Speaking to IMF Survey, Daria Zakharova, IMF mission chief for Poland, discussed the findings of the latest economic health check.
IMF Survey : Poland’s economy has been one of the best performers in Central and Eastern Europe in the past decade. What do you think contributed to this success?
Zakharova: The Polish economy has grown strongly and steadily even during the crisis: it was the only economy in Europe that did not go into recession then. Steady growth allowed Poland to close more than a quarter of its per capita income gap with the euro area over the last 20 years. Much of this major achievement can be attributed to Poland’s very strong policies and institutions, which helped successfully weather the global financial crisis and several bouts of market turbulence since then.
IMF Survey : Despite the steady growth, one ratings agency downgraded its sovereign ratings and another put a negative outlook to it. Are there clouds on the horizon?
Zakharova: Some recent decisions and announcements have made markets jittery and contributed to the Standard & Poor’s downgrade and Moody’s change of the outlook to negative. We don’t think that the authorities’ recent measures would necessarily have major repercussions for near-term growth, but depending on how they are implemented they could negatively affect longer-term and potential growth, by weakening investor sentiment.
A new risk factor on the horizon is the result of the United Kingdom’s vote to leave the European Union, which could affect Poland through trade, financial, and confidence channels, as well as spillovers from its potential impact on the euro area. So far financial spillovers have been manageable. The authorities are well equipped to handle market volatility.
IMF Survey : The Polish economy is growing at full capacity. Is there a danger of overheating?
Zakharova: Right now we’re not worried about overheating in Poland because inflation has been low for the past two years. The current account is almost in balance, and we don’t see any signs of asset price bubbles. In addition, the authorities are in a good position to handle systemic risks, including from potential overheating, as they have recently introduced a full-fledged macro-prudential framework.
However, it is true that...