Poland
Poland
’
’
s Competitiveness
s Competitiveness
in
in
2008
2008
Marzenna A. Weresa
Marzenna A. Weresa
World Economy Research Institute
World Economy Research Institute
World Economy Faculty
World Economy Faculty
Warsaw School of Economics
Warsaw School of Economics
How
How
to
to
measure
measure
Poland
Poland
’
’
scompetitive
scompetitive
position
position
in
in
2008?
2008?
How
How
to
to
measure
measure
Poland
Poland
’
’
scompetitive
scompetitive
position
position
in
in
2008?
2008?
C
C
ompetitiveness
ompetitiveness
as a broad category embedded in the level
as a broad category embedded in the level
of a nation
of a nation
’
’
s prosperity
s prosperity
. To
. To
measure
measure
Poland
Poland
’
’
s
s
comeptitve
comeptitve
position
position
we
we
apply the following assessment criteria:
apply the following assessment criteria:
The current condition of the economy measured by the so
The current condition of the economy measured by the so
-
-
called
called
“
“
magic pentagon
magic pentagon
”
”
indices (GDP growth, inflation,
indices (GDP growth, inflation,
unemployment, public finance balance, and current
unemployment, public finance balance, and current
-
-
account balance);
account balance);
Living standards
Living standards
reflected by the GDP per capita level
reflected by the GDP per capita level
(in purchasing power parity or PPP terms) as well as by
(in purchasing power parity or PPP terms) as well as by
key social indicators such as life expectancy, infant
key social indicators such as life expectancy, infant
mortality, school enrollment, the Human Development
mortality, school enrollment, the Human Development
Index, income inequalities, and the incidence of poverty;
Index, income inequalities, and the incidence of poverty;
Position in external economic relations
Position in external economic relations
, determined by
, determined by
the capability to sell goods and services on the EU market
the capability to sell goods and services on the EU market
and the ability to attract FDI and other production factors.
and the ability to attract FDI and other production factors.
Some
Some
basic
basic
facts
facts
Poland is the largest of the 12 new member
states of the European Union in terms of area,
population, and the size of its economy.
In EU27, Poland is sixth in terms of area and
population, with 7.2% and 7.9% respectively.
In terms of GDP level, Poland ranks seventh, in
both PPP (4.2%) and OER terms (2.9%).
Poland
Poland
’
’
s competitive position in 200
s competitive position in 200
8
8
GDP growth reached 4.8%, ranking
Poland among the fastest-growing states
in the EU27 after Romania, Bulgaria, and
Slovakia.
GDP per capita was below the EU27
average; Poland’s per capita GDP
amounted to €14,400, versus €25,900 in
the EU as a whole
Relative development levels in Poland, EU countries and
selected transition economies, 1989-2008 (GDP per capita
at PPP, Poland = 100)
(50)
(48)
(47)
(46)
(45)
(42)
(32)
(38)
200
205
214
220
223
238
316
262
EU15 average
174
178
180
181
186
174
210
178
Greece
131
143
146
150
147
162
212
159
Portugal
252
282
282
281
280
271
252
195
Ireland
186
198
199
199
200
202
244
199
Spain
206
223
230
237
244
242
291
256
UK
176
190
198
204
211
242
327
274
Italy
194
204
209
216
218
239
320
268
France
201
215
217
228
230
246
350
279
Germany
100
100
100
100
100
100
100
100
Poland
2008
2007
2006
2005
2004
2000
1992
1989
Data in parentheses show Poland’s development level as a percentage of the EU15 average
Relative development levels in Poland, EU countries and
selected transition economies, 1989-2008 (GDP per capita
at PPP, Poland = 100)
79
79
73
69
67
54
79
89
Romania
71
70
70
69
67
58
108
122
Bulgaria
165
166
168
170
171
163
176
194
Slovenia
128
125
121
117
113
104
137
155
Slovakia
111
111
106
103
100
81
128
145
Lithuania
101
102
101
95
90
76
93
137
Latvia
113
117
122
123
125
116
140
146
Hungary
122
127
125
119
113
93
114
142
Estonia
148
150
148
150
148
142
194
197
Czech Rep.
(50)
(48)
(47)
(46)
(45)
(42)
(32)
(38)
200
205
214
220
223
238
316
262
EU15 average
100
100
100
100
100
100
100
100
Poland
2008
2007
2006
2005
2004
2000
1992
1989
Data in parentheses show Poland’s development level as a percentage of the EU15 average
Poland is on its convergence path
towards the EU15
• Since 1989, the Poland’s development
gap toward the EU15 average has
narrowed by more 12 percentage points.
