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Opinion of the Chief Economist of ZPP – summary of 2022 and prospects for 2023

Warsaw, 7 February 2023

 

Opinion of the Chief Economist of ZPP – summary of 2022 and prospects for 2023

 

The year 2022 could be called interesting, in the sense in which the Chinese use the curse “may you live in interesting times”.  The beginning of the year brought concerns about inflation (although even pessimists predicted a peak in consumer inflation of approximately 10% year-on-year).  It was supposed to be influenced by the rising prices of energy raw materials and the rebound in the Polish and global economies after the pandemic.  This rebound started in 2021, but many forecasts, especially those from 2021, indicated its continuation in the following months. This, in turn, was expected to affect prices.

Even before the aggression against Ukraine, Russia began to apply a policy of a limited supply of energy resources to Europe. This was possible due to the dependence of European countries on Russian gas (supplied via pipelines, which meant that there were not many stimuli to change the supplier; in fact, Europe’s dependence on Russian gas has been deepening, not weakening, as a result of German policy in recent decades), oil ( flowing through the Przyjaźń oil pipeline – again, there is no cheaper and easier form of import, hence Central European countries, in particular, were dependent on Russian supplies) and its distillates (especially diesel oil was imported to Europe in significant quantities). The beginning of the year also brought the last significant wave of COVID, during which the government still tried to apply restrictions limiting mobility. 

At the same time, hopes for the sustainability of a post-COVID economic rebound in the conditions of logistical issues (due to COVID, or rather anti-COVID policies) made us think with concern about the length of the aforementioned inflation impulse.  It was supposed to be caused primarily by excessive demand in relation to the production capacity of companies struggling with rising costs and supply disruptions.  Optimists; however, expected another year of stable economic growth and a slowdown in inflation after the expiry of the pandemic state aid.

The Winter Olympics in Beijing, which took place in February, were supposed to be a symbol of the success of China’s “zero COVID” policy and the effectiveness and agility of Chinese foreign policy.  The Olympics venues were often closed to spectators, who were few in number anyway – foreigners had virtually no chance to enter China for health and hygiene reasons.  Despite this, the following months showed that the Chinese pandemic was an even greater failure than the European one. Subsequent lockdowns slowed down the recovery of the economy, and the end of the year brought a relaxation of that policy (probably due to the economic situation and growing internal unrest) and a rapidly growing wave of the pandemic. Its scale is difficult to assess due to the censorship of information by the Chinese authorities. China’s efforts to organise the Olympics in times of peace were only partially successful – it may have postponed the date of Russia’s invasion of Ukraine – but only by 2 or 3 weeks … The year of the Chinese Olympics will not be remembered as a year of peace, at least in the West.  However, China and its policy must be remembered because, as it turned out at the end of the year, the Chinese accidentally threw a life belt to Europe in the middle of an energy crisis.

And this crisis began at the turn of February and March, when, as a result of Russia’s invasion on Ukraine, the EU launched a policy of sanctions limiting imports of energy resources. A similar policy of limiting exports by Russia became an offset to the above. Later on, the size of future supplies was affected by the explosion of the Nord Stream gas pipeline: since it was temporarily closed anyway, its impact was negligible; however, it called into question the possibility of a rapid return to a business-as-usual policy with Russia.  The concerns about supplying Europe with energy resources, which are crucial especially in winter (when RES efficiency is often negligible), led to an increase in the prices of natural gas and oil on regional and global markets. This, in turn, translated into an increase in the prices of fuel and energy – one of the two drivers of inflation, which turned out to be much higher than anyone had expected, not only in Poland but almost everywhere in Europe and, more broadly, in the world. Europe’s energy problems; however, were largely resolved thanks to the supplies of liquefied natural gas. At the end of the year, it turned out that the increase in those supplies was made possible mainly by the collapse in demand in China. There were two reasons for that collapse – the aforementioned policy of shutting down the economy and, to some extent, the increase in supplies from Russia (which was trying to find buyers for its hydrocarbons).  In 2022, the driver of inflation was also the fiscal policy of the previous years. Thee successive measures to support citizens and businesses resulted in an increase in debt in European countries and also in excessive money issuance.

