Poland: a European success story

Since it joined the European Union, Poland has gone from strength to strength. Here's one exchange-traded fund to profit.

When communism collapsed, Poland was widely deemed "backward and provincial", says Seekingalpha.com's David Hunkar: "a millstone around Europe's neck".

Now, after "an almost non-stop boom", it's the EU's sixth-largest economy, a frequently overlooked European success story.

Market reforms, over £100bn in EU aid and accession to the single market in 2004 are the key reasons why the economy expanded by 116% between 2003 and 2013. Poland was among the very few states to avoid recession in 2009.

It warded off the global crash, thanks to a large domestic market 40 million people a relatively well-regulated banking sector and low household debt. A public investment programme also helped.

The eurozone crisis caused a nasty slowdown, however, as tightening credit and the poor outlook in key export markets (foreign sales still comprise 40% of GDP) severely dented corporate investment. But the backdrop is improving again amid the gradual recovery in Europe.

Polish growth rebounded to an annual pace of 3.3% in the first quarter, from 2.7% in the previous three months. And the outlook remains encouraging, according to Capital Economics.

Consumers have rebuilt their savings. There also seems to be plenty of spare capacity left, as inflation is still low. It is likely to be some time before policymakers are tempted to raise interest rates.

Over the longer term, growth should stay strong, as Poland still has plenty of catching up to do. GDP per capita has jumped from 44% of the EU average in 2004 to 67% today, notes Remi Adekoya in The Guardian. A third of the population still has no bank account.

The well-educated and relatively cheap workforce will be a major asset. "Poland successfully competes in outsourcing of services with countries like India," says Franklin Templeton's Mark Mobius, and should keep benefiting from companies shifting production from Western to Eastern Europe.

A deepening downturn in Russia, which accounts for 6% of Polish exports, could affect Polish growth, but is only likely if the Ukraine crisis escalates sharply, reckons Shareholders Unite on Seekingalpha.com.

But any Russia-induced jitters on the Polish stock market should be seen as a buying opportunity, given the solid long-term outlook and already reasonable valuations. A possible play on Poland is the iShares MSCI Poland ETF (LSE: SPOL).

Recommended

Four of the best investment trusts for investing in emerging markets
Investment trusts

Four of the best investment trusts for investing in emerging markets

Investors need to tread very carefully in this risky sector. Here are the best ways to approach it
22 Mar 2021
Storm brews in emerging markets as investors pull cash out
Emerging markets

Storm brews in emerging markets as investors pull cash out

Foreign investors have begun to pull cash out of emerging markets as they begin to look less attractive when compared to the rising return from holdin…
12 Mar 2021
I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
What’s in Biden’s global corporation tax proposals?
Global Economy

What’s in Biden’s global corporation tax proposals?

US president Joe Biden’s administration recently proposed a universal model for taxing global companies. Saloni Sardana looks at what's involved.
13 Apr 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021
Four investment trusts for income investors to buy now
Investment trusts

Four investment trusts for income investors to buy now

Some high-yielding listed lending funds have come through the crisis with flying colours. David Stevenson picks four of the best.
12 Apr 2021