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2008 OECD Economic Surveys: Poland 2008

image of OECD Economic Surveys: Poland 2008

Poland has been catching up with the rest of the OECD more quickly in the past two years, but the short-term outlook is clouded by strong excess demand pressures and rising inflation.  This 2008 edition of OECD's periodic survey of the Polish economy examines key challenges Poland faces including monetary and fiscal policies, reforming the tax system, bridging the housing gap, and rapidly improving transport infrastructure.

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Raising labour supply to sustain strong potential growth

Poland’s economy has performed well in the last two years. Real GDP has grown faster than in almost all other OECD countries. Unemployment has fallen sharply, as employment has surged while participation has declined. The benefits of this robust growth performance have been shared between capital and labour: wages have picked up sharply. The immediate challenge is to head off overheating by an appropriate policy mix consisting of judicious monetary tightening and a budgetary policy that holds the general government deficit below 3% of GDP. Looking further ahead the primary objective should be to reform labour-market, tax and other structural policies so as to boost effective labour supply in a way that will sustain the process of convergence of per capita incomes with those of the more affluent OECD members. That will mean: increasing labour-market flexibility, further reducing the tax wedge on labour income (especially for the least skilled), closing off the remaining routes to early retirement, and improving labour mobility by strengthening housing markets (particularly for rentals) and enhancing transport infrastructure.

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