The increase in energy prices in Europe affected the condition of some manufacturing industries, especially energy-intensive ones,  e.g.,  BASF moved most of its chemical production from Europe to the USA. It also affected the situation of households, which had to and still have to face a sharp increase in energy and fuel prices. On top of that, rising prices fueled inflation and, consequently, consumer prices in Europe are 15-25% higher than two years ago.

The following months brought an increase in tension in Ukraine: the Russian offensive, which collapsed, Ukraine’s counter-offensive in the autumn, and finally, the new tactics of Russian attacks on civilian critical infrastructure facilities. It was not until late autumn that the situation stabilised. It is worth mentioning that the assistance of NATO countries played a key role in terms of Ukraine’s combat capability and ability to wage the war against Russia.  Poland remained one of the leaders of that assistance throughout the year.

The war also triggered a massive wave of emigration from Ukraine, which I have already written about. Approximately 1.5 million new emigrants from Ukraine stayed in Poland, either for a shorter or longer period of time.  Some of them decided to bind their fate to the Republic for a while, taking up work here, setting up businesses and sending their children to school.  This is almost 1 million people who still remain in Poland, have valid PESELs, and will potentially rejuvenate the population and replenish the labour force.

At the same time, after the summer price rallies, fuel and energy prices stabilised. With storage facilities full and supplies secured, prices began to fall back to the pre-war levels towards the end of the year.  The falling prices further fueled growing fears of a recession, possibly global in scope.  Especially since strained supply chains, risks related to the uncertainty associated with the course of the conflict and the carelessness of economic policies during the COVID period are also conducive to that.

Inflation triggered a response from other central banks; therefore, a cycle of solid increases in interest rates, not seen for a long time, was noticeable both globally and in Poland this year – the time of zero cost of capital is over, at least for now.  This, in turn, began to translate into the cost of servicing debts, private ones – such as housing loans in Poland – and public ones.  In the autumn, the increase in UK bond yields (meaning a drop in market valuation) threatened the stability of the market and the UK pension system so much that it prompted a multi-billion dollar liquidity intervention by the Bank of England. During the same period, the Polish government refrained from issuing PLN bonds due to the compensation expected by the market for borrowing capital. It was replaced by issuing dollar-denominated debt – much cheaper but exposed to currency market turbulence.

And those turbulences were serious.  On the main EUR-USD currency pair, annual volatility reached several dozen per cent. EUR fell 20% against USD in the period from January to September, and then strengthened by 10%.  The volatility of peripheral currencies, such as PLN, was even greater.  This volatility, as many times before, protected Polish exporters but, at the same time, had a negative impact on energy prices and the situation of not only importers but also foreign currency borrowers.

At the end of the year, the situation in the world and in Poland became stable.  However, the last 12 months led to a deterioration of the situation of Polish entrepreneurs (inflation, the wage-price spiral and especially rising energy prices played a key role here) and even more serious problems for consumers. For the first time in a very long time, real wages fell due to inflation, while the cost of living skyrocketed.  The reduction in consumption (also evident through the fall in lending) is more and more painfully felt by entrepreneurs. One can only hope that the worst is over, although this is not certain.

With regard to Polish politics, which is worth mentioning at the end, the most important issue in the field of economy, apart from disputes over inflation and interest rates, was the matter of the National Recovery Plan – the EU funds allocated for the post-COVID recovery of the economy, the transfer of which the European Commission made conditional on the Polish government achieving a number of milestones.

The year 2022 was so interesting that it remains only to wish that the upcoming 11 months of 2023 will be at least as peaceful as January.



Dr hab. Piotr Koryś
Chief Economist of ZPP

 

See: 07.02.2023 Opinion of the Chief Economist of ZPP – summary of 2022 and prospects for 2023

Slightly better business sentiment – The Busometer ZPP for the first half of 2023

Warsaw, 9 February 2023 

 

SLIGHTLY BETTER BUSINESS SENTIMENT
 The Busometer ZPP for the first half of 2023

 

Business sentiment for the next six months has improved slightly; however, it remains significantly pessimistic. The overall value of the BUSOMETER sentiment index in companies was 36.4, while the index was 32.4 in the previous research period.

As Cezary Kaźmierczak, the President of the Union of Entrepreneurs and Employers, noticed: “Entrepreneurs are reacting cautiously to the signals coming from the market.” So far, the gloomy scenarios forecasted last year have not materialised; however, there are still no clear signs of recovery.  The result is a more optimistic mood, compared to that from the last few readings; however, it is still far from enthusiasm.”

