There is every indication that the Polish

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1 25 There is every indication that the Polish economy grew more than 3 percent in 2014, marking one of the best results in the European Union. Most projections show that the Polish economy will continue to grow at a similar rate this year, which would also be a very good result. In the last few years Poland was always at the forefront of the fastest growing countries in Europe. DOING WELL? THINK AGAIN As a result, some began calling Poland a green island, meaning a safe haven that resisted recession amid the global economic crisis. Of course, this was eagerly cited by the Polish government s PR machine. However, the success of the Polish economy in Europe does not mean that Poland is in a strong position globally. In many countries economic growth has been much faster than in Poland. This is shown clearly by a ranking compiled by the Bankier.pl website, listing the fastest growing economies in the world over the last five years. Bankier.pl has evaluated which countries saw the fastest cumulative growth in terms of gross domestic product in The list is interesting. It points to no universal recipe for rapid economic growth. The world s 10 fastest growing economies have only one thing in common: none of them is in Europe. They are generally poor or very poor countries, combining unlimited opportunities with a very low standard of living. At the forefront are Liberia, Afghanistan and Ethiopia, which recorded over 60 percent GDP growth in But the top 10 also includes global economic powerhouse China, with nearly 53 percent growth. Poland, with cumulative 14.3 percent growth in the last five years, was ranked a distant 115th among the world s fastest growing economies, behind countries such as Thailand, Botswana, Turkey, Egypt and Chile. This shows that Poland s status as the fastest growing economy in the European Union is not necessarily reason enough to be proud. Even in Europe, Turkey, Belarus, Moldova and Kosovo recorded faster GDP growth than Poland. Andrzej Ratajczyk

2 26 VOICE - BUSINESS / WARSAW ECONOMIC HUB Brainstorming the Future More than 100 prominent politicians, businesspeople, financiers and academics discussed the role of Poland in its region, Europe and globally during the Warsaw Economic Hub international conference held at the Warsaw Stock Exchange building Dec. 10. This year s meeting of investors, entrepreneurs and economic experts as well as central and local government officials in Warsaw was organized for the seventh time by the Warsaw Stock Exchange, the International New York Times and The Warsaw Voice. The debates focused on the role of Poland in its region, Europe and globally and on the country s burgeoning economy, as well as on the situation on financial and capital markets in other countries in the region. Conference participants also discussed medium- and long-term forecasts for the Polish economy and Europe as a whole. Marek Sawicki, minister of agriculture and rural development, said at the opening of the conference that 2015 will be a year of considerable uncertainty, but also of big opportunity. Certainly, a lot will depend on how the Russian-Ukrainian conflict evolves, Sawicki said. Agriculture is the sector of the Polish economy that has been particularly affected by the turbulence across Poland s eastern border, he added. The imposition by Russia of an embargo on the importation of many agrifood products from Poland has created many problems for Polish food exporters. If these markets had remained open, our exports could have increased by up to 30 percent, Sawicki said. Agriculture has become the third biggest sector of the Polish economy in terms of the value of exports, according to Sawicki. And most likely in 2014, much as a year earlier, the value of Polish food product exports exceeded 20 billion euros, he said. Despite the uncertain situation caused by the Russia- Ukraine conflict, Sawicki said he believes Polish agriculture will develop in the future due to factors such as growing global demand for food. According to Sawicki, Poland will be part of this growth not just quantitatively but also qualitatively. Therefore, one of the objectives of the Polish Ministry of Agriculture in the coming years will be to come

3 27 Marek Sawicki, Minister of Agriculture and Rural Development up with a new agricultural offering for the more demanding consumer, Sawicki said. We will be strongly supporting organic production, production of high quality food, production based on groups of farms, not just small individual businesses, Sawicki said. Funds from the EU s new budget for are expected to contribute to the development of Polish agriculture and the economy as a whole. Former Polish prime minister Jan Krzysztof Bielecki said that Poland has good medium-term prospects. I believe the Polish economy will thrive Jan Krzysztof Bielecki, former Polish Prime Minister and Chairman of the Prime Minister s Economic Council in the next five to seven years, Bielecki said. Besides, a new generation is growing up in Poland that will contribute new quality. Deputy economy minister Jerzy Witold Pietrewicz said the future of the Polish economy will largely be shaped by EU funds available under the bloc s new budget. It seems that until 2020 we have a chance to remain a green island in Europe in terms of growth, Pietrewicz said. But it is necessary to develop entrepreneurship, and to fight bureaucracy throughout the EU because this inhibits investment. P/0228/14

