors abroad. These enthronements are crucial because it has reduced unemployment rates and increased economic activity in Poland, subsequently enhancing economic growth.FDI has increased steadily since 1995 with the exception of 2008 and 2009 due to global economic crisis (United acres Conference of Trade and Development, 2010). It has boosted economic activities greatly. Other than a cheap but skilled labour force, excess Economic zones accomplished by the Polish government has also attracted foreign investors. At present, there are 14 Special Economic Zone in Poland (KPMG, 2009). variant areas have different geographical landscapes allowing wide-ranges of businesses to be set up. These areas provide opportunities for tax exemption. The amount of tax exempted will depend on the size of the investment (Nam, 2004). The Special Economic Zones have attracted investors from all over the world, in ill-tempered investors from the EU as the benefits are greatly to their advantage to invest. The regulations are more flexible and they share the same benefits as Polish firms. These, combined with the stability exchange rate of Zloty, have attr acted FDI from the EU as all investors stand an equal chance.Porters Factor ConditionsAlthough Poland has enjoyed steady economic growth in novel years, there are still a few factors hindering their growth, for example, having low-down transportation systems. Having good nucleotides enables a country to fully utilise their resources expeditiously and effectively boosting the economy. Therefore for Poland to improve on their economic growth, they must improve on their infrastructure. In my opinion, the infrastructure would not be a cephalalgia because Euro 2012 will be held by Poland and funds had been provided by the EU as an aid to improve on their infrastructure (Szafranko, 2010). paygradeAs previously mentioned, political stability is key to economic growth but there are factors that unsettle Polands stability such as corruption6. This is a significant disadvantage, for instant, if the government invested in a 10million project but due to corruption, only 2 million is injecte d, the project would either be substandard or incomplete due to the amount of money lost. Furthermore, safety will also be a key concern due to the substandard undertakings. With this kind of uncertainties, investors will have their doubts when investing in the country. However, Poland has taken several measures to reduce corruption, and with more effort, corruption can be reduced.Besides that, the countrys high unemployment rate can also be a concern for the country7. While it is true that the high unemployment rate saved Poland during the recession, it cannot be a long term plan for the country. A high rate of unemployment would cause stress within the country and crime rate would increase cause instability. Furthermore, it would also prevent the country for optimising their resources. Despite the current high unemployment, young reports show that the unemployment rate is steadily decreasing over the years8. resultantIn conclusion, there are many factors driving Polands econom ic growth such as political stability and stable exchange rates. Polands international competitiveness has been tested by the rise of the BRIC, notably China. There are numerous reasons why Poland has been able to attract large volumes of FDI, one of which is the Special Economic Zones with tax exemptions lowering business costs. Sound macroeconomic policies have sharpened Polands competitive edge and positioned it well to seize opportunities from joining the EU, thusly attracting more FDI leading to further growth. The main difficulty Poland now faces is corruptions. However, the boundary to which this has affected Polands economic growth is hard to determine but the delineate factors of economic growth outweighs this problem. There is also room for supplementary receipts to further boost the economy especially the developments of infrastructures. Nonetheless, the growth for Poland is sure to emanation with the adoption of Euro and Euro 2012.Critical ReflectionThe PESTLE analy sis allows clear sagacity of the country in the macroeconomic level. The political and economic aspects of the PESTLE provide a clear modeling on how it affects the economical growth and the finale of the influence. However, the usage of PESTLE is limited to the present and does not give a wider picture of the future such as Poland is planning to adopt Euro in 2015. Under some circumstances, analysing the PESTLE is insufficient in certain aspects such as the infrastructure in Poland. Nevertheless, the Porters Diamond Factor Conditions are used to complement the weaknesses of this issue. However, both models fail to address one major factor, the restrictive factor stipulation in the breath9analysis which is important given the recent financial crisis. Furthermore, in my opinion, safety of a country is important as well. Safety is indispensable because it provides certainty for foreign investors. Although the PESTLE analysis is widely used and it provides information on various factors, I think a new model that incorporates more factors should be introduced.There are many factors driving Polands economic growth, however, the level of contribution of each factor is uncertain. One might wonder how Hungary suffered from a different fate from Poland scorn both having drifting exchange rates. In my opinion, it is not just the floating exchange, but the different factors that complement each other that exist only within Poland to have boosted Polands economic growth.Lastly, research was made based on recent statistics for data accuracy. However, sources from research using resources that date back to 20 years were also used. The results are important because this data provides an insight to the rise of Polands economic growth after the downfall of communism. Some resources are survey to biased views, making it impossible to obtain a perfectly immaculate reasoning. Mixed responses can be seen regarding the countrys progress. According to local Polish people in the university, it is said that Polands economy is not very