The main difficulty faced by the independent country was solving its economic problems: Poland was ravaged by hyperinflation (over 500% in 1990), while a huge foreign debt precluded investment. The situation was made worse by phenomena like hidden unemployment, an obsolete and inefficient industry, and a backward agriculture.
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Panorama of Warsaw, the Polish capital |
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| The enterprise laws of 1988 and the deregulation of prices in July 1989 did not bring the expected results. Poland decided to implement the Balcerowicz Plan, devised by the then Minister of Finance. The Plan called for a liberal domestic price policy, increased imports, tougher wage control and financial policy regarding companies; it introduced interest rates higher than inflation; made the złoty a convertible currency and stabilised its exchange rate against the US dollar. As a result the Polish economy stabilised and opened up to the world. Its banking system and monetary credit policy were reformed. Capital and labour markets were created. In July 1990 Sejm passed the privatisation laws. The next years saw the introduction of personal income tax (July 1991) and VAT (1992). Other important developments were privatisation, company self-sufficiency, and the encouragement of competitiveness. Privatisation, free market principles and a radical reduction of the budget deficit started bringing results. By1992 inflation had dropped to 43% and in the next years went down to single digits (by the end of 2001 it fell below 4%). The economic successes of consecutive cabinets persuaded Poland's creditors to reduce the country's foreign debt by 50%, and encouraged Western companies to invest in Poland. The Warsaw Stock Exchange was opened in 1991, accompanied by a growth in GDP (4% in 1993, 7% in 1995).
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In the 1990s many office buildings were built in Warsaw. |
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| The now fully convertible złoty was revalorised in 1995 (1 PLN = 10 thousand old złoty) and the success of the Polish reforms stabilised the złoty/dollar exchange rate. Poland is now a country with a stable political system, a developing economy, actively operating international organisations (Poland is a member of the WTO, OECD, CEFTA, and other bodies). Although it has slowed down recently, economic growth is steady and has a foundation in the profound social reforms including health care and pension system reforms. For a decade Poland has been adjusting its laws and economic institutions to the EU regulations. Today, the EU is Poland's most important trade partner. 70% of Polish exports are sent to the EU, 60% of the imports originate in EU countries. The changes due to the process of transformation which began in 1989 have caused a significant shift in values in all aspects of economic life. Their main premise was the now accomplished implementation of free-market principles, based on the dominant and steadily growing position of private enterprise. The private sector became the main agent of Poland's economic growth, while privatisation stimulated the ascendancy of the most competitive structures within the economy itself. In 2001, the private sector produced over 75% of the Gross Domestic Product, employing over 70% of all the professionally active persons.
As in the European Union countries, heavy industry, with its high social significance, proved to be the hardest to privatise and restructure. The process of privatisation of large companies in the steel, chemical and heavy engineering industries is underway; so is the privatisation of the power industry (with a quickly rising interest on the part of foreign investors), the gas industry, transportation (mostly Polish Railways), and the mining industry. Privatisation and the required market modes of operation called for the creation of a suitable legal framework to develop real and effective competitiveness. This process culminated in the late 1990s in the passing of laws relating to the freedom of business activity, regulations for the granting and monitoring of public assistance, as well as for the implementation of the acquis communautaire (the legal order of the European Union)
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The Warsaw Stock Exchange |
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with regard to the free flow of goods (a national system for the control of standards, manufacturer's responsibility for production and product safety ). The new company law in effect since 2001 is fully compatible with the EU regulations regarding the principles of company registration and operations. After over a decade, the level of deregulation in the Polish economy is comparable with the EU figure, and thanks to the systematic legislative transformation the last differences in the way economic entities are treated - the final vestiges of the command economy - have now disappeared. A company's ownership type, size, its business, or the nationality of its owner no longer bear any significance.
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