Some economic pundits have been questioning whether it’s for real. After all, they’ve witnessed European Union (EU) stagnation, become tired of the EU showdown with Greece, and noted how governments, trying to heal their sovereign debt crises, put on an ambitiously brave face as they seek re-election.
So, when policymakers at the International Monetary Fund (IMF) and the EU herald economic revival and upgrade their forecasts for EU growth into 2016, commentators cast doubt.
But, the truth is, the EU is recovering – thanks to a large slice of good luck: a sharp drop in oil prices and a weakening Euro have combined to boost Eurozone growth and stave off entrenched stagnation.
In fact, one or two largely unsung EU economies are doing rather well, and are well placed to help stimulate the whole of the EU back into prosperity.
Take Poland (pictured above), for example. Over the past 25 years, the Polish economy, in real GDP terms, has doubled in size. On GDP per capita, Poland has moved from 32% to 60% of the Western European average. Poland was the only EU country to avoid recession during the global financial crisis and is today the eighth-largest EU economy. Its impressive history of growth for more than two decades has left the country, long a marginal European economy, poised to become a regional growth engine.
EU countries – where they stand
The IMF forecasts that the 19 European countries using the Euro currency will collectively expand by 1.5% in 2015 and 1.6% in 2016, up from a January 2015 forecast of 1.2% growth this year and 1.4% next. Last year the Eurozone grew by just 0.9%.
The European Commission has also upgraded its growth forecasts. The commission predicts the Eurozone economy will grow by 1.3% in 2015 and 1.9% in 2016.
Anticipating bailout agreement and conformity, the European Commission has even only marginally downgraded its projections for Greece. It predicts Greece will grow by 2.5% in 2015 and return to 3.6% growth in 2016.
European Commission officials acknowledge that the EU economy remains troubled, pointing to weak investment and stubbornly high unemployment across Europe. But they highlight that unemployment is projected to drop to 11.2% in the Eurozone this year (albeit barely lower than during its peak of the global financial crisis when it hit 12%).
Pierre Moscovici, the EU’s economic chief, says the sharp fall in oil prices and a weaker Euro are providing a welcomed benefit. He adds:
“Europe’s economic outlook is a little brighter today than when we presented our last forecast. But there is still much hard work ahead to deliver the jobs that remain elusive for millions of Europeans.”
The European Commission’s growth forecasts (see chart below) for the end of 2015 (compared with its previous forecast for late 2014) highlight Germany’s sustained growth; France (the Eurozone’s second largest economy after Germany) recovering; Spain recovering strongly; Italy remaining stagnant; the Eurozone overall resisting decline – and the EU bolstered by the UK, a non-Euro country, driving comparatively strong growth.
Poland – birth of a growth engine
Twenty-five years ago, events in Poland started changes that swept through Central and Eastern Europe, sparking massive economic and political transformations.
As the Polish economy emerged from decades of state control, industries were privatised and market-based competition was introduced, followed by painful reforms.
Within a few years, Polish GDP and living standards began to rise significantly, as the country started on a growth path that continues today.
Accession to the EU in 2004 confirmed the success of Poland’s effort and indicated a development path that was leading toward positioning Poland among Europe’s most advanced economies.
Over the past 25 years, the Polish economy has doubled in terms of real GDP, and enhanced GDP per capita by upward of 30% compared with the Western European average. Having avoided recession and pegged its place as the eighth-largest EU economy, Poland is poised to become a regional growth engine.
The McKinsey Institute forecasts that Poland can accelerate development to become the fastest-growing EU economy for the next decade. Under its growth model, Polish GDP would top 4% annually over the next decade and per capita GDP achieve 85% of the projected EU-15 average by 2025.
Such development would leave the country on a par not only with Cyprus and Portugal, but also similar to Spain and even Italy (the Eurozone’s third biggest economy). Poland would become a globally competitive advanced economy and a significant exporter of goods and services.
“While this more ambitious scenario does not require Poland to abandon its existing growth model…, it does require a powerful collective effort by both the private and public sectors,” says McKinsey.
“Since the country is already a developed economy, this accelerated growth will only be achieved through a major multi-sector transformation programme in conjunction with further improvements to infrastructure, simplification of regulations, and investment in education and innovation.
“We believe the country has the means and resources to begin this new economic phase, transforming by 2025 from a regionally focused middle-income economy to an advanced European economy competing successfully on the global market.”
UHY has member firms throughout Europe. In Poland the network is represented by Biuro Audytorskie Sadren Sp. z o.o. and by ECA Group.
Biuro Audytorskie Sadren Sp. z o.o.
Contact: Wieslaw Lesniewski
Email: w.lesniewski@sadren.com.pl
ECA Group
Contact: Roman Seredyński
Email: roman.seredynski@ecagroup.pl
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Tel: +44 20 7767 2621
E-mail: d.maeremans@uhy.com