Five trends that will change the Polish and European economy
WNP.PL - 13-10-2020
The European Economic Congress in Katowice has highlighted the phenomena that shape the condition and immediate future of the economy in Poland, Europe and in the world. We are looking at five selected trends - important and current ones.
The European Economic Congress took place in Katowice in September. The main topic discussed during more than 70 debates was the coronavirus pandemic. The black swan - an unprecedented and unpredictable phenomenon - has made its mark on current trends and created new ones.
Together to the next level
At the European Economic Congress, there was a strong feeling of the need to act together in the face of the challenges posed by the coronavirus pandemic, a climate crisis which has already been signalled, or a phenomenon which could be called a kind of Community identity crisis.
The health and economic consequences of the pandemic remain a pressing concern. The response to the pandemic is, among other things, besides government support - known in Poland as an anti-crisis shield - the new European Union budget and the Recovery Fund. Europe’s response to the COVID crisis is an indispensable and essential condition for the existence of Europe.
The European Green Deal strategy and the digital transformation of the European economy are projects which aim to bring Europe to a new level, ensuring its global competitiveness and conditions for development.
The European Green Deal strategy is not only intended to stop the climate crisis, but also - as part of a process that has been planned for decades and which is multi-directional - to turn the economy into a “green track” in line with the idea of sustainable production, minimising a human impact on the environment, and social and environmental responsibility. The overarching objective of the Green Deal as a development strategy is to raise the European economy to an ultra-modern level. The pandemic does not weaken the green trend.
Digitisation, the knowledge-based economy, cutting-edge technologies and the exploitation of Europe’s intellectual potential are to enable the Union to join the race of digital giants: the USA and China, which are establishing a new world order.
Competition instead of cooperation
A different trend is visible on a global scale. These are trade wars, barrier formation, state protectionism. This phenomenon, which had been known for years, came to light again after the outbreak of the financial crisis in 2008, and the coronavirus pandemic intensified it when countries kept strategic goods (e.g. personal protective equipment) within their borders and then, one after the other, introduced regulations to protect domestic companies from hostile takeovers.
Liberalists argue that free trade continues to form the bloodstream of the world’s economic organism, but that it is being operated on and various implants are being placed here and there. In any case, the belief, popular not so long ago, that free trade changes policy must undoubtedly be considered untrue. Politics changes free trade. China has not become a member of the family of democratic countries, and in the next few years, it will become the leading economy in the world.
Europe is changing the energy sector
The sense of the transformation of European energy is not only determined by environmentalists, for whom Green Deal is the most important project, but also the need to modernise and use more and more available “cleaner” technologies, rising energy prices, the widely accepted demand for energy efficiency, changes in the structure of energy production (dispersion of sources, the activity of prosumers).
Polish power generation is decapitalising, and coal reserves are depleting, and the pressure of the EU on decarbonisation is far from weakening. And the demand for electrical energy will increase. Modern society and economy need it; electromobility needs it.
The inevitability of the green transformation is already being seen by European and, among them Polish, giants of the energy and fuel sector investing in renewable energy sources and hydrogen technologies, who are changing their strategies in this respect. However, social acceptance is a key condition for the successful transformation of the energy sector. The funds of the Fair Transition Fund are expected to help to achieve this. Unfortunately, as stated at the July European Council summit, they are to be less than planned.
A sensible restructuring plan for the coal industry and dialogue with employees are also needed. The new energy technology sector may create 300 thousand new jobs in Poland. However, the same number of jobs or more can disappear in and around the mining industry.
Crisis, state, investments
The COVID-19 pandemic has radically changed the location of the state in the economic cycle. The figure of the night watchman, who does not interfere in doing business but only makes sure that nobody disturbs, is a thing of the past. The state is playing an increasingly significant role in stimulating the economy, and such its functions are becoming socially accepted. Moreover, this is yet another trend which became very apparent at the 12th European Economic Congress. In recent months, European countries, including Poland, have pumped unprecedented money into the economy in order to cushion the effects of the pandemic and flatten the economic curves that have collapsed as a result of the recession.
In the near future, the main drivers of growth in the Polish economy will be private consumption, public investments and exports. Private investments are at a disadvantage.
Among the public investments, attention should be paid to the programme of infrastructural construction, which is financed with EU funds, and the Central Communication Port, for example, on which we will spend billions in the coming years.
The attitude of local governments will also be critical here. Their budgets have been severely weakened by the pandemic, and depending on the size of the city, the deficit may be as high as hundreds of millions of zlotys. Nevertheless, many of them have not given up on investment. However, they are counting on aid granted by the State, and this brings us back to the main point of view that describes this trend.
The global technological development budget has shrunk as a result of the pandemic. However, the pandemic has boosted demand for digital tools - and not just those for remote working.
In Poland, the digitisation of the economy was a bit like the fashionable books that you must have on your bookshelf, but you do not even read them. And suddenly the lockdown changed everything in March. Digital tools have become popular in every home. Today, they can be used almost anywhere, even in public administration and local authorities that have been rather reluctant for many years.. This is an obvious trend. The answer to the question whether these changes will last is less obvious.
Many companies and people expect the post-pandemic reality to come back to the pre-pandemic norm, that everyone will go back to their offices and turn off their instant messengers. This scenario will probably be different from reality - hybrid work awaits us. Multinational corporations focus on the permanence of these changes, and these are the trendsetters.
Digital technology, automation and robotics will become a tool for business to protect against instability, a type of vaccine against unpredictable turbulence.
There is something else that contributes to the need to digitalise the Polish economy. Well, despite sustained economic growth, wages remain relatively low. This is the effect of the middle income trap. The effectiveness of work in Poland still leaves much to be desired, and the lack of workers is remedied by economic emigration. It works well in the short term, and it is disadvantageous for us in the long term.
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