Poland's Economy Is Decoupled From Politics, Minister Says

(Bloomberg) -- A surge in Polish investment last quarter was a sign of the economy being unaffected by the country’s political dispute with the European Union, Investment and Development Minister Jerzy Kwiecinski said.

The EU’s largest eastern economy probably expanded about 5 percent in the last quarter of 2017, compared with the same period of 2016, the fastest clip in six years, Kwiecinski told Bloomberg. Investment likely grew about 10 percent in the same period as private companies joined public institutions in spending on EU projects, he said. Such growth would be the fastest since the first quarter of 2015, before the Law & Justice party won power. Preliminary gross domestic product data is due out on Feb. 14.

The country’s $471 billion economy is set to remain one of the quickest developing in Europe this year, amid billions of euros of inflows of EU aid, he said. It’s unclear if Poland will remain the biggest net recipient of funds in the bloc’s post-2020 budget, in part because of the conflict over what authorities in Brussels say is an erosion of democratic values under Law & Justice.

Last year, the EU’s executive said judicial reforms implemented by the government in Warsaw posed a threat to the rule of law and recommended that member states back unprecedented political sanctions on Poland. Momentum is also gathering in Brussels to use development grants as a way of ensuring rogue states can’t flout the bloc’s values without consequences, according to diplomats in Brussels.

“We can’t turn a blind eye on our international relations, and they of course play a very significant role also in our economy,” Kwiecinski said in an interview in Miami, during a Polish-American leadership forum. “We’re doing our best to solve the dispute. However, for the past two years, or since the dispute started, it didn’t have any negative effects on our economic performance.”

‘Very Conservative’

Poland’s zloty gained 0.1 percent to 4.1828 against the euro at 9:38 a.m. in Warsaw. It’s trading little changed against the European currency so far this year after surging 5.4 percent in 2017, the second-best performance among emerging-market peers.

Last month, Premier Mateusz Morawiecki reshuffled his cabinet, replacing some ministers who were in conflict with Brussels, although he kept the powerful justice minister. Kwiecinski, a deputy minister who was also promoted last month, said that “one of the main aims of the new administration is to improve” relations with the EU.

Poland’s economic growth will slow to 3.6 percent this year from 4.6 percent forecast for 2017, according to the official government target, which Kwiecinski said was a “very conservative forecast.” With diminished external risks, thanks to solid global economic expansion, the main domestic concern remains a shortage of workers, he said.

“The current pace of economic growth won’t be sustainable without more sophisticated ways of managing our workforce, including immigrants and our own labor resources,” Kwiecinski said.

To contact the reporters on this story: Mc Nelly Torres in Miami at mtorres136@bloomberg.net, Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net.

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Jonathan Levin at jlevin20@bloomberg.net, Wojciech Moskwa, Balazs Penz

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