As we continue our in depth look at the European country of Poland, we now turn our attention to the economic side of the nation. It would be near impossible for us to cover the entire, broad subject of Poland’s economy in a simple blog post. Due to constraints, we have decided to take a quick glance at what we believe are the six most important topics that fall under Poland’s economic banner: Currency, tariffs and imported goods, Income level per capita, inflation rates and price stability, privatized ownership, and social welfare.
As a member of the European Union (EU), Poland adheres to the European Agreement, which was set up to promote trade among the 28 EU countries. It provides product preferential access to EU products. Being a strong exporter of goods, Poland benefits from applying common external tariff to all imported products, including products imported from the United States. This Central European country benefits from tariffs quite well in fact. In January 2014, Poland imported 271.7 billion dollars in goods from the United States but intern; it was able to export 373.8 billion dollars to the US. Poland has the sixth largest economy in Europe. The country’s free-market economy has allowed the country to benefit from trading with neighboring countries. Germany, bordering Poland on the west, is Poland’s number one trade partner in the world. Poland’s second largest importer of goods is Russia. Poland’s foreign trade relationships with countries such as Russia, Germany, the United States, and those in the European Union, have allowed the country to achieve a large domestic market, develop strong economic growth, and raise the national Gross Domestic Product.
Firms have often used Gross Domestic Product, or GDP, as a reliable means of gauging the overall potential of foreign markets that they are considering for branch expansion. When contrasting Poland’s GDP with that of the United States, we then find a most promising market for American firms. As of 2013, according to statistics researched, compiled and published by the World Bank, Poland’s GDP is 525.9 billion (in U.S. dollars), and its population numbers 38.53 million. What is more, the OECD categorizes Poland as a “high income” country. A possible driving force behind this potential could be the inflation rate, or lack there of. In turn, the World Bank’s GDP numbers for the U.S. for the same year were $16.77 trillion for a population of 316.1 million. Naturally, the U.S. is a much larger country, but given Poland’s “high income” status and GDP, it is not far removed, in terms of economic distance, from the United States. Quite the contrary actually, it presents a wellspring of potential to U.S. firms, including fast-food franchises looking to expand their footprints overseas, particularly in Europe.
This Central European country has an inflation rate of -1.30, which in turn means that they are experiencing deflation. Deflation occurs when the inflation rate is at or below zero. This makes borrowing money easier and more affordable because it also brings interest rates down. Poland would be a good place to start up a new restaurant because you are able to borrow more money at lower interest rates and your money also goes a lot farther. One is able to buy more with the Polish złoty having the same amount of money in U.S. dollars
Both state owned and privately owned companies drive Poland’s utilities market. Poland imports the majority of their natural gas needs, but is currently trying to drill into natural gas deposits around the country to boost domestic production. 100% of Poland’s population has access to clean water, in both rural and suburban areas. As for Poland’s electricity, 83% of it comes from fossil fuels. Even with how poor Poland is at managing their non-renewable resources, they still outrank the United States 72 to 101. Only 2.8% Of Poland’s energy can be contributed to Hydroelectric power, which is slightly less than the United States can account for and thus ranking lower than the US 132 to 119. Poland’s top four industries include machine building, iron and steel manufacturing, coal mining, and ship building. In 2013 they showed an industry growth of 5.2%, which ranked them 53. The United States ranked 115 in the same category, showing that Poland is growing at a moderate rate. Poland receives an ease of doing business rank of 32nd, while the United States received a rank of 7th. Poland has many challenges ahead if it wishes to continue to grow, but a company pursuing the restaurant industry in Poland would be able to benefit from this growth in production by locating themselves near major industrial areas to accommodate the growing amount of labor the industries will need.
On March 1, 2009, an agreement between the US and Poland improved social security protection for people who work or have worked in both countries. This agreement eliminates double taxing, so if work is covered by both the US and Poland, you would only have to pay taxes to one system. If an employee works in the US, you and your employer would only pay taxes to the US and vice versa. If you are sent to work in Poland for five years or less, you will continue to be covered by your home country and will be exempt from coverage in the other country. This is important because no one wants to be double taxed and shell out more income.
Healthcare and insurance is important to discuss because foreigners who are employed in Poland can benefit from health care if your employer pays a monthly contribution to the Polish National Health Fund. This is important because if we are going to expand our restaurant business to Poland, the manager has to know that he will have to pay an extra cost if he brings US employees to Poland to help get the restaurant started. Obviously the Poland employees will already be covered. Accidents can happen in the restaurant industry, and if you have to pay an extra cost to bring US employees with you to Poland for a year or two, it is worth the extra investment and has to happen.