Polish Socioeconomic Development in the 1990s and Scenarios for EU Accession

Abstract

POLAND'S TRANSFORMATION from a species of planned economy, worn-out and poorly functioning, started in August 1989. At that time the country was widely considered to be the pioneer in transformation and its first non-communist government commanded much interest in Western government, business and financial circles. Yet despite a broadly successful attempt to deal with immediate problems and stabilise what was in 1989-90 an economy facing hyperinflation, Poland's neighbours, Hungary and Czechoslovakia, soon became viewed as much more appealing and attractive business destinations, as well as more 'robust' system transformers. This perception did not change even as Poland became the first economy in the region to resume growth after the deep slump of 1989-91. Throughout the early 1990s the baton in the contest over economic transformation was passed between Hungary and the Czech Republic and it was only relatively recently, after confidence in the Czech economy was dented in early 1997, and as Poland's exceptional GDP growth dynamism became clear, that it became the subject of greater investor enthusiasm.1 By 1998, not far from the 10th anniversary of the collapse of communism, Poland was again widely considered as one of the most successful pioneers in economic transformation. Moreover, it was viewed as an economy where 'fundamentals' were sound, with most economic indicators (growth, inflation, foreign direct investment) moving in a healthy direction, and which looked reasonably strong in the face of the much greater uncertainties on the international economic scene following the 1997-98 crises in South-East Asia, Russia and Brazil. Even the current account deficit, which widened sharply in 1996 and was for a time a cause of concern, was held to 3% of GDP in 1997 and to 4.4% in 1998.2 Given the 'green light' by the EU in 1998 to begin accession negotiations, Poland seemed to be once more a front-running transformation economy ready to be included in the first wave of EU enlargement eastwards.3 Nevertheless, since the start of detailed negotiations some doubts have crept in regarding the likelihood of the smoothness or otherwise of Poland's EU accession. Despite impressive mid-1990s economic performance, some observers, arguing largely but not exclusively on the basis of Polish domestic political developments, have cast doubt on the country's readiness for EU membership. In the worst case it has been suggested that Poland may miss out on the first wave of expansion.4 Others have identified underlying (and perhaps growing) EU indifference as another barrier to long-awaited EU enlargement.5 The internal politics of EU reform-from CAP to