• In 2008 alone, Poland gained 2 p.p.
• Despite this catching-up process in terms
of GDP per capita, Poland performed
below the EU27 average, outpacing only
two other EU members, Romania and
Bulgaria.
Relative development measured by
Relative development measured by
GDP
GDP
Poland
Czech Republic
Slova kia
Hunga ry
Slovenia
Estonia
Lithua nia
La tvia
Bulga ria
Roma nia
EU27
EU15
0
5000
10000
15000
20000
25000
30000
35000
-2
0
2
4
6
8
10
G
D
P
p
er
c
ap
it
a
in
€
(i
n
P
P
P
),
2
0
0
8
Rea l GDP growth ra te in %, 2008
0
30
20
30
40
INF
-7
-20
40
10
5
10
20
10
-10
0
10
-4
-1
2
GDP
UNE
CAB
GOV
GDP - GDP growth rate (%)
INF - Inflation rate (%)
UNE - Unemployment rate (%)
GOV - General government balance (% of GDP)
CAB - Current-account balance (% of GDP)
Poland’s competitiveness
measured by the ‘Magic pentagon
’
• GDP growth (4.8%)
• inflation (4.3%),
• current-account deficit
(-4.7% of GDP)
• government deficit
(-2.0% of GDP),
• unemployment rate
(7.2%)
GDP - GDP growth rate (%)
INF - Inflation rate (%)
UNE - Unemployment rate
(%)
GOV - General government
balance (% of GDP)
CAB - Current-account
balance (% of GDP)
Poland’s competitiveness
measured by the ‘Magic
pentagon
’
Human
Development
Index:
quality of life
• Poland was ranked 4th among the new
EU member states, behind Slovenia, the
Czech Republic, and Hungary, but ahead
of Slovakia, the three Baltic states,
Romania, and Bulgaria.
• An improvement was also noted in
income inequalities, which decreased
from 0.36 to 0.33, as measured by the
Gini coefficient.
How to measure
Poland’s
international competitive position
How to measure Poland’s international
competitive position?
• ability to sell goods and services on the
EU market
• attractiveness to foreign direct investment
(FDI).
Poland
Poland
’
’
s international competitive
s international competitive
position
position
:
:
foreign
foreign
trade
trade
1.
1.
Poland
Poland
’
’
s share in global trade
s share in global trade
was
was
around
around
1%
1%
and
and
continued to be disproportionately low in relation to its
continued to be disproportionately low in relation to its
potential in terms of area, population, and the absolute
potential in terms of area, population, and the absolute
GDP level
GDP level
.
.
2.
2.
In 2008
In 2008
imports grew faster than exports leading to a
imports grew faster than exports leading to a
wider trade deficit.
wider trade deficit.
3.
3.
Poland
Poland
’
’
s foreign trade dramatically decelerated in the
s foreign trade dramatically decelerated in the
fourth quarter of 2008 as a result of the global financial
fourth quarter of 2008 as a result of the global financial
crisis, with a decrease in exports.
crisis, with a decrease in exports.
4.
4.
An even sharper decline in trade flows was recorded in
An even sharper decline in trade flows was recorded in
January 2009, which could presage a deterioration of
January 2009, which could presage a deterioration of
Poland
Poland
’
’
s international competitive position for all of
s international competitive position for all of
2009.
2009.
Revealed comparative advantage indices
(RCA)
where:
• means the exports of commodity group “i“
from country “K“ to bloc “j”,
• imports of commodity group “i“ to country
“K“ from bloc “j”,
Revealed comparative advantage indices
(RCA) for Poland’s intra-EU trade
Poland’s international competitive
position: foreign trade
• In 2008, as in 2007, Poland’s comparative advantages in
international trade relied mostly on the exportation of
traditional commodities.
• These included low value-added goods such as livestock
and animal products, crop products, minerals, leather,
wood, textiles, footwear and headgear, base metals, and
furniture.
• A new salient trend that appeared recently and was
enhanced last year involved some improvement in
Poland’s comparative advantages in the trade of high
value-added goods easy to imitate.
Intra-industry trade
•
Intra-industry trade is shown by the Grubel-Lloyd (GL)index:
The GL index ranges from 0 and 1.
Intra-industry trade is a difference between total trade and inter-industry trade.
The higher the GL index, the more intensive is intra-industry trade.
Intra-industry trade as a % of Poland’s total
trade with the EU15 in 2000-2006
Source: Eurostat data
0
5
10
15
20
25
30
35
40
s
h
a
re
o
f
II
T
i
n
P
o
la
n
d
's
t
ra
d
e
2000
2001
2002
2003
2004
2005
2006
2007
Intra-industry trade
• Machines (section 16) and vehicles (section 17)
account for a large proportion of Poland’s IIT
with both the EU15 and EU11.
