Polands economy was in a
strange place during much of last year. Retail sales had fallen
for the first time since the fall of Communism while growth, in
the only European Union member state to avoid recession during
the financial crisis, had slowed to 1.3% in 2013 from 1.9% the
previous year and 4.5% in 2011.
Many wondered whether emerging
Europes sovereign standard bearer, the only nation from
the former soviet bloc with genuine near term aspirations of
becoming a developed country, was losing its way. That feeling
was reinforced by a government decision to transfer $51bn worth
of underperforming privately run pension funds back under state
control. Had Poland lost its affection for Western-style
capital markets and if so, what did this mean for the wider
In the event, there was little need
for concern. The elevation of Mateusz Szczurek, a 39 year old
former ING economist, to the post of finance minister in
November 2013 convinced global investors that Poland remains
committed to reforms and deregulation. During his first year in
office, he has overseen a quiet but impressive economic
turnaround. In September, Standard & Poors tipped
gross domestic product to grow by 3.1% this year and 3.3% in
2015, boosted by improving market conditions, low inflation and
accommodative monetary policy.
Economists like his technocrat
credentials. William Jackson, emerging market economist at
Capital Economics in London, describes him as a safe pair
of hands. Charles Robertson, global chief economist at
Renaissance Capital, points to the countrys
impressive economic outperformance since
Szczureks elevation. Confidence is back, no one
doubts Polands financial mix and the economy is looking
pretty good, he says. Looking ahead over the next
12 months, I have concerns about many leading countries across
emerging Europe, including Russia, but none about Poland.
Hes done a good solid job.
And along with his steadiness,
investors respect his credibility and chutzpah. The decision to
nationalise the countrys pension fund system predated his
arrival. Nor was he ensnared by a taping scandal that tainted
the reputation of several Polish ministers including
Szczureks predecessor, Jacek Rostowski. In September,
incoming premier Ewa Kopacz retained his services, singling out
the finance minister, a responsible economist, for
Szczurek has even waded into the
austerity debate, urging European leaders to spend more in
order to boost growth. Only by agreeing to 700bn ($888bn)
in fresh spending, the minister warned in September, could the
region that was strangling itself unnecessarily,
reverse its paralysing economic decline.
Mateusz Szczurek thinks
long and hard before unrolling a long list of reasons underpinning Polands ability to
recover from a recent bout of the economic shivers. Growth in
emerging Europes financial and fiscal powerhouse dipped
alarmingly over the past two full years, with retail sales and
bank lending also slipping, before springing back
to life in 2014.
The key [to the
turnaround] was a combination of a supply-side reform drive
with public investments responding to the shortage of private
demand, Polands finance minister tells Emerging
Markets. Other reasons for the nations renewed
strength include its exchange rate flexibility, which has
allowed for quick relative price and wage
adjustment, along with prudent financial regulation and
low levels of private and public debt.
Each of these points is
crucial, insists Szczurek, to understanding why Polands
economy remains head and shoulders above its regional peers.
His words also betray the mind and moods of the private sector,
where he worked for 16 years before being tapped last November
to oversee Polands finances.
Szczurek highlights the
importance of balancing books and slashing costs. A
stabilising expenditure rule to be introduced in
the 2015 budget will, he says, cut the countrys medium
term structural deficit to below 1%. The new rule will also aim
to lower levels of gross government debt, currently running at
around 57% of GDP. Other measures designed to impact
favourably on the fiscal balance include the
streamlining [of] administration costs in order to
improve tax compliance and a gradual but systematic rise
in the retirement age.
The minister is at
pains to underline the countrys enduring commitment to
reform, deregulation and the health of its capital markets.
Despite Polands move in early 2014 to effectively
nationalise its pension fund system a decision that
predated his arrival the minister insists that the
core of the pension reform launched in 1999 [remains]
intact as a defined contribution system.
Szczurek admits that
challenges remain, including low inflation and wages at home
and rising interest rates in the United States. Polands
consumer price inflation is near zero, below the central
banks official target of 2.5%, though the minister tips
deflation, caused mainly by decreasing food and energy
prices, to last only a few months.
By far the biggest
drag, though, is the torrid level of growth across Europe.
Eurozone stagnation is by far the greatest challenge for
Poland, he says. Our firms are ready to benefit
from any uptick of external demand thanks to wage discipline
and productivity growth. But we do need European growth to have
a lasting acceleration on our own growth