Polish Finance Minister: Poland needs a new model of economic growth

"We have a peace dividend behind us, which was destroyed by the events in Ukraine. The demographic rent that provided us with a high supply of qualified personnel has also been exhausted. The current growth model therefore requires corrections - says Andrzej Domański, Polish Minister of Finance.

Poland, Europe and the world find themselves in an exceptional time - we are a few weeks before the presidential elections in the United States, just before the European Commission takes over the reins in a new composition and less than three months before Poland takes over the presidency of the EU Council. During the European Forum for New Ideas held in Sopot, Finance Minister Andrzej Domański pointed out that this time of "new deal" is taking place in very demanding conditions - after a series of economic crises, a disruption of macroeconomic balance, and also during the ongoing conflicts in Ukraine and the Middle East. This makes the future exceptionally hazy today.

The goal? Maintaining a high rate of growth

- The word "uncertainty" in this increasingly multipolar world is repeated and inflected by a growing group of politicians and analysts today. Poland, nominally the sixth largest economy in the EU, and after taking into account the difference in purchasing power - the fifth, will have a key role to play. For many countries, we are an example to follow, being the engine of growth of the EU economy. However, we live in pre-war times and we must be ready for various scenarios. That is why we are already spending over 4% of GDP on defense, and in the budget for next year we have secured 4.7% of GDP, the most among all NATO members - explained Minister Domański during his speech at EFNI.

 

Energy, migration, security issues and cooperation with entrepreneurs, as well as the priorities of the Polish presidency - these are the most important topics of the opening speech of Prime Minister Donald Tusk during the EFNI conference in Sopot.

Despite this, in the second quarter of this year, our country recorded the highest rate of growth among the large EU economies. In 2025, it is to be almost 4%, which – as the Minister of Finance notes – will place us at the top of the OECD group. However, we cannot ignore threats from the East.

 

– The surrounding reality poses new challenges. We are also facing the excessive deficit procedure inherited from our predecessors. But our goal is to maintain a high rate of economic growth. This year, real wages will increase by 9%, the most in the 21st century. This drives consumption, which is conducive to GDP growth. However, we need sustainable growth based to a greater extent on investments – claims Andrzej Domański.

 

According to him, however, we must refer to the very high dynamics of changes in global economic relations. – The departure from the deepening of globalization processes is currently determined primarily by the issue of economic security, which is, among other things, the result of challenges from competing states such as Russia and China. As a result of these tensions, protectionist activities are intensifying, and the effect is the progressive fragmentation of the world economy – indicates the minister.

We are losing in the global race

As Andrzej Domański emphasizes, a debate has begun in the EU on leaving the "economic comfort zone", and the pretext for a broader discussion was, among others, Mario Draghi's report. - This is a painful but accurate diagnosis of the challenges facing Europe. We are already losing in many respects in the global technological race with the USA and Asian countries. And we face new challenges: energy transformation, demographic changes, new geopolitical conditions. We must draw conclusions and take decisive action, because otherwise our socio-economic model will cease to exist - warns Domański.

In his opinion, the biggest pain point of the EU is the lack of economic growth. - Let's be honest: there will be no green economy, no common security policy, no social cohesion if the European economy sinks into long-term stagnation. Economic growth should be a priority in the context of the policies introduced - he claims.

 

Investment is needed to revive growth. Meanwhile, Europe is massively underinvested. Real investment outlays in the EU are currently only 10 percent higher than in 2007, before the great financial crisis. In the United States, these outlays are 35 percent higher. "This shows this huge disproportion in investment outlays, and we can see the effects of this in many areas," Domański emphasizes. He notes that the EU missed out on, among other things, the technology race.

The result? Today, one American company, Nvidia, is worth more than the entire DAX index, which groups the largest German companies.

 

The need for a responsible migration policy

- Poland's improving situation in the international and EU arenas and the upcoming presidency will allow our country to more effectively influence the EU's responses to global challenges. I cannot turn a blind eye to the depletion of our competitive advantages. We have a peace dividend behind us, which was destroyed by events in Ukraine. The demographic rent that provided us with a very high supply of well-qualified staff has been exhausted. The current growth model therefore requires corrections - comments the Minister of Finance. - Poles are an increasingly wealthy society, with growing aspirations. Our task must therefore be to support modern branches of the economy, based on knowledge. The energy transformation must be at the center of both Poland's and Europe's attention. Skillful management of changes in the European energy sector may not only allow for lower energy prices, and thus improve the competitiveness of European companies, but also become a powerful pro-development vehicle – he continues.

Minister Domański emphasized that at the same time we are participants in a technological race and a fight to improve the efficiency of our economy, and in this area we still have a lot of catching up to do.

– The robotization rate of the Polish economy is disastrously low. The level of adaptation of IT solutions in Polish companies, including AI technology, is one of the lowest in the entire EU – enumerates Andrzej Domański.

According to him, in view of long-term negative demographic changes, the process of shortages on the labor market has accelerated. This is a huge challenge. – However, we must pursue a responsible migration policy. The influx of labor migrants to our country is inevitable, but it must take place in a controlled manner. It is necessary to attract employees from those specializations to Poland, where there is a particular lack of domestic resources. After all, the Polish economy has not been competing solely on low labor costs for a long time. What we are focusing on and must focus on is qualified staff – he adds." 

 

Let us be honest. America competes with the EU for investment money and for qualified migrants. We need peace in Ukraine, restore the flow of cheap Russian gas into the EU, normalize trade with China, and develop our own AI economy. Then and only then can we start moving on by building a competitive technology of the future, becoming a strong support source for our American friends, not just a dying place for extraction of investment money and of high profits for energy companies.