4 28 VOICE - BUSINESS / WARSAW ECONOMIC HUB Brainstorming the Future More Innovation Needed Richard Lyman, The New York Times; Pawe Tamborski, President of the WSE; Ryszard Petru, Chairman of the Association of Polish Economists; Krystian Bestry, VP & Head BPO Services EMEA, Infosys BPO Ltd, Vice-President of ABSL; and Zbigniew Jagie o, President of PKO Bank Polski Pawe Tamborski, president of the Warsaw Stock Exchange, was also optimistic. I look forward to an upturn on the Warsaw trading floor in Poland is beginning to be viewed as a safe haven and I think investors and funds will increasingly think highly of companies listed on the WSE, Tamborski said. He added that last year many investors waited for the situation to clarify when it comes to open pension funds (OFE). Their approach was also influenced by anxieties over the Russia-Ukraine conflict. A few months ago the WSE signed an agreement with Warsaw City Hall on taking action to support start-ups. The aim of these efforts is to increase the innovativeness of the Polish economy, create a positive image of the city as one supporting innovative projects, and to attract foreign entrepreneurs and investors to Warsaw. The aim is not to have as many companies as possible based in Warsaw, but to make sure that these companies are competitive on international markets, said Micha Olszewski, deputy mayor of Warsaw. Jerzy Witold Pietrewicz, Secretary of State, Ministry of Economy; Jan Krzysztof Bielecki; Marek Sawicki; Iwona Sroka, President & CEO of the Central Securities Depository of Poland (KDPW) and KDPW_CCP; and Krystian Bestry It seems that Polish companies have grown aware of the need to invest in research and development, as evidenced by their growing expenditure in this area. But the situation is still far from ideal. Polish industry does not yet have sufficient skills in managing research and development projects. Those taking part in one of the panel discussions at this year s Warsaw Economic Hub conference talked about how EU funds can be used to foster innovation in the Polish economy. According to Prof. Krzysztof Jan Kurzyd owski, director of the National Center for Research and Development (NCBR), it is worth focusing on innovative solutions and promoting innovative sectors so that Polish companies can strengthen their position not only regionally but also globally. I am glad that Polish companies increasingly understand the need for an active research and development policy. If we want to skillfully support this process, we should channel public funds to the best, Kurzyd owski said. He added that recent years have seen rapid growth in private sector spending on research and development. Kurzyd owski also said that there is an insufficient number of R&D departments in Polish companies, which leads to a serious knowledge deficit. Iwona Chojnowska-Haponik, director of the foreign investment department at the Polish Information and Foreign Investment Agency (PAIiIZ), said, Unless we become innovative, we may not be competitive on the international market in the future. According to Chojnowska-Haponik, Polish companies are still hesitant to invest in R&D; foreign companies active on the Polish market do so far more often, she said. Meanwhile, Pawe Olechnowicz, president of the Lotos Group, said Polish companies should take advantage of the best solutions in the world. We need to communicate with not only Polish, but also global research centers. A company like Lotos should be innovative in every respect and this is what are we striving for. And research institutes working with us contribute to this, said Olechnowicz.

