Poland Continues As Bright Spot in Region

Country was able to spend during economic crisis

Growth supported by high domestic demand

Banking system well capitalized

How did Poland manage to weather the global crisis with some of the highest growth rates in Europe and a stable banking system when most of its neighbors in the region faced―and continue to face―so many problems?

In an interview with IMF Survey online, Mark Allen, the IMF’s representative for eastern and central Europe based in Warsaw, discusses Poland’s secret to success.

IMF Survey online: Poland’s economy has been very resilient since 2008, and the country continued to fare quite a bit better than some of its European neighbors in the past year. Why is that?

Allen: Poland is in some ways more like a large emerging market, a version of Turkey or Brazil or possibly China. In the four years since the crisis began, the Polish economy grew by 15 percent and the nearest competitor in the European Union, which was Slovakia, grew by 8 percent. So the performance has been extremely strong.

Poland has benefited from being a large economy with quite substantial domestic demand. There has been public investment growth, with Poland experiencing some of the highest in Europe in the course of the last year. Consumption has held up well, in some measure thanks to European Union funds flowing into the country. And the government was in a position to deploy a countercyclical fiscal policy―in other words, putting more demand into the economy during a time when it was under pressure.

IMF Survey online: Was Poland able to weather the current crisis mainly because of the work the government did before 2008, which gave the Poles, as you pointed out, extra money to spend once the downturn hit?

Allen: Exactly. They didn’t allow the boom in the banking system and the housing boom to get out of hand. They didn’t run large fiscal deficits before the crisis. Their debt, even though, at close to 55 percent, is a little bit high by emerging market standards, did not give rise to concern.

So yes, the fact that the economy was in a good position going into the crisis really has helped Poland enormously.

IMF Survey online: And yet no one is immune in the current environment, especially given the ongoing crisis in the eurozone. What are the key risks the Polish economy faces this year?

Allen: Well, the main risks to Poland are from factors outside of its control. The IMF has downgraded its forecast for the global economy, and we’re now...