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Poland: structural, digital and green reforms needed to raise living standards, OECD says

Amid ongoing economic challenges with the war in Ukraine, Poland’s macroeconomic policy needs to strike a “fine balance” between supporting the economy while reducing inflation, according to a new OECD report. Structural reforms aimed at paving the way for a successful green transition, reaping the benefits of digitalisation and strengthening public finances, will help Poland to continue lifting living standards, the non-partisan international organisation said.

According to the latest OECD Economic Survey of Poland, Poland’s monetary and fiscal policy should be carefully balanced to support growth while avoiding high inflation from causing entrenched economic challenges. In the longer term, population ageing makes it important to lift workforce participation and productivity. Broadening the tax revenue base, extending working lives and improving spending efficiency in areas such as health and infrastructure can help boost productivity while easing long-term fiscal pressures, the report said.

“Poland’s success in raising living standards has been very impressive and despite the impact of today’s global uncertainties and the war, the fundamentals of the Polish economy remain strong,” said Mathias Cormann, OECD Secretary-General. “To lay the groundwork for future growth, Poland needs to accelerate the development of renewable energies, promote a wider development of digital and managerial skills and ensure it is on a sustainable fiscal trajectory for the future,” he added.

For the immediate future, the OECD recommended keeping energy-related support to households and firms temporary to ensure that such measures do not add to inflationary pressures. Over the longer term, while Poland’s debt is relatively low (50 per cent of GDP) its public finances face mounting pressures from population ageing and higher health and defence spending. The Survey recommended carrying out a comprehensive spending review, improving spending efficiency and broadening the tax revenue base by eliminating some value-added tax exemptions and increasing taxes on real estate. Extending working lives, including through gradually aligning male and female retirement ages, and increasing that age with healthy life expectancy gains, is also key, according to OECD.

“Given Poland’s continued reliance on coal and changes in energy supply, the Survey recommends the government follow through on a planned revision of its strategy on how to achieve the transition to climate neutrality through changes in energy supply,” the report said. To ensure a just transition to net zero, a social agreement to close coal mines should be extended to lignite coal and complementary policies introduced to the whole coal value chain, the OECD added.

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