promising. However, according to other reports, the results say otherwise. In my opinion, Polands progress is very promising but the government should provide more social benefits to the local Polish to prevent superficial migration which may lead to brain drain.Bibliography byplay Monitor world(prenominal). (2011). Poland Infrastrucuture Report Q1. capital of Poland Business Monitor International.Cottarelli, C., Szapry, G. (1998). Moderate inflation the experience of transition economies. Hungary International Monetary Fund.Credit Suisse. (2010). Poles getting rich quick. Warsaw globose Wealth Report.Dnevnik.bg. (2010). Bulgaria, Romania, Poland, Czech Republic to adopt euro in 2015 analysts. Sofiaecho , 50.E, P. M. (1990). The Competitve Advantage of Nations. Harvard Business Review , 73-93.Economic Intelligence Unit. (19 March, 2009). Viewsfire. Retrieved 2011 April, 4, from Viewsfire http//viewswire.eiu.com/site _info.asp?info_name=social_unrest_tablepage=noadsrf=0Eurostat. (6 April, 2011). Poland Unemployment Rate. Retrieved 7 April, 2011, from Eurostat http//sdw.ecb.europa.eu/quickview.do?SERIES_KEY=132.STS.M.PL.S.UNEH.RTT000.4.000Eurostat. (6 April, 2011). Real gross domestic product Growth Rate. Retrieved 7 Aptril, 2011, from Eurostat http//epp.eurostat.ec.europa.eu/tgm/table.do?tab=tableinit=1plugin=1language=enpcode=tsieb020Gillespie, P. (1999). Too early to say if 1989 was a liberation or a revolution. creation News , 16.Gulde, A.-M., Kahkonen, J., Keller, P. (2000). Pros and cons of currency get on with arrangements in the lead-up to EU accession and participation in the Euro zone. International Economic Review , 173.Haggard, S., Webb, S. B. (1996). Voting for reform democracy, political liberalization, and economic adjustment. New York Oxford University Press.Jedrzej, B. (13 October, 2010). Poles are at the forefront of nations increasingly rich. Retrieved 7 April, 2011, from G elda Waluty Finanse, FT http//forsal.pl/artykuly/458053,polacy_sa_w_swiatowej_czolowce_bogacacych_sie_narodow.htmlKariel, H. S. (1956). Democracy absolute Lewins Field Theory. The American Journal of Sociology , 280-289.Kornai, J. (2000). Ten Years After The avenue to a Free Economy The Authors Self-Evaluation . SSRN , 29.KPMG. (2009). A Special Economic Zone in Poland. Warsaw Invest in Poland.Laposte. (4 January, 2010). Polands Consumptio. Retrieved 7 April, 2011, from Laposte.McKEEVER INSTITUTE of frugal polity ANALYSIS. (December, 2004). POLAND Economic Policy summary. Retrieved 7 April, 2011, from McKEEVER INSTITUTE of stinting POLICY ANALYSIS http//www.mkeever.com/poland.htmlMurell, P. (1993). What is shock therapy? What did it do in Poland and Russia? Post-Soviet Affairs , 111-137.Nam, C. W. (2004). Types of Tax Concessions for Attracting alien Direct Investment in Free Economic Zones. Munich Center for Economic Studies and Ifo Institute for Economic Research.National Ba nk of Poland. (7 April, 2011). Exchange Rate Archive. Retrieved 7 April, 2011, from National Bank of Poland http//epp.eurostat.ec.europa.eu/tgm/table.do?tab=tableinit=1plugin=1language=enpcode=tsieb020Nunnally, S. (2010). Economic Growth And Low agitate Costs Make For Attractive Investments. Articlesnatch , 1.Nuti. (1986). Hidden and Repressed Inflation in Soviet EconomiesDefinition, Measurements and Stabilisation . Contributions to Political Econo , 37-82.Papazoglou, C., Pentecost, E. J., Marques, H. (2006). A Gravity Model calculate of the Potential Trade Effects of EU Enlargement Lessons from 2004 and Path-dependency in Integration. The World Economy , 1077-1089.Sachs, J. D. (1996). Economic transition and the exchange-rate regime. The American Economic Review , 147.Szafranko, E. (2010). Evaluation of a Possible Development of the Transportation Network in Poland support by the EU Funds. Olsztyn Economic Journal , 357-379.TradingEconomics. (2009). Literacy rate youth perfect (% of people ages 15-24) in Poland. Retrieved 7 April, 2011, from Trading Economics http//www.tradingeconomics.com/poland/literacy-rate-youth-total-percent-of-people-ages-15-24-wb-data.htmlUnited Nation Conference of Trade and Development. (22 July , 2010). World Investment Report 2010. Retrieved 7 April, 2011, from Invest in Poland http//www.paiz.gov.pl/files/?id_plik=13224 auxiliaryAppendix 1Polands economic growth has been steady with the exception of the economic crisis in 2008.Source equal from (Eurostat, 2011)Appendix 2PESTLE AnalysisIn this essay, I utilised the Political and economical factors in the PESTLE analysis. The PESTLE analysis provided me a clear framework to facilitate my research on the essay.Appendix 3Polands have high unemployment rate. However, over the last few years, unemployment has been decreasing steadily.CUsersNicoDesktopunemplo.pngSource Adapted from (Eurostat, 2011)Appendix 4The Polish currency, Zlotych had depreciates against the Euro from 2008 to 2 009 which caused the Polish currency to be more competitive in the market. Low currency value reduces the cost of acceptation hence it attracts investors to invest more in the country. Furthermore, the exchange rate is very stable, making it a reliable currency.Source Adapted from (National Bank of Poland, 2011)Appendix 5Polands domestic consumption is much bigger than the export. The high domestic consumption is one of the reasons that allowed Poland to enjoy a positive GDP scorn the current economic crisis.Source Adapted from (Laposte, 2010)Appendix 6Polands is in the main stable politically with the exception of corruptions.Source Adapted from (McKEEVER INSTITUTE of ECONOMIC POLICY ANALYSIS, 2004)Appendix 7Porters Diamond Factors ConditionThe Porters Diamond factors discipline analyses nations position in factors of production (E, 1990). From there, the key opportunity and threats can be highlighted clearly. In this case, the infrastructure is examined because it is the weak link in Polands economic growth. However, Poland infrastructure has been growing steadily (Business Monitor International, 2011).Appendix 8STEER AnalysisThe STEER analysis is the updated version of the PESTLE framework. The main factor that differentiates STEER from PESTLE is the regulatory factor.