Impact of Macroeconomics Aspects on Economic Performance: A Brief

Study on Poland

A report submitted to the Cluster Innovation Centre

in partial fulfillment of the requirements for paper
IV.5.1 Understanding Economics behavior the macro level

(Semester- IV 2019)

Ashish Priyadarshi (11708)

Under the supervision of Dr. Vikas Singh

April 2019
Acknowledgment

I would like to express my special thanks of gratitude to my mentor Dr. Vikas Singh who gave me the
golden opportunity to do this wonderful project on the topic ​“Impact of Macroeconomics Aspects
on Economic Performance: A Brief Study on Poland”​, which also helped me in doing a lot of
Research and I came to know about so many new things I really thank him.

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Index

1. Introduction …………………………………………………………………..3
2. Employment Unemployment Rate ...………………………………………...4
3. Currency Exchange Rate in terms of Dollar and Euro ...……………….....6
4. Gross Domestic Product ...…………………………………………………...7
5. Poland’s Tax System …..……………………………………………………...8
6. Leading International Trade commodity …………………………………....9
7. Poverty level and compare it with India’s poverty level .…………………...9
8. Trade & Entrepreneurship in India vs Poland ………..…………………...11

List of Figures

1. Poland’s vs World average fiscal health ……..…………………...………….4

2. Unemployment rate in Poland vs the World in 2002​ ​..…..………...…...…....5
3. Unemployment rate in Poland vs the World in 2018​ ​…………………...…...5
4. Euro vs Polish zloty Rouble in the past years …...……………………...…...6
5. USD vs Polish zloty Rouble in the past years …….……………….……........7
6. GDP of Poland in the last 5 years ………...……………………….…….....…8
7. Poland vs EU Exports in the last 10 years ​...………..………………...……...9
8. GDP growth rate of India vs Poland​ …..………………………………...…..10
9. Unemployment rate of India vs Poland​ …………………………………...….10
10. Balance of trade in India vs Poland​ ……………….…………………...…11

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Abstract

Macroeconomics factors or variable ( e.g. unemployment and employment, GDP, tax system,
currency exchange rate, etc) plays an important role in the economic performance of any country.
Maximum research concentrates on the financial market of developed or developing countries
because developed countries are efficient enough and do not suffer from inefficient problems which
are found in less developed countries. Taking these things, financial markets in developing countries
required deep analysis and more research attention. In this study, we analyze the macroeconomic
variables to examine the economy of Poland.

Introduction

The Polish economy is the 8th largest economy in EU and a key European success story. Since 1995,
Poland has become the fastest growing economy in the world among large countries with a similar
level of development. It’s is beating even the Asian tigers like South Korea, Singapore and Taiwan.
The Polish economy is performing strongly by which real GDP growth reached 5.1% in 2018. It is
driven by domestic consumption and accelerated investments. Unemployment is low to 4 percent and
shared prosperity indicators are improving.
The three major drawbacks in Poland’s economy are a shortage of labor in the economy, procyclical
government policies encouraged by the political calendar and adverse global factors.
The shortage of labor will in the future weigh heavily on potential GDP growth and be aggravated by
the early retirement of an rise in share of the workforce. A shortage of workers could negatively affect
production capacity and investment. The problem may be expanded by the possibility that other
European Union countries open their labor markets to workers from Ukraine, who have till now
helped Poland mitigate the deficiency in the labor supply.

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 Fig 1 .Poland’s vs World average fiscal health
Source: https://www.heritage.org
As in this political calendar with EU, presidential and general elections all coming up within one year,
it has inspired a range of procyclical policies. Proposed measures to lower tax rates and inflate the
cost of pension payments are expected to put pressure on public finances in the medium term. Due to
the irreparable nature, such policies would weigh on Poland’s fiscal position in the future.

Employment Unemployement Rate

Unemployment Rate was all time high in poland in the early 2000s at nearly 20%. After joining EU,
unemployment rate went downward and since 2008 the unemployment rate of Poland is lower than
unemployment rate of EU
The unemployment rate of poland started rising after industrialization and became severely high after
the Great Depression. Unemployment rate was at an all time high in 2002. Today, employment rate in
Poland is better than many countries.

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Fig. 2. Unemployment rate in Poland vs the World in 2002
Source: World Bank

Fig. 3. Unemployment rate in Poland vs the World in 2018

Source: World Bank

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Poland’s economy is one of the largest in Central Europe and was the only economy in Europe to
avoid a recession during the 2008-2009 global economic downturn. Poland’s free market economy is
dominated by the agricultural and mining sectors.

Currency Exchange Rate in terms of Dollar and Euro

Poland does not use the euro as its currency. However, under the terms of their Treaty of Accession
with the EU, the country is obliged to eventually replace its currency with the euro.
The position of Polish złoty exchange rate is good in terms of Dollar as 1 USD = 3.78 Polish złoty
and with Euro as 1 Euro = 4.27 Polish złoty.

