Sustaining Rapid Growth in Poland: What is the Primary Concern?
25 Pages Posted: 20 May 1998
Date Written: March 18, 1998
The Polish economic reform has entered a new stage. The challenging task now is to maintain the current growth momentum in the long run. This article investigates the sustainability of the growth by analyzing the economic conditions of Poland. While most economists still concentrate on macroeconomic problems of restructuring, infation and current account deficits, the article argues that these problems are only secondly important. The primary concern of the Polish economy is the weakness in domestic savings. Empirical evidence reveals that the current savings rate of Poland is weaker than that of fast growing economies. An econometric test further finds that rapid growth in Poland does not automatically promote savings through the existing institutional mechanism. Instead, there seems to be a jump-ahead consumption behavior. Hence the current growth rate cannot be sustained unless the domestic savings rate is raised by effective policies. The paper discusses policy options for the Polish policymakers to promote savings and suggests that a discriminatory consumption tax should work best.
JEL Classification: O11, O16, P27
Suggested Citation: Suggested Citation