As it was the case in the second quarter of 2022,  entrepreneurs positively assess the situation on the labour market (currently 53.1 compared to the previous 51.6).

“This confirms that the labour market in Poland is in a stable and good condition at the moment – there is low unemployment and employers are unlikely to consider downsizing” – noticed Cezary Kaźmierczak commenting on the results of the study.

The value of the sentiment index in the context of the economic situation increased quite significantly (from 27.9 to 35.1). The index can still be described as a “crisis”; however, its increase shows that some entities see prospects of an economic rebound on the horizon in the perspective of the next six months. However, the fact that as many as 58% of entrepreneurs believe that the economic situation will deteriorate further in the coming months cannot be ignored.

The only component of the index that has not increased from the previous study is the investor sentiment index (it is 24.1, as it was six months ago).

As the ZPP President clearly noticed: “There is a certain risk that we will be stuck in persistent and long-term inflation, which will prolong the period of slowdown, and the lack of prospects for recovery from that phase will block investment attempts in the corporate sector.”

METHODOLOGY AND DESCRIPTION OF THE STUDY

The Busometer ZPP – the SME Economic Sentiment Index, is an indicator showing the degree of optimism of small and medium-sized enterprises and their planned activities in the perspective of the next six months. The Busometer has been published by the Union of Entrepreneurs and Employers in cooperation with Maison Research House every six mothn since 2011.

The Busometer Index value is influenced by three components:

  • the economic situation,
  • the labour market (remuneration and employment),
  • investment. 

The value of each component ranges from 0 to 100.  The Busometer scores below 50  indicate pessimistic business sentiment, while scores above 50 indicate optimism.


See:
9.02.2023 Busometr: Prognosis for the first half of 2023

 

Summary of 2022 in the energy industry as a year of changes and challenges

Warsaw, 20 January 2023

 

Summary of 2022 in the energy industry as a year of changes and challenges

 

  • Although the energy crisis did not bring the predicted catastrophe to Europe, it did lead to a significant turnaround in resource and raw material policies.
  • Accelerating distributed energy development in the EU today is a race against time and other markets – a race for stable and lower energy prices on the Old Continent.
  • In the face of new challenges, the energy transition all the more needs to be implemented in a smooth, rational and economically efficient manner.

With Russia’s attack on Ukraine on 24 February 2022, the old order to which the European continent had been accustomed to for more than 20 years, was gone. Until that day, fluctuations in energy commodity prices were stabilized by the steady supply from Russia. As it turned out, however – and this had already been noted by Polish policymakers, among others – Russia’s raw materials policy not only pursued economic goals, but also served as an effective weapon in the struggle against the more broadly defined Western world. Last year was thus a sad lesson on the consequences of years of naiveté in assessing the Kremlin’s intentions. Despite everything, however, we entered 2023 as a winning continent. Thanks to widespread mobilization in the face of the energy crisis, for the time being we have avoided a wave of blackouts in Europe. And while it is possible that without the support of mother nature (high temperatures + wind), the image would be less optimistic – it should also be acknowledged that so far, the darkest scenarios have not come true.

At the same time, there is no doubt that, under the influence of events beyond our eastern border, the 2022 energy policy of countries based solely on economic analysis, has been undermined. Nowadays, the strategic perception of energy, its independence, diversification of sources, stability of supply, stockpiles of raw materials, dispersion or, finally, resilience to threats, are equally important. This is not to say that such thinking has not existed in Europe before, but it has definitely been in the vanguard. Today’s overhaul of European countries’ energy systems is beyond economic.

With the above in mind, it is necessary to consider whether Poland’s energy industry is stable, secure, efficient, and whether the existing concepts of its development are defensible when confronted with new challenges. For example – further dispersal of energy generation sources has almost become the raison d’etre of most countries in Europe, but it is the state generation and transmission system that is supposed to guarantee the necessary energy supply to maintain production in times of emergency (e.g. war).