• Good prospects for the development of IIT are
also available in the production of plastics
(section 7) and other chemical products (section
6).
• Agricultural goods and food products, especially
prepared foodstuffs (section 4), should rise to
prominence in Poland’s IIT in the near future.
Poland
Poland
’
’
s
s
ability to attract foreign direct investment
ability to attract foreign direct investment
(FDI)
(FDI)
(
(
inflows
inflows
and
and
stocks
stocks
)
)
Source: UNCTAD, 2008.
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
U
S
$
m
il
li
o
n
0,0%
20,0%
40,0%
60,0%
80,0%
100,0%
120,0%
%
FDI stock
Annual growth rate of FDI stock
The FDI inflow into Poland as a percentage
of the total inflow to the EU10 in 2007
Poland
28.5%
Bulgaria
13.6%
Romania
15.8%
Latvia
3.5%
Czech
Republic
14.8%
Slovenia
2.3%
Estonia
4.0%
Lithuania
3.1%
Hungary
9% Slovakia
5.3%
Poland
Poland
’
’
s
s
ability
ability
to
to
attract
attract
FDI
FDI
FDI
FDI
in Poland last year was somewhat lower
in Poland last year was somewhat lower
than in previous years, and it decreased further
than in previous years, and it decreased further
in the first quarter of 2009.
in the first quarter of 2009.
But
But
…
…
Poland
Poland
managed to maintain its leading position
managed to maintain its leading position
as the largest recipient of foreign capital among
as the largest recipient of foreign capital among
new EU member states last year, absorbing
new EU member states last year, absorbing
more than a fourth of all FDI flows into the EU10
more than a fourth of all FDI flows into the EU10
group.
group.
Investment attractiveness (IA) of
industry branches
j
j
ij
ij
FDI_OUT
j
FDI_IN
j
:
FDI_OUT
FDI_IN
∑
∑
IA =
where:
FDI_INij = inflow of FDI into industry j of country i
FDI_OUTj = outflow of capital from country i abroad to industry j
∑jFDI_INij = total FDI inflow into country i
∑jFDI_OUTij = total outflow of direct investment from country I
Industries with an IA higher than 1 (IA>1) enjoyed a comparative advantage in
attracting FDI in the analyzed period, while an IA lower than 1 but higher than 0
(0>IA<1) indicates that the industry did not possess a comparative advantage in
attracting FDI.
13.030
-
Other transport equipment
7.629
-
Motor vehicles
33.093
-
Radio, TV, communication equipment
184.775
-
Office machinery and computers
2.620
-
Mechanical products
12.645
-
Metal products
3.440
-
Rubber and plastic products
1.256
-
Chemical products
0.001
-
Refined petroleum & other treatment
49.854
-
Wood, paper, publishing and printing
0.148
-
Textiles and wearing apparel
1.829
-
Food products
1.632
MANUFACTURING
-0.370
MINING AND QUARRYING
176.320
AGRICULTURE AND FISHING
IA Index for
2007
Industries
IA in Poland in 2007
2.723
-
Insurance & activities auxiliary
1.944
-
Monetary intermediations
3.469
FINANCIAL INTERMEDIATION
55.669
-
Telecommunications
0.206
-
Sea and coastal water transport
-1.354
-
Land transport
9.633
TRANSPORT AND COMMUNICATION
18.594
HOTELS AND RESTAURANTS
0.922
TRADE AND REPAIRS
1.917
CONSTRUCTION
0.320
ELECTRICITY, GAS AND WATER
IA Index for
2007
Industries
IA in Poland in 2007
2.011
PRIVATE PURCHASES & SALES OF REAL ESTATE
2.393
OTHER ACTIVITIES, NON ALLOCATED
1.597
OTHER SERVICES
14.490
-
Promotion
0.366
-
of which: Business and management consultancy
0.382
-
Other business activities
6.393
-
Research & development
-0.079
-
Computer activities
0.936
-
Real estate
0.498
REAL ESTATE & BUSINESS ACTIVITIES
IA Index for
2007
Industries
IA in Poland in 2007
T
T
he most attractive industries for FDI
he most attractive industries for FDI
in
in
Poland
Poland
in
in
2008
2008
In
In
manufacturing
manufacturing
Poland had relatively high
Poland had relatively high
advantages for FDI in sectors such as
advantages for FDI in sectors such as
production of office machinery and computers
production of office machinery and computers
;
;
wood and paper processing; publishing and
wood and paper processing; publishing and
printing; production of radio, television and
printing; production of radio, television and
communications equipment
communications equipment
.
