Rapid economic recovery earns Poland recognition as East European ‘tiger’

• Pages: 90-92

Page 90

When Poland began its transformation to a market economy in 1989, it was in a deep crisis and thought to be facing greater challenges than its central and eastern European neighbors. By late 1991, however, it had begun to recover and went on to register remarkably strong growth in the 1990s. In their IMF Working Paper The “Soaring Eagle”: Anatomy of the Polish Take-Off in the 1990s, authors Mark De Broeck and Vincent Koen explain Poland’s success, put its overall growth performance in perspective, and look at the country’s growth prospects over the next few years.

Although Poland’s economic contraction was deeper than any the country had experienced since World War II, it was, according to De Broeck and Koen, shallower and shorter than in most of the other transition countries. From the onset of the recovery in 1991 through 1998, Poland enjoyed seven years of uninterrupted growth at an average rate of more than 5 percent a year, exceeding most official and unofficial projections. Poland outperformed its relatively successful central and eastern European neighbors (see chart, this page) and even more, the other transition countries.

Patterns of growth

De Broeck and Koen examined the available sectoral, ownership, and regional data to identify key features of Poland’s growth and, despite the uneven quality of the data, were able to draw some broad conclusions.

During the 1990s, growth was driven first and foremost by industry, specifically manufacturing, while mining and agriculture stagnated (see chart, page 90). Although the centrally planned economies were widely perceived to be heavily oriented toward industry, the authors discovered less of a shift from industry to services in Poland than might have been expected. They attribute this paradox to the fact that services, broadly defined, encompass activities that were “over-weight” under central planning (for example, freight and certain government administrative functions) alongside those that were underdeveloped (such as trade, hotels and restaurants, and financial intermediation). De Broeck and Koen point out that consumer-oriented services did, indeed, expand rapidly.

The 1990s witnessed a surge in the number of private sector firms and entrepreneurs. Between 1991 and 1998, the number of registered commercial law companies increased more...