OECD Economic Surveys Poland

1 OECD Economic Surveys Poland March 2018 OVERVIEW This Overview is extracted from the Economic survey of Poland . The survey is published on the responsibility of the Economic and Development Review Committee (EDRC) of the OECD, which is charged with the examination of the Economic situation of member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. OECD Economic Surveys : Poland OECD 2018 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given.

2 All requests for public or commercial use and translation rights should be submitted to Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at or the Centre fran ais d exploitation du droit de copie (CFC) at OECD Economic Surveys : Poland OECD 20189 Executive summary Growth is strong, and the labour market is booming New public benefits have helped to bring down poverty Raising Poland 's capacity to innovate would ensure continued convergence to higherliving standards Investment in higher education and research will strengthen innovation andtechnology absorption Raising skills promoting stronger employment will be key for long-term growthprospects Higher tax revenues or spending prioritisation will be needed to finance plannedspending increasesEXECUTIVE SUMMARYOECD Economic Surveys : Poland OECD 201810 Growth is strong, and the labour market is boomingEconomic growth remains strong.

3 Rising social transfersand a booming labour market are underpinning rapidconsumption growth. The unemployment rate is at arecord low level, labour shortages are spreading, andthere are early signs of accelerating wages. The labourmarket is expected to tighten further, leading tosomewhat faster wage and price inflation. After a severecontraction in 2016, investment is projected to recover,driven by faster disbursements of EU structural funds,capacity constraints and low real interest public benefits have helped to bring down povertyUnlike in many other countries poverty and incomeinequality have fallen, and large family benefitsintroduced in 2016 have helped to bring down in the context of very rapid ageing. On the otherhand, there is a risk that the benefits might induce less-skilled women to leave the labour market for longerafter childbirth, shortening their contribution periodsto pensions. Together with the recent lowering of theretirement age back to only 60 for women, this willheighten risks of old-age poverty.

4 The government isworking to improve currently limited access toaffordable childcare services. Insufficient institutionalcare for the elderly is another barrier to femaleemployment and improved well-being for Poland s capacity to innovate would ensure continued convergence to higher livingstandardsPoland s income convergence has mainly resulted fromefficiency gains thanks to sectoral restructuring andforeign technology absorption. As its labourproductivity is still 40% below the OECD average, Polandnow needs to strengthen its technology adoption andown innovation capacity. Research and development(R&D)investmentisweakasisinno vationactivity,inparticular in small and medium-sized enterprises(SMEs). Infrastructure is still a bottleneck, and there ismuch room to improve its environmental impact. In itsStrategy for Responsible Development the governmentplans higher R&D tax incentives along with increasedpublic support for innovation in SMEs, venture capitalmarket and infrastructure development, largelydependent on EU structural funds is strongAverage annual change in real GDP in %, 2010-16 Source:OECD (2017),OECD Economic Outlook: Statistics andProjections(database).

5 1 2 share of children in absolutepoverty has fallen0-17 years old, per centSource:Statistics 2 in GDP per capita continuesConstant PPPs, index OECD=100 Source:OECD (2017),OECD National Accounts StatisticsandOECDE conomic Outlook: Statistics and Projections(databases).1 2 RepublicHungarySlovak RepublicSloveniaEXECUTIVE SUMMARYOECD Economic Surveys : Poland OECD 201811 Investment in higher education and research will strengthen innovation and technology absorptionPoland s spending on higher education and research,the quality of its research and the supply of researchersare all relatively low but rising. The government plans amuch needed reform of higher education and publicresearch to strengthen the quality of training forstudents and researchers and currently weak science-industry collaboration. The new agency for academicexchange is an opportunity to work more closely withPolish and foreign researchers trained abroad to build ontheir knowledge and networks.

