The Polish Economy Has Surprised Us Many Times Before

According to Polish Economic Institute estimates, in 2022, the value of both public aid for refugees and private support amounted to approximately 1% of GDP, not including military aid. This is first and foremost our moral duty. As many as three-quarters of Poles have participated in helping refugees and donated a total of PLN 9‒10 billion. We have passed the test of solidarity once again. It is wonderful that we can open our hearts to people who are fighting for their freedom. I am proud of Poland and the Poles. Moreover, the longer Ukraine fights, the safer our country is. Let us also remember that refugees integrate quickly into the Polish labour market.

What role can Poland play in the reconstruction of Ukraine? Is the topic of reconstruction present at all times in the discussions of, for example, EU finance ministers?

The topic of Ukraine’s reconstruction and EU accession has been discussed practically since the outbreak of war. Representatives of international institutions are talking about it, too. In this context, the necessity of confiscating the assets of Russian oligarchs who support Putin’s regime is worth emphasising. We are urging the European Commission to seek solutions that would make this possible. Reconstruction of Ukraine also encompasses a path towards EU membership and with it, the necessary reforms. Reconstruction cannot be carried out with just European or international institutions. It has to be a joint effort ‒ capital must be made available by governments, and international financial institutions, but also by private businesses. These efforts must be coordinated, and a special platform must be established along the lines of the one used for military cooperation. The process of Ukraine’s integration is, of course, spearheaded by the European Commission, but the role of neighbouring countries is very important as well, especially considering the scale of assistance they provide.

At the World Economic Forum in Davos, opinions could be heard among representatives of global companies that the reconstruction of Ukraine might involve new investments in Poland. Will this present an additional opportunity for Polish companies?

Everything depends on security, stability and the risks involved in investing in Ukraine. Whether there is going to be a true peace or just a freezing of the conflict. The importance of Poland with regard to the reconstruction of Ukraine may be unique, due to its geographical location ‒ we have the longest land border with Ukraine. Even today, the Podkarpacie region is a hub for this kind of activity, so Poland certainly has significant prospects with regard to the reconstruction of Ukraine. In fact, the same is true for the entire region of Central and Eastern Europe. It is estimated that thanks to this, over the next few years, Polish GDP growth may be 3.6‒3.8 percent higher. Polish companies are very keen to be present in Ukraine. Several thousand companies were interested in talking about it even in late spring or summer. Our companies’ familiarity with the Ukrainian market is also important.

Experts point out, however, that the war had to a certain extent covered up some of the problems that Ukraine had been struggling with. They point, for example, to the need for introducing anti-corruption measures.

The topics of governance, i.e. principles of management and fighting corruption, also come up in international discussions. When I talk to Ukrainian politicians about it, these issues are very important to them. They are aware that this is an element of the future that must be strived for. It’s not going to be an easy road, especially in terms of allocating further funding. But there is no other. Today, Ukraine is fighting not only for its own freedom but also for our security.

And what challenges will 2023 bring for Polish public finances?

2022 and the outbreak of war had resulted in an energy crisis: increased prices of energy resources and, consequently, food. Both of these cause high inflationary pressure; gas price escalation reached 175 percent, oil 40 percent. This translated into almost 20 percent inflation. Both the central bank and I were keen to ensure that our efforts to counter inflation would not result in a hard landing, i.e. a very severe economic slowdown or even a recession and serious economic upheaval. This has been achieved, although of course it can be debated whether the policy of raising interest rates was the right one. Personally, I believe it was. Last year still ended with good GDP growth, i.e. 4.9 percent. However, we can see that the economy is indeed slowing down and forecasts for 2023 are no longer quite so optimistic. The European Commission forecasts GDP growth of 0.4 percent for Poland, while we have budgeted for 1.7 percent. Our economy has surprised us many times before and there is still a chance it would surprise us now. Of course, a number of conditions would have to be met ‒ first and foremost the situation outside Poland would have to stabilise.

Recently, economists of at least three banks have even upgraded Poland’s economic growth forecasts. So is there a chance for more optimism?

Indeed. There is a chance that inflation might start to fall significantly from March onwards and reach single digits by the end of the year. At this time, there is much more cautious optimism, although the situation is still uncertain. Today, I am betting on GDP growth of slightly over 1%. I am also hoping that the process of allocating money under the National Recovery Plan would be successful; there are also other funds available from the EU. It is important to make sure that black swans do not flock to us. That is why we are continuing with programmes to support Poles through energy price hikes at all times, as well as maintaining zero VAT on food. We are monitoring the situation and, if necessary, we will react and provide assistance in a targeted manner. The labour market continues in a good shape. Companies are accepting new employees all the time and, as a result, refugees from Ukraine are finding not only assistance but also employment with us. Over 420,000 people have already received work permits under simplified regulations. In addition, more than 14,000 Ukrainians have set up businesses in Poland ‒ and this is their contribution to our economy. Last year, when private consumption was falling due to the war and growing uncertainty, the presence of Ukrainian citizens in Poland was an important factor that sustained it.

What was the revenue from taxes paid by Ukrainians in Poland?

We have a preliminary estimate of the taxes and contributions they paid regardless of when they came to us. It already amounts to over PLN 13.5 billion.

The war has also made it necessary to expedite decisions concerning, for example, the development of the military. How can the state budget contribute in this case? Will this be a substantial challenge?

Our defence spending is growing very markedly. We are spending 3% of GDP, or PLN 97 billion, on the maintenance, development and modernisation of the army. In addition, we have the Armed Forces Support Fund, which will allow us to purchase armaments; this is already happening at a rapid pace. Financing involves more than just the budget funds or the AFSF. With countries from which we buy weapons, we also count on the involvement of their financial institutions, insurance institutions, and development banks. And we are working on that. I am also thinking about syndicates of financial institutions, banks, or government instruments, such as those offered by the US government. Every time we talk about purchases, we talk about off-market financing.

Does the Minister of Defence not surprise you with the rapid pace of declarations and purchases?

Deputy Prime Minister Błaszczak and I work together in the steering committee. It also includes the President of BGK and the government plenipotentiary Tadeusz Kościński. We meet regularly and discuss things.

If we take into account the slowdown of the economy in 2023 and possible tensions in the markets, resulting for example from further Russian attacks in Ukraine ‒ is the implementation of this year’s budget at risk?

I am quite confident. The budget bill is ambitious but prepared with our current times in mind. Security issues are a priority. It is very important to maintain the momentum of public investment in infrastructure, among other things, but also strategic investments geared towards local governments. These are important measures to stimulate the economy. The outbreak of war was a shock that increased investment risks. But after a time, the sentiment towards Poland as a good place to invest has returned, which is gratifying. Interest in Polish bonds, as well as the prospect of investment in our country in connection with the energy transition or digitalisation, is evident in conversations with both international institutions and private banks. This is confirmed by recent bond issues on major foreign markets ‒ the dollar-denominated one in the autumn and the euro-denominated one in February ‒ and strong interest from investors. We will probably proceed with further issues this year, but their timing will depend on market conditions and our own needs in this regard. I would not rule out another issue denominated in US dollars. ©℗