How will coronavirus change the Polish economy?

Forecasts for the Polish, global and European economies are burdened with a very wide margin of error, Piotr Arak, director of the Polish Economic Institute, said at the European Economic Congress (EEC) in Katowice, which took place online in May.
How will coronavirus change the Polish economy?

(EEC, Public domain)

It is likely that the Polish economy may shrink by over 7 per cent this year, Mr. Arak continued, although “it can’t be ruled out that if there is a relapse in autumn, it will fall by more. „For the time being, it seems that European economies and countries are managing relatively well and maintaining the level of disease spread, which would mean that only these two quarters, i.e. the second quarter and also part of the first quarter, will have a very negative impact on these macroeconomic indicators for the whole of Europe, for the whole of Poland and for the whole globe.”

Others were less optimistic. The global economy could fall by 10-15 per cent, according to Tomasz Suchański, president of Żabka Polska. “This is more than during the Great Depression of the 1930s and means that the crisis has a huge impact on us all, affects all countries and all industries, all people. We also need to be prepared for significant changes in customer behavior. Coronavirus will cause that processes that were previously spread over years to significantly accelerate and it will be a matter of months if not weeks: e-commerce, click & collect, home delivery — everything that the food industry is already beginning to implement.”

A competitive economy

“Poland needs to be prepared to create a competitive economy regardless of how long the pandemic lasts and what new events will appear,” said Brunon Bartkiewicz, president of ING Bank Śląski. “We are dealing with an overlap of technological, climate and social factors,” he went on, adding that “the changes brought about by the pandemic give the Polish economy a chance.” The key factors are decentralization of consumption and production and shortening supply chains and relocating production can be a great opportunity for our country,” Mr. Bartkiewicz concluded.

Construction sector in trouble

In April 2020, local governments’ orders in the construction sector were 30 per cent down y/y, but the industry may also be the most important in the context of saving Polish GDP from the effects of the economic crisis, EEC Online participants said. “All construction companies have noticed a significant drop in local government investments. This is a dramatic change that only large companies will be able to handle. The smaller ones operate mainly on the local governments’ procurement market,” said Artur Popko, Vice President of the Management Board of Budimex (Polish construction company). In his opinion, the construction industry may be the most important in terms of saving Polish GDP and boosting the labor market. He said construction employs 960,000 people in Poland and is responsible for about 7 per cent of GDP. Rafał Grudzień from the ProperGate start-up, which manages just-in-time deliveries to construction sites, said that the COVID-19 pandemic does not threaten ongoing construction projects.

MICE needs a shield and sword

“Nothing is happening now in the meetings and leisure industry, except online events,” said Marcin Hera, CEO of Arena Gliwice. “Paradoxically, however, this crisis helps to make people outside the industry aware of the importance of it. Generating 6-7 per cent of the Polish GDP, maintaining hundreds of thousands of jobs,” he added. “The point is that we not only have shields, but also swords, so that we can think about earning again. At the beginning it certainly won’t be much, but it counts,” said Mr. Hera.

Marcin Stolarz, president of PTWP Event Center, which manages the International Congress Center and Spodek in Katowice (southern Poland), said PLN210m had been spent by event participants in Katowice last year. “Over 500 events took place in the ICC and Spodek,” Mr. Stolarz said. “This is an incentive for the development of the hotel industry in the city. By 2022, seven new hotels and more than a thousand rooms will be built here. It is also an impulse for gastronomy, public transport, trade and the cultural sector,” he concluded.

Flying hit

The aviation industry is inseparably connected with the MICE industry. The president of the Katowice International Airport in Pyrzowice Górnośląskie Towarzystwo Lotnicze Artur Tomasik announced that the Pyrzowice airport had recorded a 90 per cent drop in revenues since March 2020.

In April, Chopin Airport served 13,000 passengers, 99.1 per cent less than in the same period last year. Since the beginning of the year, the airport in international traffic has served 2.811 million people (a decrease of 39.3 per cent), and in the domestic about 313,500 (decrease by 41.3 per cent). Most passengers (56.6 per cent) traveled in the Schengen area and 43.4 per cent has chosen destinations to Non-Schengen countries. Warsaw Chopin Airport is the largest airport in Poland. In 2019, the port handled 18.86 million passengers, i.e. by 6.2 per cent more than in 2018.

The view from Brussels

“The EU has changed its procedures to facilitate and accelerate countries’ response to the effects of the crisis,” Valdis Dombrovskis, Vice-President of the European Commission, said. “The EU budget still has large resources available to support the economy in crisis. We are starting work on a long-term program for unfreezing the economy, for which we want to spend EUR1 trillion. The EU has changed its fiscal policy to be more flexible to enable individual countries to respond to the needs arising from the crisis,” Mr. Dombrovskis added.

The official added that the next steps are to ensure adequate flexibility of the EU budget so that countries can benefit from European funds, which are still available and can use them to fight the crisis. EUR54bn is still available, of which Poland may receive EUR12.5bn, Mr. Dombrovskis said. “Questions about whether in July we will have a fully defrosted economy should go to fairies, rather than to ministers, prime ministers or presidents. What we know for sure is that we will function for a long time under the new normality often mentioned by Poland’s Prime Minister Morawiecki.”

Poland strongly supports the proposal to establish a European Investment Bank (EIB) Guarantee Fund, Małgorzata Jarosińska-Jedynak, Poland’s minister of funds and regional policy, said. “However, we believe that this instrument should be a European solution that requires all Member States to join it. Member States, citizens and businesses expect a very active EU role in the fight to address the socio-economic impact of the epidemic. Since the beginning of the COVID-19 pandemic, Poland has been operating on the EU forum, trying to convince the Commission to take more active steps to introduce changes in EU law. Due to the pandemic situation Europe is facing, the multi-annual financial framework for the new fund perspective should be set as soon as possible. I hope that this will happen in June, at the next European Council.”

A chance for greening

“The economic crisis caused by the coronavirus should be the moment to adapt and rethink the assumptions of the European Green Deal,” Konrad Szymański, Poland’s Minister for European Affairs, said, adding that Poland’s strategy of achieving climate neutrality should see gas play a key role. “But,” he added, “Poland has a critical attitude to the assumptions of the European Green Deal. We did not see sufficient compensation mechanisms. Above all, we did not know the equitable distribution of the burden of this policy between countries and sectors. Poland does not question the sense of the energy and climate transformation of the Old Continent. But we pay attention to the notion of justice, so that the costs of this policy do not hit poorer countries,” Mr. Szymański said.

Less globalization

“As for the global economy, we already know for sure that there will be less globalization in the future,” Janusz Jankowiak, chief economist of the Polish Business Council, said. “Because the pandemic is a pro-cyclical activity, that is, it strengthens trends that have already made themselves felt. We had a fairly strong deglobalization trend, combined with breaking of long-term trade ties, and protectionism — a classic example being the American-Chinese trade conflict — which was spreading and later covered other areas.

Mr. Jankowiak added that the pandemic will also increase debt, but that there would be more digital economy. This contactless economy got a solid push as a result of the pandemic.

Learning to adjust

Tomasz Konik, a partner at Deloitte, noted that we have lived in the psychology of prosperity in recent years. “In such a situation, it is difficult to accept a negative signal and assume negative scenarios. In the first phase, it was a mistake to fight the pandemic at the national level. There was too little international cooperation, but now that is improving,” he said.

(EEC, Public domain)

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