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

5 of the best gold ETFs
Gold

5 of the best gold ETFs

Some investors like to hold gold as an insurance policy against uncertainty, but buying the physical metal can be tricky. Here are the best gold ETFs …
13 Mar 2023
3 ETFs to buy now
Funds

3 ETFs to buy now

We take a look at three exchange-traded funds that investors could benefit from investing in
13 Mar 2023
Should you stick with Mid Wynd investment trust?
Investment trusts

Should you stick with Mid Wynd investment trust?

Max King looks at the prospects for Mid Wynd as the trust prepares to say goodbye to Simon Edelsten and Alex Illingworth, managers of the trust since …
9 Mar 2023
The ten investment trusts with the highest dividend yields
Investment trusts

The ten investment trusts with the highest dividend yields

Investment trusts are one of the best ways to participate in the stockmarket, and the way they are structured means they can maintain their dividends …
2 Mar 2023

Most Popular

Government plans could see NS&I boost interest rates
Savings

Government plans could see NS&I boost interest rates

The government-backed bank has a new funding target, which could prompt it to boost the rates on its Premium Bonds, ISAs and bonds.
16 Mar 2023
Share tips of the week – 17 March
Investments

Share tips of the week – 17 March

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
10 Mar 2023
How to make your child a tax-free millionaire by age 37
Investments

How to make your child a tax-free millionaire by age 37

Exclusive research for MoneyWeek reveals how funding an ISA and a pension for your child until age 18 could build up a seven-figure sum by the time th…
14 Mar 2023