Throughout the great recession Poland has remained one of Europe’s few bright spots. It hasn’t gone into recession, commercial real-estate is booming and the retail sector continues to grow despite both a relatively high marginal savings rate (which to be sure has decreased significantly since the ’90s) and an unemployment rate hanging in the low double digits.
With almost 40 million inhabitants, Poland represents a huge internal market. And perhaps for cultural-historical reasons, or simply because of its size, it’s able to attract a wider diversity of foreign brands to its market than, for example, the Czech Republic.*
Perhaps another reason for Poland’s growth is that with other European economies stagnating, investors are depending on central and eastern European markets and their fairly obvious potential for growth. People in this region largely abhor being called “Eastern Europeans” and just might be encouraged to produce and buy their way to general European recognition.** And if Poland ever gets around to finishing its highways, upgrading its rail system and getting on with other infrastructure projects, well, it’s understandable that people are excited about future growth possibilities in living-standards, labor-productivity and general economic output.
Let’s not drink too much vodka
In the same way that driving anywhere in Poland requires navigating lots of potholes, an efflorescent Poland won’t be harvested swimmingly. One question is the impact growth will have on Poland’s energy consumption, which is mainly fueled by coal. Air quality is already pretty bad; and it’s likely to get a lot worse in the coming years, especially if the EU continues with a kind of cap and trade policy that enables polluters to keep on polluting. (And no one seems to have any problems with these kinds of things.)
Another concern for Poland is the the sovereign debt crisis and declining export markets. I wouldn’t be surprised to see bearishness creep in as a result of economic slowdowns in Germany, France, the UK and Italy (Poland’s largest export markets respectively). Yet having control over its monetary policy means Poland can play Europe’s favorite game, “beggar thy neighbor,” and devalue the Zloty if it so desires.
Reclaiming the glory of the old Grand Duchy
Interestingly, Poland’s recent retail sector growth has mainly been happening outside the capital. Unlike many post-communist countries, Poland’s internal market growth isn’t simply dependent upon its capital. There are urbanish areas all over the country and people living there like Ikeas, H&Ms, KFCs and Carrefours just as much as the average Varsovian.
While it’s possible that Poland’s relative boom will leave a lot of the country, like the American southwest before it, with a whole bunch of empty buildings, it’s also possible that these current trends represent a real and permanent change in the constitution of European economic power. Not only is Warsaw becoming a commercial hub for the central and eastern European region, it’s also becoming its financial capital. And traditional European and American players have taken note.*** I suppose it’s no surprise that the place that gave us heliocentrism is now the country toward which so many players are being gravitationally pulled.
* Some America brand-stores I’ve seen in Poland that I haven’t seen in the Czech Republic: The Gap, Domino’s Pizza, Pizza Hut, Cheetos, Gatorade and apparently Toys ‘R Us is coming soon. The diversity argument I’m making here is admittedly more anecdotal than evidential. The story is that whereas Czechs prefer Hapsburgian brands, Poles are less discriminating. As I don’t work for a consulting company I don’t have access to accurate figures in this area.
** The common refrain in both Warsaw and Prague is: “We live in the geographical center of Europe.” Of course they can’t really both be right, but such is pride.
*** Naturally, one of these players is Goldman, Sachs. Whether or not, like in Greece, they’re helping Polish companies artificially and shadily exaggerate their growth reports and potential remains to be seen.