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Slower Doesn't Mean Worse
Slower Doesn't Mean Worse
04.03.2019
EPP

By Jacek Baginski

Poland’s economic miracle of the last several decades has earned it titles such as “Europe’s Growth Champion” and “The European Tiger”. But as we move into 2019 and much of Europe appears to be approaching a slowdown, the question is still being asked in many quarters “How much longer can it last?”

This is a legitimate question as the story of Poland thus far seems almost too good to be true. But there is every indication the country is still on track to continue its expansion. As I mentioned here, Poland’s GDP growth in 2018 was 5.1 percent. According to the Polish press, the IMF is now predicting that Poland’s economic growth to be 3.6% this year, slowing to 2.8 percent in the following three-year period.

The World Bank is similarly forecasting Polish economic growth for 2019 to reach 4.0 percent. They predict slowing to 3.6 percent in 2020 followed by a rate of 3.1 percent in 2021. This is in contrast to the doom and gloom the bank is predicting for much of the world in its Global Economic Prospects report.

Finding the Sweet Spot

But as Kimberly Amadeo writes in her recent piece for The Balance, growth that’s too fast is not exactly healthy. Ideally, a country’s growth needs to be measured, neither too slow, nor too fast. According to the Financial Times, Poland’ s capital markets and economy have more than doubled since it joined the EU in 2004. And while Poland is just fine right now with low unemployment and high wage growth, a bit of a slow down should actually instill a sense of calm and confidence.

According to Trading Economics, Poland’s GDP growth rate averaged 1.03% from 1995 until 2018. That is the kind of slow, consistent growth Ms. Amadeo was referring to, and it benefits were evident in FTSE Russell’s upgrade upgrade last September to Developed Market status. That placed Poland in the same ranks with Germany, Japan, the UK and the US.

William Boal, an economics professor at Drake University, points out in this article that in general, it’s poorer countries that tend to grow faster. “The consensus is that once you’ve caught up with the frontier, the high-income countries, it’s harder to grow fast," Boal said. 

As Poland joined the big boys club, it shouldn’t be surprising that its growth rate is going to become more modest. This isn’t just to be expected, it’s actually a net positive. Now that we are officially in the ranks of the most developed countries on earth, we must use the same metrics to measure ourselves.

Jacek Baginski is the CFO of EPP, Poland’s largest owner of shopping malls