13 years of Poland in the EU: analysis of significant changes

Mar 24, 2017 9:55 AM|Conotoxia.com

Throughout the last 13 years, Poland has received over 90 million euros non-returnable help from the European Union. During this time, the wages in Poland rose significantly and 2.5 million jobs were created and export expanded fourfold. Has this opportunity been completely seized? Not necessarily. There are other countries, which entered the European Union at the same time and have overtaken us in some areas – wrote Marcin Lipka, Cinkciarz.pl senior analyst.

Marcin Lipka, główny analityk Cinkciarz.pl

This week the European Union celebrates the 60th anniversary of signing the Treaty of Rome. Moreover, May marks 13 years since Poland joined the EU. These anniversaries lead to reflections on which elements of our economic integration have taking Poland to the podium, and which other countries from Central and Eastern Europe did better.

The Polish economy is often presented as an example of successful integration with the union structures. However, in some cases it is due to the fact that Poland is the biggest country in the region. For this reason, some numbers might appear more spectacular than with the other countries that joined the EU over a decade ago.

In other cases, the position among the statistical leaders is a result of a low starting point, which made the rapid improvement of the situation easier. This particularly refers to the labor market, which was in terrible shape at the beginning of the 21st century.

EU funds? We are not a leader

According to the data published recently by the Ministry of Finance, from May 2004 to January 2017, Poland received almost 135 billion euros from the EU budget. In this period, our membership fee was nearly 44 billion euro. This means that for over 13 years Poland received over 90 billion euros of non-returnable help – that’s almost 400 billion PLN.

This huge amount, which exceeds the whole of Poland’s budget for this year, shows that we are the largest beneficiary of the Union’s funds in the region. However, when compared to the Gross National Income (GNI), our position is significantly lower. According to the Eurostat’s data, from 2004 to 2015, we received a total of 25.6 percent GNI, which puts us in 5th position among nine countries that joined the European Union in 2004. Poland was overtaken by, among others Hungary (34.7 percent GNI), Estonia (31.6 percent GNI) and Latvia (42.7 percent GNI).

Foreigners rule foreign trade

The opening of the Union’s borders and introducing four freedoms of the single market (the flow of goods, people, services and capital), granted Polish entrepreneurs access to the common market. Also, the balance of the capital inflow is positive for Poland, even though apart from the transfer of widely understood know-how and technology, as well as joining the global supply chain, some negative trends prevailed.

According to the data of OECD, in 2003, Polish export was at a level of only 54 billion dollars. In 2016, this number reached the level of 204 billion dollars meaning it increased by almost four times. Another factor which proved to be an important change in the recent years was the gradual reduction of the current account deficit. 13 years ago the deficit was over 14 billion dollars (25 percent export and 6 percent GDP). Nowadays, in Poland, we record a trade surplus in the amount of 5 billion dollars.

Compared to other countries that entered the EU in 2004, the scale of Polish export growth and changes to the balance look spectacular. This is partly due to quite a weak starting position. The Czech Republic, just before it joined the European Union ,had a relatively small deficit (2.5 billion dollars, 2.5 percent GDP), and now its surplus is nearly 20 billion dollars – 10 percent GDP.

A larger opening towards the external market increased the share of Polish entities in goods trade only to a small extent. According to the data of the Central Statistical Office of Poland presented in the report “Economic activities of entities with foreign capital in 2015”, the value of the export concluded by the foreign companies was 429 billion PLN (about 360 billion excluding services). This is nearly half the value of the goods sent abroad in 2015. A decade earlier, according to the analogical report by CSOP, their share was at the level of almost 60 percent.

2.5 million new jobs

It is fairly difficult to find a word that more accurately reflects the shape of Poland’s labor market in 2003 than disaster. According to the Eurostat, the unemployment rate was 19.8 percent and it was the highest rate among the countries who stood for joining the EU, as well as the Union’s members. In Hungary, this index was only 5.8 percent and in the Czech Republic – 7.8 percent.

It is also worth noting that 13 years ago the employment rate for people between the age of 20-64 in Poland, was the lowest out of the 28 countries examined by Eurostat. It was as little as 57.3 percent, whereas in Hungary this index was 62.8 percent and in the Czech Republic – 70.4 percent. Also, the employment rate for people between the age of 20-24 was extremely low. In the second quarter of 2004, it was only 35 percent and the average for 15 members of the EU was 56.1 percent.

The improvement of the situation on the labor market since entering the European Union is indisputable. The Eurostat data clearly shows that the unemployment rate in Poland in January was only 5.4 percent and the average for the EU was 8.1 percent. Interestingly enough, although it’s still higher than in the Czech Republic (3.4 percent) and in Hungary (4.3 percent – most recent data for December 2016), the scale of changes in Poland was at its highest since the moment of joining the EU.

When presented in percentages the employment rate also looks much less optimistic. In the third quarter of 2016, for people between the age of 20-64, it was 69.7 percent, placing Poland in the 20th position in the entire EU. The Union’s average is at the level of 71.5 percent, while in Hungary it was 72.1 percent and in the Czech Republic – 77 percent.

What will surely be a challenge for the years to come is an improvement in professional activity of the older generations. Over half of Poles between the age of 55-64 are professionally inactive (referring to those that don’t have a job and don’t seek one), while an average for the EU is 40 percent. Generally, however, the changes on the labor market were positive. Over the 13-year-period the Polish economy created over 2.5 million jobs.

Wages – a surprising advance

A comparison of the wages from the countries of different currencies, taxation systems and inflation levels can cause a lot of problems and interfere with the results of the study. This is why Eurostat uses the purchasing power standard (PPS euro), which allows to compare the purchasing possibilities of a consumer in a particular country, taking into consideration the statistical basket of goods and services.

In 2003, a 12-month net salary of a single person earning 80 percent of the national average (usually it is also the median) was a 6.4 thousand euro PPS in Poland, a 6.1 thousand euro PPS in Hungary and slightly above a 7 thousand euro PPS in the Czech Republic. For a broader comparison: in the category specified above people in Germany were earning a 16.8 thousand euro PPS and in France – 15.3 thousand euro PPS. Thus, the difference in the financial standard of living between the top members of the EU and the countries expecting accession was a huge one.

According to the most recent data from Eurostat (for 2015), the purchasing power of a single person who earns 80 percent of the average salary in the Czech Republic is an 11.6 thousand euro PPS, in Hungary – 9.4 thousand euro PPS, and in Poland – 12.2 thousand euro PPS. In the largest countries of the so-called Old Union (Germany and France), these numbers are respectively 20.7 thousand euros and a 23.8 thousand euro PPS.

The data shows that the true success of Poland after joining the European Union is the increase in wages. Not only did they go up by 90 percent in terms of PPS, but we also managed to overtake the Czech Republic. Additionally, the ratio of the purchasing power of a Pole vs. a German increased from 38 percent to 51 percent. This should be considered as an extraordinary result as the economy of our Western neighbour is one of the world’s strongest.

General success

The last 13 years have been economically successful for Poland. We are not a leader when it comes to using the EU funds vs. the DNB and our export was to the large extent dominated by the foreign capital, however, the fundamental improvement of the situation on the labor market and relatively strong wage increase should make the Poles satisfied with the economic results of joining the European Union.

Mar 24, 2017 9:55 AM|Conotoxia.com

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