Poland’s economy set to be least affected in EU by COVID-19 pandemic, says report

Although the crisis is likely to bring an end to around 30 years of economic growth, the EU expects Poland to get away with the least amount of damage with growth in 2021 predicted to rise by 4 percent. Kalbar/TFN

The Polish economy is set to be the least affected in the EU by the Covid-19 pandemic, despite the virus bringing an end to around three decades of uninterrupted economic growth in Poland.

According to an economic forecast by the European Commission published on May 6, the Polish economy will fall by 4.25 percent in 2020 as consumer confidence weakens, unemployment rises and the country battles falling demand for exports.

But the Commission added that Poland should bounce back in 2021 with growth predicted to rise by 4 percent.

The sobering statistics from the Commission also predict that Germany, Poland’s leading trading partner and home to the EU’s biggest economy, will see a fall of 6.5 percent.

Poland went into lockdown in mid-March.Wojtek Jargiło/PAP

But Germany’s woes are small when compared to those of the southern EU states where the effects of the pandemic will be compounded by a savaging of the tourism industry. Greece, for example, could see its economy contract by 9.7 percent and Italy by 9.5.

In Poland the lockdown crisis could also lead to unemployment climbing to 7.5 percent this year, says the Commission, and the fiscal deficit rising to 9 percent of GDP owing to the government pumping money into the economy to lessen the effects of the slowdown, and a decline in tax revenue.

Although the crisis is likely to bring an end to around 30 years of economic growth, Poland can find some consolation in the fact that the EU expects the country to get away with the least amount of damage.

This appears due to the strength of the Polish economy pre-crisis. Diversified and characterised by low unemployment, strong consumer demand, and a sound fiscal base, the economy may have enough strength to absorb much of the damage wrought by the crisis.

The government has introduced a 5-stage ‘unfreezing’ of the economy with this week seeing shopping centres reopen.Kalbar/TFN

Last month S&P, the rating’s agency, maintained Poland’s A- long-term foreign currency debt rating, pointing to the country’s diversified economy and strong macroeconomic fundamentals.

The World Bank also reported in April that: “Poland has fiscal and monetary space to mitigate the adverse effects of lower global and domestic demand and shield its financially vulnerable populations, potentially leading to a quicker rebound in 2021 and 2022.”

At the end of March Fitch Ratings also struck a cautiously optimistic note about Poland, at least in the long term.

It affirmed Poland's long-term foreign-currency Issuer Default Rating (IDR) at A- with a stable outlook, adding that the Polish economy should be “relatively resilient to the shock from the Covid-19 pandemic.”  

Fitch added that Poland has a “diversified yet relatively closed economy, moderate tourism sector, net energy importer status, flexible exchange rate, a current account close to balance and some degree of fiscal space to accommodate expansionary fiscal measures.”