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Year 2016 in Polish Economy
Data dodania: 13.01.17

A number of fields of economy recorded positive results in 2015 despite the assessments made by the new government saying that the economy was in ruins. GDP growth was 3-3.6% and for two years investments had been on the increase, more goods had been exported, all sectors in the food-processing industry had recorded a rise, some of even more than 10%. Also, the first half of 2016 showed upward tendencies in the majority of sectors of economy, but in the third quarter of 2016 the economy suddenly curbed: GDP at current prices went up by 2.5% (in comparable conditions at constant prices it rose by 2.2%), while in last year’s quarter four the economy grew by 4.6%.

 

 

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Other indicators depicting country’s economic development also show downward tendencies. Exports (calculated in euros) rose by 0.8% during the first 10 months of 2016 (the increase recorded in 2015 was 8.2%). Indeed, the improvement in exports calculated at current prices in Polish zloty was 5.1%, but that did not result from the exported volume (quantity), but from the Polish zloty to euro and US dollar exchange rates. What worries most is the falling investment market. According to initial estimates, the drop in investments in the sector of enterprises reached about 10% in 2016. Entrepreneurs are careful to invest since they do not trust government’s actions. Political fragility and new regulations that are negatively assessed by entrepreneurs have been the reasons for the slow-down in investments recorded for a year now. Moreover, the rate of growth in industrial production has slackened. The results in the construction sector are worse and worse as the bear market there is still continued and is becoming more and more intense.

 

 

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Among relatively good results in 2016 one can list the dynamics of retail sale (a rise of 5.6%), average employment in the sector of enterprises (a rise of 2.9%), registered unemployment rate (a fall of 8.2%), and average monthly nominal salary (a rise of 4%). Other indicators that were better than a year ago are economic and financial results; in the first three quarters net rate of return was 4.7% in companies employing more than 49 people. Quarter four of 2016 recorded a rise in the price of industrial marketed production, which is a herald of inflation. A lot of experts express criticism over the impact government’s decisions have on economic perspectives; the forecasts about the general economic situation are gloomy. In industrial processing entrepreneurs signal that falling domestic and foreign orders result in limiting production. The situation in construction is even worse - nearly a quarter of surveyed companies critically evaluate the current and future economic situation; there are fewer and fewer orders, and it is signalled that there will be delays in payments for the work already done. At the same time it must be clearly noted that the retail trade is facilitated by the positive impact of the “500+” scheme, and pre-Christmas shopping boosted the turnover even more. Any positive and negative predictions should be postponed for next year. 

 

 

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Legend: Year-to-year GDP growth in EU member states in Q3 of 2016 in %; [from the left in the chart] Latvia, Italy, France, Denmark, Estonia, Belgium, Austria, Portugal, Finland, Hungary, Lithuania, Germany, Greece, the Czech Republic, Poland, Great Britain, the Netherlands, Croatia, Sweden, Cyprus, Slovenia, Spain, Slovakia, Malta, Bulgaria, Romania, Ireland, EU-28; Source: Central Statistical Office; data from EUROSTAT database 

 

 

Construction

 

In 2014-2015, accompanied by strong fluctuations, construction output rose by about 3%. In 2016 the industry recorded a slump. Construction and assembly output produced by companies employing more than 9 people was 15% lower than last year, and the rates fell each month of the year. All types of construction experienced a fall.

 

The situation in construction and the development of the sector are mainly influenced by infrastructure, and residential and retail construction. The year 2016 was beneficial for residential construction; on the other hand, the non-residential (retail) construction output was lower - fewer hotels and office buildings but more retail and service facilities were erected.

