Reforms’ results and the international competitiveness of the Polish economy

Active internationalisation of the Polish economy

We adopt a simplifying assumption that at a macro level, two forms of economic cooperation can be treated as active internationalisation - exports and outward FDI. As mentioned in the introduction, due to the lack of space, we will not deal with changes in the commodity and geographical structure of exports and investment outflows, although these are essential aspects of the internationalisation of the Polish economy. We will confine ourselves to stating that the scope and degree of internationalisation in both these cross-sections were characterised by great diversity.

The analysis of data on GDP and gross export values in the period 1990- 2018 leads to interesting conclusions. Global GDP value in 2018 was 3.7 times greater than at the beginning of the studied period. For world exports, the corresponding index was 5.6 and 3.9, when it comes to per capita trade. Total exports and exports per capita both grew visibly faster than global GDP, which was a characteristic feature of the world economy in the whole period after World War II.³ In Poland, this trend was even more remarkable. In the years 1990— 2018, GDP and exports increased respectively by 888% and 1619% (both total and p.c.), which means that trade was nearly twice as dynamic as GDP. The comparison of indices at the world and Poland level enables concluding that the Polish economy integrated relatively quickly with the global environment, which was mainly due to the low initial internationalisation and commencement of the catching-up process. Therefore, the share of Poland in the world export grew from 0.46% in 1990 to 1.34% in 2018. In 2018, export p.c. in Poland reached USD 6755, against USD 2505 being the world average. The rise of this indicator in the period under study amounted to 390% for the world as a whole. For Poland, the increase was four times more rapid. The above proves not only internationalisation as such but also its central role in the transition of the Polish economy.

Changes in Poland’s position in the global arena can also be observed based on the rankings of the largest exporters. In 1990, the country was ranked as the 37th largest exporter. After two decades, it became 27th, and finally 25th in 2018. In terms of the value of merchandise exports per capita, Poland was ranked as follows: 1990 - 89th, 2010 - 59th, 2018 - 46th. In this case, the positioning in the ranking was a bit more distant, but the shift up much more significant. It is also worth emphasising that in the corresponding classification of economies in terms of GDP, Poland’s position was very similar when taking into account total GDP. but worse in the case of GDP per capita (1990 - 92nd, 2010 - 66th,

Figure 9.1 Poland’s position in the global economy and the relative importance of merchandise exports for the Polish economy

Figure 9.2 Value of Poland’s export, import, net trade, and export-import coverage ratio

2018 - 72nd). One can draw complementary conclusions based on the Export Performance Index, which defines the relation of a given country’s share of global exports to its share in global GDP. Thus, this index measures the relative intensity of exports against GDP.

In the entire analysed period, the Export Performance Index exceeded unity, which means that Poland’s share in global exports was higher than its share in global GDP. In the years 1992-2001, the index was slightly greater than one,

Table 9.2 Export, import, and FDI performance indices

Source: authors’ own compilation with the use of UNCTAD database (http://unctadstat.unctad.org).

and in the years 2002-2018, it was growing quite systematically, which could be associated, among others, with an effect of trade creation shortly before and immediately after Poland’s accession to the European Union. The above may lead to the conclusion that Poland is a relatively more significant exporter than a value- added creator in the global economy.

The progress in internationalisation measured by outward FDI was even more profound. In the years 1990-2018, global outward FDI stock grew nearly 14 times, while FDI stocks located abroad by Polish investors grew more than 300 times. As a matter of their dynamics, in 2018, Poland’s outward FDI stocks constituted 0.092% of the world’s outward FDI stocks. Although this share is meagre and far lower than the share of Poland in the global exports, it is nearly 22 times larger than in 1990 (0.004%). Despite the dynamics of outward investments, the gap between Poland’s engagement in foreign trade and FDI is still huge. The development of the outward FDI Performance Index confirms this finding. In any year of the analysed period, the relative importance of Poland’s FDI (measured against

Figure 9.3 Value and dynamics of Poland’s inward and outward FDI stocks

global outward FDI) did not match the relative importance of Poland’s GDP. The above reflects well the current phase of the development of the Polish economy and its need for capital.

The analysis of both possible modes of active internationalisation of an economy - exports and outward FDI - indicates a significant breakthrough against the beginning of the transition period. However, it is difficult to assess the achieved results as an unambiguous success. The comparison of indicators of the internationalisation of the Polish economy with those for neighbouring Central and Eastern European Countries (CEEs) that followed a similar development path before 1990, is not good for Poland. The latter conclusion, however, requires some relaxation since the Czech, Slovak, and Hungarian economies are far smaller than the Polish economy, which significantly increases their relative internationalisation potential.