.
In the service sector,
In the service sector,
the most attractive
the most attractive
industries for FDI
industries for FDI
were
were
:
:
telecommunications,
telecommunications,
R&D
R&D
services,
services,
promotion
promotion
.
.
However
However
…
…
.
.
Inward FDI Performance Index was the
Inward FDI Performance Index was the
lowest among the
lowest among the
Visegrad
Visegrad
countries
countries
0,000
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1
9
9
0
-9
2
1
9
9
1
-9
3
1
9
9
2
-9
4
1
9
9
3
-9
5
1
9
9
4
-9
6
1
9
9
6
-9
8
1
9
9
7
-9
9
1
9
9
8
-2
0
0
0
1
9
9
9
-2
0
0
1
2
0
0
0
-2
0
0
2
2
0
0
1
-2
0
0
3
2
0
0
2
-2
0
0
4
2
0
0
3
-2
0
0
5
2
0
0
4
-2
0
0
6
Poland
Hungary
Slovakia
Czech Republic
Source: Based of UNCTAD data.
Drivers of Poland
Drivers of Poland
’
’
s
s
competitiveness in 200
competitiveness in 200
8
8
Domestic
demand,
in
particular
Domestic
demand,
in
particular
investment
investment
Human
Human
resources
resources
T
T
otal
otal
factor productivity
factor productivity
The growth of total factor productivity
The growth of total factor productivity
(TFP) played a less important role as a
(TFP) played a less important role as a
competitiveness driver in 2008.
competitiveness driver in 2008.
An economic slowdown caused by the
An economic slowdown caused by the
global financial crisis negatively affected
global financial crisis negatively affected
the 2008 TFP growth rate
the 2008 TFP growth rate
TFP
TFP
contribution to the GDP was only
contribution to the GDP was only
26.8%, the lowest since 1998.
26.8%, the lowest since 1998.
Main obstacles to the improvement
Main obstacles to the improvement
of Poland
of Poland
’
’
s competitiveness in 200
s competitiveness in 200
8
8
Lack of the significant progress in the
Lack of the significant progress in the
development of infrastructure, including
development of infrastructure, including
highway construction
highway construction
(
(
;
;
Stagnation in Poland
Stagnation in Poland
’
’
s technology and
s technology and
innovation performance;
innovation performance;
Total R&D expenditures as a
percentage of GDP in selected
EU countries
0.64%
0.8%
1.2%
1.4%
0
0,2
0,4
0,6
0,8
1
1,2
1,4
1,6
1,8
2
Slovenia
Czech
Rep.
Hungary
Poland
Average for
the EU27
1.9%
Policy measures that had
Policy measures that had
negative
negative
impact
impact
on Poland
on Poland
’
’
s competitiveness in 200
s competitiveness in 200
8
8
Economic reforms, especially those of
Economic reforms, especially those of
public finance, were limited;
public finance, were limited;
The
privatization
of
state
The
privatization
of
state
-
-
owned
owned
enterprises did not meet the planned
enterprises did not meet the planned
targets;
targets;
There was limited progress in improving
There was limited progress in improving
the business/institutional environment.
the business/institutional environment.
Policy measures that had
Policy measures that had
positive
positive
impact
impact
on Poland
on Poland
’
’
s competitiveness in 200
s competitiveness in 200
8
8
cuts in the personal income tax
cuts in the personal income tax
,
,
the Polish government
the Polish government
’
’
s
s
determination to
determination to
maintain budget discipline in response to
maintain budget discipline in response to
recessionary trends
recessionary trends
Challenges for Poland in 200
Challenges for Poland in 200
9
9
To face
To face
global
global
recession
recession
T
T
o
o
keep
keep
unemployment
unemployment
under
under
control
control
,
,
To
To
maintain a positive GDP growth rate
maintain a positive GDP growth rate
In order
In order
to cope with these challenges
to cope with these challenges
, indispensable
, indispensable
are:
are:
productivity increases
productivity increases
further institutional changes,
further institutional changes,
higher investments in knowledge generation and
higher investments in knowledge generation and
diffusion
diffusion
These
These
measures
measures
might
might
be insufficient to enhance
be insufficient to enhance
competitiveness at a time of crisis.
competitiveness at a time of crisis.
Therefore,
Therefore,
the foundation
the foundation
of the country
of the country
’
’
s competitive
s competitive
advantage needs to be redefined.
advantage needs to be redefined.