Assignment Poland’s Economy
How was Poland able to avoid the worst effects of the economic crisis that gripped most of Europe during 2008–2009?
Poland was able to avoid the economic downfall that many other countries faced during the 2008-2009 financial down turn. Poland’s conservative fiscal policies were the main reason it avoided any economic stress during that period. Poland’s government kept public debt in control, thereby restricting borrowing levels and monitoring national funds. Poland’s counterpart Baltics was hit hard by the recession due to the countries inability to control debt. They borrowed in external currencies such as the Euro for which reason it was very difficult to repay debt. Also, a policy developed in earlier years required Poland to maintain a monetary reserve. A strategic monetary plan allowed Poland to withstand inflation price increases and cope with the asset price bubble. Economic stability encouraged investors to keep funds in Poland. If investors decided to pull funds from the economy, then currencies would drop and increase cost of government debt. During this period Poland benefited from the increase of German automobile demand. Poland was a major component supplier and thus saw an increase in GDP and exports during that period. Overall, the Poland economy saw an economic growth while other countries came across financial stress.
What lessons can be derived from the Polish experience during 2008–2009?
Countries need to integrate strict monetary policies. Background checks, income checks, and other measures need to be re-evaluated to assess the future risks involved with lending. Also, limit borrowing from external sources like the World Bank and other international lenders. Also, countries must keep an emergency reserve in case of a recession where it does not need to borrow funds from international organizations. It can utilize the reserve during a recession to ensure its economy continues to progress. Also reserves can help cope with inflationary price increases. Strict fiscal policies that should be implemented would prevent currency rate fluctuations and house repossessions. Currency rate fluctuations for example would negatively impact a countries economy if it becomes more costly to import components. For example if Poland’s currency drops significantly in comparison to the US dollar and Poland imports many components for automobile parts it manufactures to Germany then overall profit decreases.
From the perspective of international business, what is attractive about the Polish economy? What are the weaknesses and risks associated with doing business there?
From an international business prospective every economy has its benefits and disadvantages. Polish economy is known for its growth and stability as they were unaffected by the economic downfall across the globe. Their economic stability is attractive for businesses as demand will not drop. Also economic growth leads to product and service demand which leads to new industries and growth of current industries. Under a stable economy, consumer incomes will not fall and thus purchasing power will not fall. Risk of conducting business in Poland is not an issue. The weaknesses and risks associated with doing business in Poland are the restrictions and regulations imposed on the businesses. For example high tax rates make it difficult for businesses to achieve financial feasibility. Also, restrictions will limit innovative business practises to achieve efficiency and increase profitability. Another major risk with doing business in Poland is that state-owned enterprises still exist. Poland has not completed its transition from a socialist economy to a market based economy. For this reason, it is difficult to compete with government controlled enterprises. Under a socialist economy it is difficult for new entrants to compete due to...
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