Fig. 4. Euro vs Polish zloty Rouble in the past years

Source: European Central Bank

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 Fig. 5. USD vs Polish Zloty in the past year
Source: exchangerates247

Gross Domestic Product (GDP)

The combined value of exports and imports is equal to 102.8 percent of GDP in Poland & the average
applied tariff rate is 2.0 percent. Poland implements a number of EU-directed nontariff trade barriers
including technical and product-specific regulations, subsidies, and quotas.

Over the past three years, government spending has amounted to 41.3 percent of the country’s output
(GDP), and budget deficits have averaged 2.3 percent of GDP. Public debt is equivalent to 51.4
percent of GDP. The good fiscal health of Poland has lead to rise in GDP.

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 Fig. 6.. GDP of Poland in the last 5 years
Source: TRANDINGECONOMICS.COM | World Bank

Poland’s Tax System

Income Tax
● Poland's taxation of an individual's income is progressive. In other words, the higher the income,
the higher the rate of tax payable.
● The 2018 tax rate for an individual is 18% or 32%. Individuals can choose, under certain
conditions, paying a flat rate of 19% on business income without allowances.
● In Poland corporate tax in 2018 is 19%. Small companies pay 15%.

VAT
● The Standard rate is 23% and reduced rates are 8% and 5%. Export of goods and services is zero
rated.

Taxable event

● supply of goods and services for consideration within the territory of Poland by taxable persons
acting as such;
● intra-Community acquisition of goods for consideration within the territory of Poland from
another EU Member State; and
● import of goods to Poland.

There are other taxes like Transaction Tax, Real estate Tax, Motor vehicle Tax, Excise duties and
Custom duties.

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Leading International Trade commodity

Poland is a founding member of the World Trade Organization. Poland's major imports are capital
goods needed for industrial retooling and for manufacturing inputs. The country's exports include
machinery, but are highly diversified. The most successful exports are furniture, foods, motor boats,
light planes, hardwood products, casual clothing, shoes and cosmetics. Poland is less dependent on
external trade than most other Central and Eastern European countries, but it’s volume of trade with
Europe is still substantial. 30% of Poland's exports are to Germany and another 30% to the rest of
Europe. There has been substantial increase in Poland's exports to Russia. However, in August 2014,
exports of fruits and vegetables to Russia fell dramatically following its politically motivated ban by
Moscow.

Fig. 7. Poland vs EU Exports in the last 10 years

Source: Trading Economics
The top export destinations of Poland are Germany ($54.5B), the United Kingdom ($13.8B), the
Czech Republic ($12.7B), France ($11.7B) and Italy ($11B). The top import origins are Germany
($55.2B), China ($25.9B), Italy ($12B), Russia ($11.5B) and France ($8.94B).

Poverty level and compare it with India's poverty level

Poverty in poland is 17 % in 2015 i.e. is lower compared to India’s 21.9% poverty according to
census taken in 2011. In comparison to GDP, Poland’s GDP growth rate was higher than India’s but
after some changes and interventions by EU, there are some problems in the economy of Poland
leading to decreased GDP growth rate.

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 Fig. 8. GDP growth rate of India vs Poland
Source: TRADINGECONOMICS.COM

In case of Unemployment, the rate of unemployment is rising in india and decreasing in Poland as
there is rise in entrepreneurship in Poland to become an entrepreneurial powerhouse while India is
still working towards creating an entrepreneurial culture.

Fig. 9. Unemployment rate of India vs Poland

Source: TRADINGECONOMICS.COM

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Trade & Entrepreneurship in India vs Poland

India has a major absolute advantage over trade as Poland’s lack of an abundant natural resource for
trade and Poland does trading with countries in EU so there has been economical instability in Poland
after intervention by EU leading to drop in Balance of Trade.

Fig. 10. Balance of trade in India vs Poland

Source: TRADINGECONOMICS.COM

Poland is a entrepreneurial powerhouse but India has a comparative advantage with large number of
youth population. India is promoting entrepreneurs to get closer to becoming a entrepreneurial
powerhouse.

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 References

1. The world bank data(2014-2019)

2. Poland’s Economic Freedom and Overview. Retrieved from https://www.heritage.org
3. Overview of Poland. Retrieved from https://www.usnews.com/news/best-countries/poland
4. Poland Income tax and tax laws. Retrieved from http://www.worldwide-tax.com
5. Poland Tax Guideline. Retrieved from https://accace.com/tax-guideline-for-poland/
6. Economy of Poland. Retrieved from https://en.wikipedia.org/wiki/Economy_of_Poland
7. Poland Trade Overview. Retrieved from https://atlas.media.mit.edu/en/profile/country/pol/

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