Poland - In-Depth PESTLE Insights

Topics: Inflation, European Union, Public finance Pages: 113 (31228 words) Published: April 28, 2013

In-depth PESTLE insights
Publication Date: October 2011

This profile analyzes the political, economic, social, technological, legal, and environmental (PESTLE) structures in Poland. Each of the PESTLE factors is explored in terms of four parameters: current strengths, current challenges, future prospects, and future risks.

Key findings The country has a strong foreign policy, but the diplomatic row with Russia is a cause for concern The country is a member of the North Atlantic Alliance and the European Union (EU), and enjoys good relations with the US. The Polish government has strong ties with the US, Germany, France, Great Britain, Italy, Lithuania, Czech Republic, Slovakia, and Hungary. The country’s bilateral co-operation with Ukraine remains stable. In Afghanistan, the country is following objectives according to the United Nations (UN) Charter. The country plans to develop trade and business contacts with Asian, Latin American, and African countries in infrastructure, finance, tourism, and high technology. However, a diplomatic row with Russia could hamper its strong foreign policy progress. Investigations into the April 2010 air crash that killed the then Polish President Lech Kaczynski continue to impact bilateral relations between the two. While the Russian investigation has squarely blamed the Polish pilots for the crash, the Polish investigation claims that both the Russians and the Polish pilots were at fault for the accident. Although the Polish report echoed Russian findings, it also stated that the Russian investigation was incomplete, as it failed to report whether Smolensk airport (where the crash occurred) and its air traffic control were ready to receive air traffic. The report also questioned Russian claims that Poland's air commander, General Andrzej Blasik, forced the pilots into a dangerous landing under the influence of alcohol. The incident has soured relations between the countries.

While the Polish economy is resilient, rising inflation could derail economic progress Poland was the only country in the EU that escaped recession in 2009, recording growth of 1.7% owing to its strong economic policies and robust domestic demand. A low reliance on exports and a flexible currency also supported the

Country Analysis Report: Poland
© Datamonitor. This brief is a licensed product and is not to be photocopied

Published 10/2011 Page 1


country’s growth, as other Eastern European economies witnessed severe contractions as a result of the global economic crisis. For example, Slovenia saw a contraction of 7.8% in 2009, and the Hungarian economy contracted by 6.5% during the same year. The Polish economy recorded better growth than the Baltic States in 2008–09, some of which experienced a double-digit annual fall in output. The economy grew further at 3.8% in 2010. According to Datamonitor forecasts, the economy will grow by 4.1% in 2011. However, high inflation could derail the strong economic progress. Poland’s inflation increased from 1.1% in 2006 to 4.2% in 2008 due to a significant rise in energy and food prices. The annual growth of prices of consumer goods and services in Poland increased in 2009, and the average annual inflation hovered around 3.5% in 2009. The high level of inflation was due to a growth in food prices and excise goods. However, inflation came down to 2.6% in 2010 due to weak domestic consumption. Datamonitor suggests that inflation will cross the 4% mark in 2011 due to the impact of the global fin ancial turmoil on the exchange rate of the zloty and its upside risks to inflation. Increasing domestic demand, high commodity prices in the international market, a VAT rate increase of 1%, and the depreciation of the zloty against the euro are all expected to impact inflation in 2011.

Poland performs strongly in terms of human development indicators, but low healthcare spending remains a problem...
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