6 Developing mentoringand consulting services for small firms to help themcope with often complicated procedures to draw oninnovation support and find partners in science wouldensure policy skills promoting stronger employment will be key for long-term growth prospectsToo many workers have weak basic and digital out to employers, in particular among Poland smany relatively unproductive SMEs, to involve them inplanning vocational education and adult training and inproviding work placements would create more learningopportunities in line with labour market expansion of high-quality early childcare willimprove opportunities, in particular for children fromdisadvantaged families. Strong immigration fromEastern neighbours is helping alleviate labour shortages,but a migration policy strategy and better monitoringmechanisms and integration policies are tax revenues or spending prioritisation will be needed to finance planned spendingincreasesThe authorities implemented a set of measures to boosttax compliance that succeeded in shrinking the publicdeficit despite rising social , more revenuesor spending prioritisation are needed to improve publicinfrastructure, health care and higher education andresearch in line with the government s plans.

7 Thegovernment should also prepare for a possible fall inavailable EU structural funds in the next financingperiod. Limiting reduced VAT rates, increasingenvironmentally related taxes and giving a stronger roleto the progressive personal income tax would yieldadditional revenues, while contributing to more equityand better environmental outcomes. Modernisingenergy infrastructure and shifting away from coal wouldlower urban air pollution and CO2emissions whilesecuring more reliable energy supply with favourableknock-on effects on public s share of global top publications is lowPer cent of all documents,120151. See Figure 6 (Panel A).Source:OECD (2017),OECD Science, Technology and IndustryScoreboard 2017(database).1 2 in lifelong learning remains weakParticipation in training for secondary educated adultswith weak literacy skills, % of population1. See Figure 32 for :OECD (2016),Skills Matter: Further Results from the survey ofAdult Skills, OECD Publishing, 2 (Min)PolandOECDN orway (Max)The tax burden is relatively lowPer cent of GDP, 201511.

8 Or latest year :OECD (2017),OECD Tax Revenues Statistics(database).1 2 SUMMARYOECD Economic Surveys : Poland OECD 201812 MAIN FINDINGSKEY RECOMMENDATIONSM aintaining macroeconomic stability and sustainable growthIf many people do retire at the lowered statutory pension age of 60for women and 65 for men, the share of minimum pensioners andold-age poverty will rise, particularly among women, entailingfiscal costs and lower average the reform s effects, and make corrections such asaligning male and female retirement ages and indexing them tohealthy life the public about the impact of working longer on s labour force participation and thus their pensioncontribution histories could be impacted negatively by the newchild in childcare and long-term care the phase out of the child benefit for the first social spending along with improved public infrastructure,skills and research quality requires higher tax environmentally related taxes, limit the use ofreduced VAT rates and exemptions.

9 And make the personalincome tax more progressive, by introducing a lower initialand more intermediate tax brackets and ending the preferentialtax treatment of the policy settings are quite stimulatory: real interestrates are near zero, and the budget is moving to an a tighter fiscal stance through revenue-raising taxreforms or increased spending the NBP s Economic assessment suggests considerable upwardrisk for price stability, it should raise interest rates in a timelyfashion to ensure that inflation remains well within its uncertainty is holding back investment in the energysector and elsewhere in the economy. The transition to auctionsguaranteeing prices as a new support mechanism for renewableenergy has taken several years, and there is still uncertainty aboutfuture auctions. New legislation has created prohibitiveconditions for establishing wind and implement clear and stable climate-change policiesaligned with European and international objectives to reduceuncertainty for innovative green investments.

10 Ensure the stabilityand clarity of policies affecting investment government improved tax compliance successfully, but taxprocedures remain overly time consuming for a simplification component for SMEs to the government stax compliance higher education, research and innovationFunding for higher education is relatively low, and researchquality and industry-science collaboration are weak. Universityfundraising through business collaboration, adult learning andvoluntary giving is limited. The government is preparing a majorreform of the higher education and research industry-science collaboration. Continue to increasefunding for higher education and research over time, to mergesmall universities and independent research institutes to buildstrong research universities, and to allow underperforminginstitutions that do not improve over time to shut training is unstructured and lengthy with low graduationrates. Employment conditions for post-doctoral researchers areunstable, pay remains low, and career progression is insufficientlytied to research quality.