 

 

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According to initial data, 162 thou flats were completed in 2016 (nearly 10% more than last year), but still it was fewer than in 2008 when 165 thou dwellings were completed (which was the best year for residential construction). There is still a deficit of flats in Poland. There have been a lot of concepts for the development of residential construction for years, yet none has managed to bring the expected successes. All ideas were focused on assisting buyers in the process of buying the ownership title to flats, and supporting the rental of flats was passed over. It is being worked on to implement the National Scheme of Residential Construction. A lot of hopes is pinned on the realisation of the programme; what is mainly awaited is the inexpensive construction for rent. One of the pillars of cheap construction is the use of State Treasury land, but those plots “for free” often require fitting them with utilities. Experts already indicate that the possibility of finding plots in built-up areas is slim, and developing plots will increase the cost. Among other problems there are, for instance: ensuring adequate standard of flats at the low cost assumed by the government or the fact that cheap flats for rent should be located close to high-demand labour markets to guarantee mobility of employment. The first effects of “flat+” are expected at the beginning of 2018 - that is when the plans are to be verified.

 

In the case of infrastructure construction, the preferred field was the construction of motorways and dual carriageways. The scheme, co-financed with UE funds, has been realised for many years, however, unfortunately it has been accompanied by various delays; additionally, the construction costs have also been exceeded. According to the current plans (that have been changed on many occasions) the length of clearways is to reach 7,650 km in the end, comprising 2,000 km of motorways and 5,650 km of dual carriageways. So far (the data as of 1 December 2016) about 42% of the target has been completed. After the scheme is finished (including the completed sections, sections under construction and those for which a tender has been called), the length of motorways and dual carriageways will total 4,835 km (nearly 2/3 of the target length).

 

 

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It is a significant challenge to stabilize the fluctuations in construction. The year 2016 failed to make a breakthrough; the construction industry has not been experiencing such a deep decline for years. The sector has a chance to attain a substantial rise within a few years though (if no new obstacles appear). The delayed tasks in the scope of infrastructure, and expansion and modernisation of the power industry are still to be realised.

 

 

Industry

 

In 2015 the industrial marketed production increased by 4.9%; a stable rise was also maintained in the first half of 2016 (4.4%). In the second half the growth rate slowed down, and quarter three ended with a 2.5% rise in marketed production, and according to initial assessments for 2016, it will slightly exceed 3%. The output generated by the mining industry and power industry was lower than last year. The situation was better in the fields that traditionally devote a large part of their output for exportation, e.g. manufacturers of furniture, transportation equipment, electrical devices, goods made of metal, domestic appliances, and plastic. In the second half of 2016 the exports were lower than in preceding months, which triggered demand issues experienced by some industries.

 

With the diversified tendencies in industrial processing, it must be clearly noted that the glass industry is among the fields with the highest output. Both in 2015 and in 2016 the production of glass industry dynamically rose. The share of glass and glassware in mineral material industry systematically increased. The same can be said about the manufacturing of the most important glassware. Indeed, goods of various materials appear on the market (e.g. those made of plastic) that have the potential to substitute glass in a number of applications, yet glass continues to be material most appreciated by users: especially preferred products are the modern ones made of glass. The output of cast and rolled glass dropped; on the other hand, the production of float glass, single- and multiple- glazed units, and multilayer safety glass with dimensions and shape adjusted to building in rose.

 

 

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About an 8% increase was recorded in the case of float glass, coated glass and polished plate glass in 2016. The hike in the output of multiple-glazed units totalled 10%, and about 2% rise was observed in the case of single-glazed production. Household glassware output was similar to last year’s.

 

The highest share in the structure of the glass industry (of about 55%) was made up by profiled flat glass and glass subject to further treatment; traditional cast and rolled glass did not exceed 10%; the share of domestic glassware (glasses, stemware, bottles, tableware or kitchenware) in the total output of the industry totalled 1/4; the remaining types of glassware were: glass fibre, technical glass, and laboratory glassware for pharmacy.

 

What is worth noting in the scope of structural changes is the fact the rise in the marketed production of glass and glassware was sharper than in the industry in general, and also higher than in the marketed production of mineral construction materials – the observation refers to both 2015 and 2016, when the value of marketed production of glass and glassware went up by 7.3%. An important factor influencing the structural changes and ensuring an increase in production is the high share of exports in the total glass industry marketed production. When evaluating the situation in the glass industry in 2016, one should stress that the sector is characterised by advantageous market indices; the financial condition is good and stable, and the stability of export relations is a security against fluctuations in the domestic demand.

