Why Was Poland the Only EU Country to Avoid Recession?

Poland is the only country in the European Union which did not have a recession during 2009, as shown in this chart. And among all the OECD countries, Poland had the best real growth performance in 2009. I visited Poland this past week to give some talks and to better understand Poland’s resiliency. One particularly enjoyable talk was joint with Leszek Balcerowicz the former central bank governor and finance minister who deserves much of the credit for transforming Poland’s economy from central planning to a market economy back in 1989.

What are the reasons for Poland’s extraordinary performance in 2009? Good economic policy had much to do with it. As with some other emerging market economies Poland was in a much better macroeconomic position in 2009 than it was 10 years ago. It kept its inflation rate and its debt levels low, limited its borrowing in foreign currencies, and accumulated a large amount of foreign reserves. It also did not overact to the financial crisis, despite urging of many inside and outside of Poland to do more to stimulate the economy with discretionary fiscal policy. By not overacting it prevented the kind of panic seen in other countries.

Some say that the flexible exchange rate was a factor in avoiding recession as the depreciation of the Zloty helped keep net exports from declining as sharply as in other countries. However, the Zloty appreciated before the crisis which would have had negative effects, and the subsequent depreciation essentially took the exchange rate back to about where it was before that appreciation, as shown in the second chart.

While Poland still needs to be vigilant and keep its government debt from rising as a share of GDP, it is currently in far better shape than other countries according IMF data on debt, including the United States.

About John B. Taylor 117 Articles

Affiliation: Stanford University

John B. Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University and the Bowen H. and Janice Arthur McCoy Senior Fellow at the Hoover Institution. He formerly served as the director of the Stanford Institute for Economic Policy Research, where he is now a senior fellow, and he was founding director of Stanford's Introductory Economics Center.

Taylor’s academic fields of expertise are macroeconomics, monetary economics, and international economics. He is known for his research on the foundations of modern monetary theory and policy, which has been applied by central banks and financial market analysts around the world. He has an active interest in public policy. Taylor is currently a member of the California Governor's Council of Economic Advisors, where he also previously served from 1996 to 1998. In the past, he served as senior economist on the President's Council of Economic Advisers from 1976 to 1977, as a member of the President's Council of Economic Advisers from 1989 to 1991. He was also a member of the Congressional Budget Office's Panel of Economic Advisers from 1995 to 2001.

For four years from 2001 to 2005, Taylor served as Under Secretary of Treasury for International Affairs where he was responsible for U.S. policies in international finance, which includes currency markets, trade in financial services, foreign investment, international debt and development, and oversight of the International Monetary Fund and the World Bank. He was also responsible for coordinating financial policy with the G-7 countries, was chair of the working party on international macroeconomics at the OECD, and was a member of the Board of the Overseas Private Investment Corporation. His book Global Financial Warriors: The Untold Story of International Finance in the Post-9/11 World chronicles his years as head of the international division at Treasury.

Taylor was awarded the Alexander Hamilton Award for his overall leadership in international finance at the U.S. Treasury. He was also awarded the Treasury Distinguished Service Award for designing and implementing the currency reforms in Iraq, and the Medal of the Republic of Uruguay for his work in resolving the 2002 financial crisis. In 2005, he was awarded the George P. Shultz Distinguished Public Service Award. Taylor has also won many teaching awards; he was awarded the Hoagland Prize for excellence in undergraduate teaching and the Rhodes Prize for his high teaching ratings in Stanford's introductory economics course. He also received a Guggenheim Fellowship for his research, and he is a fellow of the American Academy of Arts and Sciences and the Econometric Society; he formerly served as vice president of the American Economic Association.

Before joining the Stanford faculty in 1984, Taylor held positions as professor of economics at Princeton University and Columbia University. Taylor received a B.A. in economics summa cum laude from Princeton University in 1968 and a Ph.D. in economics from Stanford University in 1973.

Visit: John Taylor's Page, Blog

1 Comment on Why Was Poland the Only EU Country to Avoid Recession?

  1. Poland was also virtually the only country to refuse to buy the flu vaccine last winter, stating that the facts did not warrant this.
    Fortunately, political correctness has not yet embedded itself in Poland-one of the last islands of individualism and personal freedom. Thats what Poland fought for during the last 200 years. We are not about to give this up in the name of political correctness.
    Let other countries look at political correctness (and one its instruments-the war on terrorism)as what it really has become-an attack on self confidence and personal freedom.

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