Polish Economy and Foreign Direct Investment

Abstract

Poland started the transition to a market economy since January 1, 1990. Despite of negative 7％ GDP growth rate in 1990 and 1991 respectively, Poland continues favorable development for 25 years thereafter. It is the fruit of Poland’s accession to the EU 2004, realizing Poland into the single EU market, expansion of export opportunities, allocation of EU funds, also foreign direct investment (FDI), as powerful engine for economic development.

For investigating factors of successively favorable economic performance in Poland, it is worthwhile to focus on the agricultural sector, because the sector shows implicit issues to be solved. Polish agricultural sector keeps an output ratio to GDP at 3％, also worker’s share at 12％ of total employee, both of which are rather high in the EU, especially in the new member-state countries. Polish labor productivity is low at 60％ of OECD average, and salary remains at one third of advanced economies. Author judges that the cause is due to the power and role of foreign enterprises as the microeconomic view.

Several studies refer to the EU funds and FDI for good performance of Polish economic development. It is the fact that a large amount of the said capital flows into Poland, and acts as strong driver for successive growth. The big enterprises including famous automobile companies invested in Poland, and their presence becomes rather strong, and plays an important role to drive Polish economy. It is obvious that foreign enterprises give a lot of to Poland, which is a positive side of contribution. But it is needed to recognize a negative side as well, because excessive power or activity of foreign enterprises causes unwanted results such as stagnation or deterioration of domestic entities’ activity. Despite the investment of foreign enterprises can be evaluated as the reliable tool for good economic development in short term, it could be a risk factor in middle and long terms.

Polish authorities paid their strong attention to secure much foreign capitals as possible in past decade. But such policy led Poland to face the Middle-Income Trap due to excessive dependence on foreign capitals. In February, 2016, Polish authority admitted possible risks for future economic development in an Action Plan for responsible development of Poland, and is turning their policy to avoid the Middle-Income Trap.