Capital Account

From 2002-2006 Poland is primarily importing securities. The country experiences periods of both capital inflow and capital outflow during this time range. Inflow occurs during years 2002, 2003 and 2005, while outflow occurs in years 2004 an 2006. Poland is borrowing from the world during these years much more than it is investing. Direct foreign investments dominate the amount of portfolio investment in Poland. As far as investment abroad, direct investment stays low while porfolio greatly increases in 2004 and later. (1)


(1) http://www.econstats.com/ifs/IFS_Pol1v_91.htm#data

The Polish currency has been generally appreciating relative to the Euro and the Dollar since at least the year 2000. With respect to the Euro, the Polish Zloty has fluctuated more heavily, but overall appreciated slightly between 2000 and 2006. With respect to the Dollar, the Zloty has been steadily depreciating since the year 2000. In 2000, 100 Dollars could be traded for roughly 435 Zloty. Whereas, in 2006, 100 US Dollars only bought approximately 310 Zloty (1). As of March 21st, 2008, 100 Euros traded for 354.36 Zloty and 100 US Dollars traded for 228.82 Zloty, signifying a further appreciation of the Zloty relative to both currencies (2).
From 1998 to 2008, Poland has been steadily increasing its currency reserves. For example: In January of 1998, it had 14,861.8 Zloty worth of reserves. In January of 2002 it had 23,353.6 worth of reserves and in Feb of 2008 it had 55,565.9 worth of foreign exchange reserves, a significant increase over the course of ten years (3).


The Polish Central Bank raised interest rates several times over the course of 2007 in order to fight inflation and achieve a target inflation rate of 2.5%. By October of 2007, inflation had risen to 3%, and the Bank’s main interest rate was at 5%, which was up by 1% since April (4). In November of 2007 and January of 2008 the Monetary Policy Council raised the National Bank of Poland interest rates by .25% each time so the current reference rate is 5.5% (5). By January, the annual increase in consumer prices had reached 4.3%, well above the target rate of 2.5% (6).




(1) http://www.business.gov.pl/Polish,currency,and,exchange,rate,75.html
(2) http://www.nbp.pl/
(3) http://www.nbp.pl/
(4) http://www.abcmoney.co.uk/news/282007173086.htm
(5) http://www.nbp.pl/en/publikacje/raport_inflacja/iraport_february2008.pdf
(6) http://www.nbp.pl/en/publikacje/raport_inflacja/iraport_february2008.pdf

Polish Economic Climate

Poland is the richest of the post-communist countries. Its GDP grows more each year than it did the last. The Polish government follows a policy-making model of privatization and capitalism. Their continuous privatization of more and more markets and liberal laws on establishing new firms have lead to a strong private sector, steadily decreasing unemployment, valuing of currency, and growing salaries. The quality of life in Poland is such that more people return to Poland from other countries than leave Poland for other countries each year.

Polish Resources

Polish Natural Resources
-Coal
-Sulfur
-Copper
-Natural Gas
-Silver
-Lead
-Salt
-Amber
-Arable Land


Poland’s main import is oil since it lacks that natural resource. Also they import lots of machinery and electrical equipment since those industries are weak. This provides a comparative advantage because they then take these imports, combine them with their own capital and resources, like their mining industry, and produce valuable exports. Since they are rich in raw metals, that explains their high export of cars and car parts. Also they are big exporters of furniture and ships, which use lots of wood which they have abundant amounts arable land to produce it. This land also supports their strong agriculture exporting. Looking at their resources and comparing it to the production function, it seems that they are rich in the capital and labor sections and weak in the technology. They need lots of labor for all the mining activities and for agricultural development.

Poland: Exchange Management Systems

Poland Foreign Exchange Management System

            Poland currently has a floating exchange rate regime.[1]   Once Poland converts to the Euro it will be a part of a monetary union, a type of dollarization.  As a part of the change to Euros, Poland will participate in the European Union Exchange Rate Mechanism II (ERM II).   This mechanism is designed to help new European Union member states achieve a relatively smooth transition to the Euro.   This mechanism establishes a particular exchange rate for the new member countries currencies to the Euro and a currency band which allows for fluctuation of plus or minus 15% around the targeted rate.[2] Some reports estimate that Poland will join the Euro Zone by 2012.[3]

 

 

History of Polish Currency Arrangements Since 1900

           Poland began the 20^th century using the Russian Rubel.[4]  In 1917, after the German invasion of Poland,  Poland used the Polish Marka.  By 1923, this currency had experienced a great amount of inflation and Poland introduced the Zloty in 1923.  The Zloty was pegged to gold, and this arrangement lasted until World War Two.[5] After the German invasion, the Zloty was pegged to the Reichsmark at a rate of 2 Zloty per Reichsmark.  In 1945, the National Bank of Poland was established and Poland fell under the control of the Soviet Union until the end of the Cold War.  Between 1950 and 1991, the Polish currency was not convertible and was valid only within Poland.[6]   In 1950, and again in 1994, new Zloty were issued which redenominated the Polish currency. 

            In 1990, the Zloty became convertible with Western currencies.  Beginning in 1991, Poland pegged its currency (using a crawling peg) to a basket of currencies including the U.S. dollar and the German Deutsche mark.[7]  The U.S. dollar was worth 45% of the basket, the Deutschemark was worth 35%, the British Pound was 10%, and the Swiss and French francs were each worth 5% of the basket.[8]   In 1995, Poland switched from a crawling peg to a crawling band, which allowed the currency to fluctuate + or - 7%.   However, in the late 1990s, Poland moved towards a floating, market-determined, exchange rate.   In the early 2000s, Poland joined the European Union and within the next decade, Poland will convert to the Euro. 

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[1] http://129.3.20.41/eps/mac/papers/0302/0302002.pdf

[2] http://www.ecb.int/home/glossary/html/glosse.en.html

[3] http://news.xinhuanet.com/english/2007-09/06/content_6668634.htm

[4] http://www.zloty.net/2007/10/16/history-of-the-zloty/

[5] http://www.globalfinancialdata.com/index.php3?action=detailedinfo&id=5190

[6] http://converter-currency.com/currency/polish-zloty.cfm

[7] http://mpra.ub.uni-muenchen.de/1967/1/MPRA_paper_1967.pdf

[8] Kokoszczynski, Ryszard, “Poland Before the Euro” Journal of Public Policy, 22, 2, 199-215.

Poland: Exports and Imports

Main Polish Imports

Machinery and transport equipment 38%

Intermediate manufactured goods 21%

Chemicals 14.8%

Minerals, fuels, lubricants, and related materials 9.1%

Main Polish Exports

Machinery and transport equipment 37.8%

Intermediate manufactured goods 23.7%

Miscellaneous manufactured goods 17.1%

Food and live animals 7.6%

(From CIA World Fact book)

Detailed Info