5 29 Micha Olszewski, Deputy Mayor of Warsaw Another priority of the city authorities in the coming years is to improve the quality of life for residents, Olszewski said. This will require significant investment in infrastructure, environmental protection and security, he added. Warsaw and Poland as a whole rank high in terms of investment attractiveness. Marcin Olszewski, managing director of Fujitsu Poland, said, For investors, stability, predictability of changes, and business security as well as infrastructure are important. Also very important is the level of education. And Poland is in a good position in this area. Janusz Steinhoff, a former deputy prime minister, said that investment is rational when the government guarantees a stable policy. Meanwhile, deputy finance minister Artur Radziwi said the stability of public finances is a key factor because it is a buffer that helps Jerzy Witold Pietrewicz react flexibly to different situations, both internal and external. However, to be successful in the future Poland needs to make its economy more innovative. According to Witold Or owski, chief economist at consulting firm PwC, money is not the only factor that determines whether or not an economy is innovative. Ideas are also important, Or owski said. That s why, it is necessary to think carefully about how EU funds should be used to make sure Poland can enter a new stage of economic development. The defense industry, meanwhile, is a sector of the economy that could become a showcase for Poland. This is an important element of the country s economic development, said Ryszard Kardasz, president of PCO S.A, a producer of optical equipment for customers including the military. The future of this sector lies in the hands of WSE Aims to Attract Innovative Companies The Warsaw Stock Exchange (WSE) wants to become the market of first choice for companies in the region. In particular, it wants to attract innovative companies. While taking the floor at the Warsaw Economic Hub conference, Pawe Tamborski, president of the Warsaw Stock Exchange, said, I look forward to an upturn on the Warsaw trading floor in Poland is beginning to be viewed as a safe haven and I think investors and funds will increasingly think highly of companies listed on the WSE. WSE managers also hope that by 2020 the WSE will become an important participant in the trade in electricity in Europe. While the financial market has already been parceled out, Warsaw can still vie for an important position in the energy sector, said Tamborski. Another niche with potential that the WSE wants to enter is the market for innovative companies. Besides, we are hoping that new Ukrainian companies will appear on the trading floor in Warsaw once the situation in Ukraine stabilizes, said Tamborski. the Defense Ministry and largely depends on programs for the modernization of the Polish army currently under way, Kardasz added. In the future we will develop exports of our own technology. But today we cannot L/0225/14

6 30 VOICE - BUSINESS / WARSAW ECONOMIC HUB Artur Radziwi, Undersecretary of State at the Ministry of Finance; Pawe Wojciechowski, former Minister of Finance; and Wojciech Pop awski, Director of Accenture Operations Poland, Vice-President of ABSL cut ourselves off from foreign technology if we want to modernize ourselves quickly, he said. One of the fastest growing sectors of the Polish economy is the business services sector, which has more than 130,000 employees. Krystian Bestry, VP & head of BPO services (EMEA) at Infosys BPO Ltd, said, The development of the business services sector (BPO) entails an increase in employment, but also the development of the commercial real estate market. Moreover, job creation in this sector does not require substantial capital investment, while it makes a huge contribution to education and know-how. Katarzyna Zawodna, CEO of Skanska Property Poland, said, We are constructing many buildings for the business services sector on regional markets. She added that bricks and mortar is not the only factor that matters. The most important factor of success in the BPO sector is human capital and young, talented employees want to work in environmentally-friendly and well-functioning buildings, according to Zawodna. It is important to find out about the expectations of the industry. What matters is the location, flexibility in terms of office space, as well as whether or not the building is certified, said Zawodna. Participants of this year s Warsaw Economic Hub conference also discussed energy security, nuclear power, instruments for financing investment projects and other issues related to the economic future of Poland and the world. The conference was held under the auspices of President Bronis aw Komorowski. A.R. Janusz Steinhoff, former Deputy Prime Minister, Senior Adviser at Roland Berger Strategy Consultants Martin Ring, Managing Director BNY Mellon, Vice-President of ABSL