It is therefore worth analyzing in more depth whether accelerating the implementation of the FitFor55 package, under the provisions of RePowerEU in response to Russian aggression, is an effective response to the challenges that have arisen. In our view – no. The move away from Russian hydrocarbons should, of course, be accompanied by the development of renewable-based generating units (and the accompanying infrastructure), but also by a rational approach to the energy resources at the disposal of European countries – coal units powered by domestic raw materials, or nuclear units. Strong acceleration and radical increase in climate targets will be a counter-effective strategy, leading to the impoverishment of European consumers.  We should base plans and decisions on precise calculations and analysis. The loop made of exorbitant climate targets must not take oxygen away from the European economy and elevate energy prices, or we will irretrievably lose the industries we absolutely need to fuel the future. So, while reducing CO2 emissions and building energy efficiency are crucial, the path to zero-carbon should be smooth, economically sound and take into account the use of available sources, including assuming the rational use of coal resources.

The details will be insanely important here, because as the example of Poland has shown, mere access to a raw material such as coal, without proper safety mechanisms and regulations, will not stabilize energy prices. Besides, no EU country has passed the test of community solidarity, as egoistic interests in securing energy resources for their own local market have come to the fore in times of uncertainty.

In our view, the experience of this war should reset some opinions about the future of Poland’s energy architecture, centered around large-scale energy projects currently located mainly in northern Poland. More attention should be paid to dispersing energy sources and relying mainly on renewable sources, stabilized in the future by nuclear, hydrogen, biogas and energy storage facilities. In doing so, it is important to consider what role natural gas facilities will play and what will flow through them in the future. In contrast, coal power generation should remain within the system, as a complementary and stabilizing source, supporting us in a smooth transition, but also guaranteeing energy security for as long as it is necessary.

In 2022, there was a reversal in polarization in the energy industry in 3 areas:

  1. Gas and nuclear power were included in the EU taxonomy,
  2. Poland concentrated on energy from nuclear and offshore wind farms,
  3. In the perspective of two decades, there will be a shift of electricity production from the south to the north of Poland.

In Poland in 2022, it was not possible to notice a particular legislative acceleration enabling increased diversification of energy sources, guaranteeing energy security. Quite the contrary – there was the will to further concentrate the sector. The protracted discussions on the windmill law and direct lines have delayed the passage of these laws, which are extremely important for the development of distributed sources. Meanwhile, wind power should be expanded on a par with photovoltaics to complement each other in the future. The availability of clean and cheap energy should not be held hostage to political struggle. These issues require consensus spanning the divisions.

The scapegoat of the 2022 energy crisis was also the long-developed Commodity Power Exchange. The abolition of the exchange obligation and legal interference in market mechanisms, which was supposed to guarantee a reduction in price fluctuations, in retrospect will not change the market to provide greater flexibility and lower prices, but will strain its transparency.

In 2023 – as in the previous year – the bottleneck for the energy industry will be the distribution network, which cannot accept and distribute the amount of energy we are able to produce at peak times. The associated connection problems basically prevent work on new projects, which in the coming years will exacerbate the deficit of green energy which is badly needed by Polish industry. The PSE company, which manages the grid, sees solutions in expanding existing connections and increasing their capacity, without leaning toward promoting to potential producers the construction of new sources, energy storage, or direct lines that would relieve pressure on the grid. There is also a lack of simplified procedures for entrepreneurs to build their own energy sources. These issues will hopefully be addressed in the updated Energy Policy of Poland 2040 strategy.

The 2022 summary should not overlook positive signs, showing that policymakers are slowly realizing the threat to the overall economy from the green energy deficit in the Polish market. The power of prosumer energy, which is becoming a significant shareholder in the energy market, supporting the green transition, indicates that taking part of the market out of institutional oversight serves a common cause. It is also noticeable that the legal foundation is being laid for the construction of local energy communities planning to invest in renewable energy sources. Local initiatives are an extremely important source of modern energy development, and any state assistance in this regard is most welcome. In doing so, it is important to emphasize the need to relieve the pressure on the high- and medium-voltage power grid, for production and direct distribution of energy locally.

What is also positive is the idea of sharing the profits with surrounding communities for locally produced energy from RES. This leads us to think more deeply about the advantages of renewable energy, especially windmills, which have long since ceased to be associated in the minds of the society with negative environmental effects, and have even become a positive part of the non-urban landscape. The government’s amendment to the windmill law in the form of a mandatory contribution of 10% of the energy generated for local consumers is, in this case, perhaps not the best way to build an investor-community coalition. However, the initiative itself seems to have had a positive reception and, most importantly, has subjected long-held views in this area to critical thinking.