 

 

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The glass industry is among those with a high rate of return. The rate of return in that sector has been high for many years (it was 8.7% in three quarters of 2016). The main factors influencing the rate of return of companies manufacturing glass and glassware are the volume and cost-effectiveness of exports; what is also significant here is the price on the domestic market and the lower-and-lower costs.

 

 

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Export

 

The total Polish export in 2015 was 179.6 billion euros, and was 8.2% higher than last year; the export to EU member states was 11% higher and, to the Central and Eastern Europe, dropped by nearly 20%. The most important contractors for Poland in the scope of exports are Germany (over 1/4 of total export), and Great Britain, the Czech Republic and France (the last three countries together constituted nearly 20% of Polish exports in 2015). From January to October 2016 the rise in total exports in the Polish economy was 0.8% (in euros) and 5.6% (in Polish zlotys). The assortment structure showed i.a. the following changes: a strong rise in the exports of various industrial goods, furniture, chemicals, transportation machines and devices, and a fall in the exports of mineral fuel and related products.

 

 

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Poland remains an important exporter of glassware in Europe. In the periods of weak market when domestic demand dropped, enterprises increased their efforts to find foreign markets for their products. Polish exporters of glass enjoy a well-established position in Europe. In 2015 the value of exported flat glass and glassware totalled 1,559 million euros, which was nearly 6% more than last year. In 2016 we observed a diversification of the assortment in the glass industry exports: a surge was recorded in flat glass production as between January and September 2016 the exports of different assortments categorised as flat glass went up in tonnes by 8%, and its value (in euros) increased by 6%. On the other hand, the quantity of household glassware was slightly lower than in the corresponding period last year. The total glass industry exports went up in current prices (in Polish zlotys) by about 10% (the indicators calculated in Polish zlotys were higher than those in euros; the discrepancy derived from the euro to Polish zloty exchange rate). The prices of flat glass rose from EUR 953/tonne in 2012 to EUR 1,480 in 2015, and remained around that level (EUR 1,453/tonne) in 2016. The price of glassware was stable in 2012-2015, recording only a slight drop in 2016 when it reached EUR 1,178 /tonne.

 

Worth highlighting is the fact that the exports strongly impact the structure of glass industry production; the share of exports in the industry output has been high for a few years now. We sell over 90% of modern flat glass products in the EU member states. However, the share of market glassware in exports has been on a slight decrease. A favourable information is that the exports to the Central and Eastern Europe increased in 2016.

 

 

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Conclusions

 

The opinions that the new government found Poland in ruin have not been confirmed. In 2015 the majority of sectors of the economy attained advantageous results. With 3.6% growth in GDP in 2015, Poland was among EU member states characterised by the highest growth. Investments rose; despite limitations in the foreign trade with Russia and Ukraine, export exceeded import and increasing export improved the recorded industrial results. The financial condition of enterprises was better than in the last years. Changes in the labour market that began in 2014 started to bear fruit - unemployment decreased. Construction was the weakest and least stable sector of the economy, although it is supported with various EU funds.

 

Also, in the first half of 2016 upward tendencies prevailed in the scope of real economy, but worrying signals appeared more and more often. In the second half of 2016 the pace of economic growth slowed down; it was when the industrial production growth rates dropped and further decline in the construction output was recorded, but what worries most is the regression in investments. It is too early to say whether the tendencies from the second half of 2016 will be of permanent nature or what the consequences of the “high-spending” government’s policy (implementing electoral promises) will be. The situation in financial markets is still unstable; the rate of growth of exports is also lower. Companies attained good financial performance after 9 months of their operation in 2016 despite the lower-than-expected dynamics of revenues. Nevertheless, entrepreneurs are unchangeably careful to invest, which should be linked with the political instability and restrictive regulations that dominate government’s decisions.

 

 

prof. Zofia Bolkowska

 


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