Domestic turbulence and Schengen suspension may hit Polish economy
PI Exclusive Report 2016-02-16Participants
Will foreign investors will start to shun Poland? | Marcin Petrykowski, CEO, Standard & Poor's, Warsaw |
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How to put the digital economy back on track? | Jacek Niewęgłowski, Member of the management board for strategy and business development, P4 |
What lies ahead for Polish exporters in key markets? | Olaf Osica, Director for Risk Assessment, Polityka Insight |
Key points
Petrykowski: PiS’s institutional reforms reduce the country's creditworthiness. The managing director of S&P’s Warsaw office presented the reasons that lay behind the decision to lower the agency’s rating for Poland from A- to BBB + and downgrading the prospects from positive to negative. As he pointed out, the agency assesses only the risk of investing in bonds issued by the government, not the entire spectrum of investments. He added that the institutional assessment represents one quarter of the assessment of a country, and in their revised rating analysts at S&P took into account the changes introduced by Beata Szydło’s government in ConTrib, the media law and the law on the civil service. These factors could lead to a further decline in creditworthiness over the next two years since they will reflect on public finances and the model of economic growth.
Reduction in deficit may change agency’s assessment. Petrykowski stressed that investors are afraid that Poland will go the same way as Hungary, which has been excluded from some investment portfolios, mainly due to political decisions. Such a scenario would be extremely negative for Poland – it could lead to an exit from the market by some foreign investors, who have grown accustomed to the predictability of Polish politics. Until recently, this had been one of the biggest advantages of investing in Poland, but over the past few months the situation has changed significantly, especially among short-term investors. Petrykowski pointed out that the S&P analysts fear a loss of independence by the National Bank of Poland. On the other hand, he stressed that a reduction of the budget deficit should positively affect the assessment of the country in the future.
Niewęgłowski: less emphasis on large-scale projects in e-governance. In the view of P4’s board member, the general state of the digital economy in Poland is not critical, although there are arrears in innovation and the digital competence of Polish society. He added that in the opinion of businesses, the state should invest less time and resources in large IT projects aimed at creating the so-called e-state, as they are at a greater risk of turning into a fiasco. The administration should instead focus on specific improvements, such as facilitating the authorisation of transactions and identification of users by means of an electronic signature. For companies, however, there are positive impulses from the government and MinDig, with the announcement of changes in the investment of funds. These are necessary because the further deepening of the gap in the digital economy may have an impact on the competitiveness of the Polish economy within 2-5 years.
Osica: two main risks for Polish exporters. According to the director of risk assessment at Polityka Insight the most significant risks are the threat of limiting the Schengen zone and the possibility of re-nationalisation of businesses by EU states. Osica stressed that the southern and south-western borders of Germany are already largely controlled and, according to him, there might soon be the same situation on the Polish-German border. He also highlighted the "the atmosphere of consent" prevailing in the EU countries regarding support for domestic enterprises at the expense of foreign competitors. Manifestations of this trend, according to Osica, include the discussions over the minimum wage in Germany.
More and more risks in the East. Osica pointed out that the likely lifting of economic sanctions against Russia will not necessarily mean the opening its local markets to all EU companies. In his assessment, the economic policy of Moscow is a function of its political objectives, and these may lead Russia maintaining trade sanctions against Poland. PI’s director of risk assessment also mentioned Russia - alongside Iran and Saudi Arabia - as an example of "Petroleum states", which will, in the coming years, have to create and develop a real economy, something which has so far been seriously neglected and underdeveloped.