By Thomas Urbanczyk, LL.M.
According to the European Commission, the economic growth forecast for Poland in 2016 is set at around +3.4%. This places Poland, alongside Ireland and Luxembourg, as one of the fastest growing countries within the European Union. Since joining the EU in 2004, the Polish economy has continuously been gaining strength; even the financial crisis could not significantly slow its growth. In addition to the economic development of the country, the unemployment rate has declined steadily in the last decade. According to Eurostat, the unemployment rate in the year Poland joined the EU was estimated at 18.97%; in 2015, figures showed unemployment to be at around 9.0%, below the EU average of 10.2%. The Polish Ministry of Labor stated that this was the best rate in 7 years.
Moreover, the GDP growth in the first half of 2015 registered at +3.5% compared to the same period last year. This trend has continued in the second half of the year. Due to the good economic situation, unemployment has declined and with it, a simultaneous growth of real wages.
Another cause for the economic upturn in Poland can be associated with foreign investments since 2004. These investments amount to approximately 180 billion euros since joining the EU. One of the largest foreign investors is Germany. In addition to numerous corporations, many small and medium-sized companies have established branches in Poland, meaning that currently more than 6,000 German companies are located there. One of the newer larger investment projects is the new Volkswagen plant, currently under construction in Bialotezyce near Wrzesnia. Towards the end of 2016, a new model that will replace the existing Volkswagen Crafter will go into production at this facility. The plant will create up to 3,000 new jobs. In the long term, this will also attract numerous medium-sized companies from Germany to Poland. According to Michael Kern, the Executive Director of the Polish-German Chamber of Commerce in Warsaw, the attractiveness of Poland can be put down to the still relatively low labor costs, the highly motivated and qualified employees, the proximity to the border and safe economic conditions. Other important aspects are the strong domestic market and EU development funds, with Poland being the biggest beneficiary within the financial period of 2014-2020. During this time, a total of about 82.5 billion euros will flow from Brussels to Poland. This should undoubtedly benefit the infrastructure and the environment, the economic development of structurally weak areas, programs to promote research, development and innovation and the development of high-speed Internet and e-government.
Alongside countries like China and Italy in the importing of goods and Britain and France in the export business, Germany remains the most important trade partner for Poland. Currently, 26% of Poland’s total exports and about 22% of total imports are traded with Germany. According to information provided by the Central Statistical Office of Poland (GUS), Polish foreign trade in 2014 accumulated to 334 billion euros in imports (168 billion euros) and exports (166 billion euros). In 2014 Poland recorded a trade deficit of 2.4 billion euros. In the first 7 months of 2015, an increase 12 million euros of foreign trade was registered compared to the same timeframe in 2014. The majority of the goods imported and exported are machinery, equipment and vehicles. Other relevant imported goods are in the areas of chemicals and energy.
The most important legislative changes that have been announced in the area of commercial law in 2015 are listed below.
Changes in the field of labor law
In August 2015 an amendment to the Labor Code was published in the Journal of Legislative Acts. Among others, these changes include regulations on fixed-term contracts in order to protect employees against an endless extension of fixed-term contracts, exemption of employees from their work duties (as there were so far no regulations to this field), changes in parental rights in order to simplify working conditions for employees raising children and the introduction of electronic medical certificates. This makes it easier for the Social Insurance Institution to monitor employees on sick leave.
Introduction of an energy law for renewable energy from 2016
Starting from January 1, 2016, the funding model for electricity from renewable energy sources in Poland will be replaced by a tendering model. In particular, the tendering process for projects has been greatly reformed and increased efficiency and quality standards have been defined for the future. According to the new law, mini wind and solar power plants will receive a fixed compensation lasting over 15 years for the energy fed into the public network. Depending on the energy source, the compensation will amount to 11 to 18 euro cents per kilowatt-hour.
Law on Control of Certain Investments
With the arrival of October 2015, the Law on Control of Certain Investments came into force. The purpose of this law is to create legal instrumentation to control companies of strategic importance in order to protect national security and public order. The law is aimed at controlling large investments made by a single investor to gain significant stakes that in turn could have an adverse effect on the protected company. This law is primarily aimed at companies with significant market shares in the energy, chemical and defense sectors. Similar regulations have already been established in other EU Member States.
Impact of the parliamentary elections on the economy
Over the past 8 years, Poland was ruled by the “Civil Platform” PO (Platforma Obywatelska). During this time, strong economic growth and a decline in unemployment were recorded. With the parliamentary elections held on October 25, 2015 Poland is now awaiting a change of government. The party “Law and Justice” PiS (Prawo i Sprawiedliwosc) won an absolute majority with 235 out of 460 seats in the Sejm.
It is uncertain how the change of government will affect the economic situation. According to Michael Kern, the GDP growth in Poland may reach even more than four percent in the years 2016-2017, provided that the party carries out all of their promises. In the following years the potential economic growth rate would more than likely fall below three percent.
Analysts also predict that the implementation of the economic program by PiS, at least in its current form, will accelerate GDP growth, public consumption and inflation rates in 2016.
According to Mr. Kern, German-Polish political relations are not at risk, and his view i that “the economies of Germany and Poland are so closely intertwined that even in the case of changes in the political landscape, the development of bilateral economic relations can be considered stable.”