The Union of Entrepreneurs and Employers also welcomes the amendment to the Renewable Energy Sources Law and the extension of the time for the first sale of PV energy in support schemes from 24 to 33 months, putting the technology on a par with wind farms. The basis for these changes was to mitigate the effects of broken supply chains during the pandemic, intended to give PV power generators additional time to adjust to the new market situation and ease price pressures.

We are very happy about the doubling of the auction volume for investments in offshore wind farms (RES Act UC 99). This is an important initiative for investment in this type of RES and, in the future, the basis of the hydrogen industry.

We are closely and optimistically following the preparatory process for a law on so-called cable pooling, i.e. making already owned connection power available to other types of renewable sources, within the framework of the existing connection agreement. The law will allow more flexible use of existing transmission lines, which could translate into additional investment in RES and a rapid increase in the supply of green energy for the Polish economy.

On the other hand, the Law on Emergency Measures to Curb Electricity Prices and Support Certain Consumers in 2023 and its secondary legislation are, in our opinion, inaccurate, and in the opinion of market participants, changes have been introduced that are unfavorable to the entire energy system, which in turn may result in a reduction in energy production in Poland. The rules for calculating the price cap introduced by this regulation pose a threat to the profitability of RES investments. Seeing what role RES played during the summer and autumn months, where the use of renewable energy gave the conventional power industry the time it needed to replenish gas and coal storage, these decisions that are hard to understand.

From the point of view of the entire Polish economy, today the passing of the windmill and direct line laws is an absolute legislative priority, as is the cable pooling law. Investments related to these laws could result in an increased supply of green energy by at least 10 terawatt hours per year, starting in 2026. And this is without any visible contribution from the State, including without a particularly intensive support system.

In this context, there is also a need to rearrange dependencies in the energy industry. The current completely vertical system promotes concentration practices that deviate from the principles of a market economy.

Moving distribution into the realm of market energy would be a revolutionary move, but if it is done with the participation of a Distribution Network Operator, the existing distribution system operators will largely control the process. Such an impulse is already being felt, but the role of the state in this area is to shape it in such a way that the restriction of market principles is minimal and dictated only by Poland’s energy security.

Invariably, the launch of the program of revitalization of multi-dwelling units 200+ (which awaits the concentration of coal assets under the National Energy Security Agency (NABE)) along with passing the wind law, remain important. This would clearly show the direction of Poland’s transition and gradual move away from coal, as well as provide more room for negotiations with the European Commission on Poland’s energy transition path, taking into account the temporarily important role of conventional power generation.

Poland should push the concept of maintaining coal mines and coal power in Europe at a level that allows the economies of European countries to function under the threat of war. In view of the military situation, maintaining only the profit criterion in the European energy industry would be a big mistake, and our country is particularly vulnerable to the consequences of a military conflict with Russia. The wealth of European countries allows the creation and maintenance of an energy reserve base based on fossil fuels.

Poland, as well as Europe, has large coal and lignite deposits that allow to maintain energy independence in special cases, and this should not be abandoned prematurely. Likewise for nuclear sources, for which the plans to extinguish in some EU countries, were a bit too hasty. It is worthwhile to make parallel efforts to develop emission-free technologies for the use of fossil resources. Such an energy policy is in no way at odds with the energy Green Deal and the need to decarbonize the power and heating industry based on carbon-free sources. On the contrary, it can inspire the development of such sources as long as it is coordinated with a program to make the operation of coal blocks more flexible.

The program of revitalization of multi-dwelling units 200+ fits perfectly into such a coordinated policy. We should present the results of this program to the decision-makers in the European Commission and try to get it approved both formally and financially.

The concept outlined above could be integrated into Poland’s overall energy transition and form the basis for optimal development of both renewables and nuclear power.