7 31 Optimism Amid Uncertainty According to most forecasts, in 2015 the Polish economy should grow by about 3 percent, a similar rate to But predictions for GDP growth this year are burdened with a large dose of uncertainty, mainly due to the ongoing conflict between Ukraine and Russia. D ata from the Central Statistical Office (GUS) shows that in the third quarter of 2014 Poland s gross domestic product was 3.3 percent higher than a year earlier. While this rate of growth was slightly slower than in both the second and the first quarters (3.5 percent and 3.4 percent respectively), it was nevertheless the best third quarter since As a result, following the third quarter, Poland retained one of the highest GDP growth rates in Europe. To compare, the two largest eurozone economies, Germany and France, remained stagnant, with economic growth at 1.2 percent and 0.4 percent respectively. All the indications are that in 2014 as a whole Poland s economic growth was at least 3 percent (the government has forecast 3.3 percent). Economists expect similar growth in 2015, although the economic situation in Poland in the coming months will depend on political developments in the region. In recent months, several institutions have revised downward their forecasts for Poland. The European Commission, in its autumn economic forecasts, put Polish 2015 GDP growth at 2.8 percent. These forecasts are worse than the government s projection of 3.4 percent and also worse than the European Commission s estimates from half a year ago (3.4 percent). Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, says Poland s economy has decelerated due to weaker external demand. According to EU experts, the Polish slowdown is due to two key factors. The first factor is the slowdown in the West, including in Germany. The second factor is the conflict between Ukraine and Russia, the direct impact of economic sanctions and the slowdown in these two economies, which translates into reduced imports from Poland. The latest GDP growth forecasts for 2015 are worse than projections from just six months ago, and not only for Poland, but also for the eurozone (1.1 percent instead of 1.7 percent) and for the EU as a whole (1.5 percent instead of 2 percent). The main reason is worse forecasts for Germany, France and Italy. More optimistic about Poland s future economic growth is Mark Mobius, executive chairman of Templeton Emerging Markets Group, who believes that in 2014 Poland s GDP grew 2.7 percent and that in 2015 it will expand by 3.5 percent. Just as with most Central European countries, exports to Germany have a big impact on the Polish economy. According to Mobius, the consequences of the conflict between Russia and Ukraine for the Polish economy are difficult to predict. It is estimated that the ban on the import of food products to Russia alone will shave 0.2 percent off the Polish GDP growth rate (food exports to Russia account for 0.6 percent of Poland s total exports). In terms of investment, it is possible to expect a significant increase in spending on infrastructure in , when new EU funds come online, according to Mobius. Forecasts by analysts from Bank of America Merrill Lynch suggest that Poland s GDP will grow 3.2 percent in 2015, followed by 3 percent in Poland s relatively strong economic performance should attract capital investors to the country. In a report by BofA Merrill Lynch with investment recommendations for 2015 regarding individual emerging markets, the bank s analysts changed their recommendations for investors in Poland from underweight to neutral. According to economist Raffaella Tenconi, Poland is a beneficiary of a policy of monetary easing by the European Central Bank and an expected interest rate cut by the National Bank of Poland will strengthen the country s economic growth in Meanwhile, the significant cash resources currently in the possession of pension funds should prompt them to buy shares, according to Tenconi. According to Marcin Fiejka, head of the Emerging Europe Equity desk at Pioneer IM in London, Poland has low political and fiscal risk at the moment. Nor are there any significant risks for the Polish economy being generated by tighter global financing conditions and the slowdown in the Chinese economy. Against the background of global emerging markets, Poland looks neutral on the whole. But it fares well compared with its peers in the region. It is in a position to attract cash flows from volatile markets and has strong economic fundamentals. Even though Polish shares are not cheap, Fiejka says, the Polish market offers relatively low risk, which is bound to catch the attention of global players. Moreover, Poland is not a raw material exporter, so it is free from the risk of falling prices. While keeping interest rates low, translating into a low cost of capital, the Polish market will benefit from the expected improvement on global markets. And this improvement will be moderate, but stable. According to Fiejka, the Polish economy will also benefit from improved trends in the European Union. In addition, it seems that foreign investors do not think of Poland in terms of the problems of the Russian economy. Being a large and secure economy, Poland can become a beachhead for capital fleeing from the Russian market. It will also benefit from EU funds. Andrzej Ratajczyk English Language Satellite TV Movies - Sports - Cartoons Entertainment channels SKY Digital Sales - Service - Installation Satellite Service tel , sales@satservice.pl