The Czech Republic has already entered the category of developed economies, while Poland, Eastern Europe’s largest economy, is losing its post-communist state label and has chances of joining the group of the world’s 20 biggest economies maybe as soon as 2030, after ranking 24th in 2013, according to IMF data.
The question is how many years will it take Romania, one of the poorest states in the EU, to catch up with Poland? Poland’s Gross Domestic Product is now 115% higher compared with the 1989 level, while Romania’s advanced by just 30% in real terms.
Poland now has a bigger population than in the year it exited communism, while Romania’s number of inhabitants has plummeted as Romanians have migrated seeking better jobs and higher living standards and because of the negative natural population growth rate.
GDP per capita, an indicator of a country’s welfare, was not much higher in Poland than in Romania in 1990, but now Poland has a GDP per capita of $14,329, while in Romania it stands at $10,160. The net average salary in Poland stands at EUR700 per month. In Romania, the average monthly salary barely reaches EUR400.
From this perspective, Poland is far from the largest economies of Western Europe, but close to countries such as Portugal and Greece, viewed as euro zone periphery countries.
And growth seems to be relentless. Poland has never entered recession after the fall of communism and its economy doubled during this period. Romania’s economy advanced only 1.3 times. During transition to market economy, Polish GDP registered average growth of almost 4%, while Romania’s contracted by almost 2%.
Seen from the outside, Poland seems to be the real success story of post-communist Europe. Germany has traditionally been Europe’s industrial hub. Poland, a country with skilled workforce, low cost of living, a large internal market and solid road, rail and air infrastructure, tends to follow in the steps of the largest European economy.
Poland’s success can largely be attributed to the governments that embraced pro-business policies. During his seven-year term, former premier Donald Tusk (photo), now president of the European Council, one of the most important positions in the EU, cut taxes and red tape and privatized state-owned companies, without ceding control of strategically important companies, such as mining, energy and chemical industry mammoths.
As a result, the private sector weighs 70% in the economy, while in Romania the weight revolves around 75%.
The Warsaw government has tried to “lure” young talents with high-quality jobs in a safe society with little internal tensions. Even the people of former Eastern Germany are attracted by the career and living opportunities of Poland. Romania is still suffering from the exodus of young talents.
Attracted by the much lower salaries compared with those of Western Europe, many multinationals have invested in Poland, turning it into a production and distribution base. Almost any IKEA-branded product sold in Europe has a part manufactured in Poland. Many Volskwagen parts are also manufactured in Poland. General Motors has production facilities here, and so do 3M, Procter & Gamble and other US giants.
Amazon, one of the world’s largest online retailers, is opening a distribution center in Poland. Google Campus Warsaw, a clone of similar projects of London and Tel Aviv, will feed startups born in garages.
The stock of foreign direct investments in Poland stood at EUR160.5 billion last year. In Romania, FDI stock reached EUR60 billion. Foreign companies’ decision to invest in Poland can be justified by the country’s 2,600 km of highway. In Romania, only 660 km of highway can be used, that is four times less.
(English version by Catalina Apostoiu)