The most important tasks in 2023 for policy-makers in the Polish energy sector:

  • Passing a law eliminating investment barriers in onshore wind power.
  • Passing a law on direct lines and cable pooling.
  • Refining and passing the law on effective support for energy communities.
  • Promptly developing and passing a law on investment facilitation for renewables on brownfield and post-mining sites.
  • Maximum removal of barriers to development of solar power.
  • Launching a program of revitalization of multi-dwelling units 200+.
  • Strong presence at the European Union level – consistent opposition to ideologically motivated programs to accelerate the energy transition and tighten climate policy;
  • Building a strategy for the use and development of transmission and distribution networks
  • Consistent, planned construction of nuclear power plant(s)
  • Changing the state’s raw materials policy and the creation of permanent stocks to make Poland independent of price fluctuations

Those of the above tasks that are regulatory in nature should be implemented in the first half of 2023, so that their effects on the economy will begin to be felt as early as 2025. This means, as mentioned earlier, an increase in the supply of green energy by at least 10 terawatt hours per year.

Despite the impediments associated with the election year in our country, we are counting on constructive legislative momentum in the energy-related area and the passing of basic and necessary laws to enable the development of modern energy based on distributed sources.

According to ZPP, we could have expected a bit more legislative activity in the energy area in 2022, but the year should definitely not be counted as a lost year in terms of progress in Poland’s energy transition. At the same time, it is worth remembering the consultation-based formula of cooperation between lawmakers and the society, which guarantees far better final results.

From the perspective of the EU energy market, Poland could be one of the few countries secure in terms of energy. However, the lack of crisis solutions and late legislative initiatives have only allowed ad hoc relief, without redefining the energy system. 2023 is the year of another opportunity for those in power to ensure our country’s competitiveness and energy stability.

 

See: 20.01.2023 Summary of 2022 in the energy industry as a year of changes and challenges

Inauguration of the new project of ZPP and Totalizator Sportowy Foundation – “Business for Ukraine Center”

Warsaw, 12 January 2023

 

Inauguration of the new project of ZPP and Totalizator Sportowy Foundation –
“Business for Ukraine Center”


 “Business for Ukraine Center” is a project of the Union of Entrepreneurs and Employers (ZPP) and the Totalizator Sportowy Foundation, which aims to support the development of Polish-Ukrainian economic relations in the difficult conditions of war and continued attacks by the Russian army on infrastructure and industrial facilities in Ukraine. The center is expected to help several hundred entrepreneurs and companies from Ukraine.

The capital’s Freedom Lounge presented an offer of a new program of the Union of Entrepreneurs and Employers (ZPP) and the Totalizator Sportowy Foundation on support for Ukrainian companies in launching investment activities in Poland and the European Union. As part of the assistance that will be provided to companies that relocate to Poland during the war and plan to expand into the European market looking for new partners, the “Business for Ukraine Center” will provide, among others, business and localization advice, assistance in finding Polish contractors or investors. The center will also provide its clients with free coworking space. In addition, there will be educational webinars on the conditions for doing business in Poland, current regulations or funding opportunities. Companies will be able to benefit from assistance in finding a location for their business. At the same time, the Center has the opportunity to provide free production space in Warsaw.

The Thursday inauguration of the Center was attended by Minister of Development and Technology of the Republic of Poland Waldemar Buda, President of the Board of Totalizator Sportowy Olgierd Cieślik, President of the Board of the Totalizator Sportowy Foundation Izabela Wyżga, President of the Board of the Union of Entrepreneurs and Employers Cezary Kaźmierczak and Bogusława Rudecka, Director of the Business for Ukraine Center at ZPP.

The “Business for Ukraine Center” program will also provide assistance and advice to Polish companies that are looking for business partners from Ukraine or are interested in participating in the reconstruction of post-war Ukraine.

“Given the large influx of companies from Ukraine – our data says that some 17,900 Ukrainian companies have been established in Poland – the program opening today fits in very well with this trend, and our first task should be to identify the problems of Ukrainian companies. As a government entity, we always pledge our support for such initiatives” , Minister Waldemar Buda said at the event.

Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers (ZPP): “I am convinced that this next project of ours will benefit both the Ukrainian and Polish entities. For obvious reasons, we are seeing a rapid increase in the interest and activity of Ukrainian companies in the Polish market. In 2022 alone, Ukrainian citizens opened some 20,000 businesses in Poland. We are currently seeing high demand for this project. These days, Ukrainian businesses are looking to Poland for what is most important – security. It is also necessary to take advantage of geographic location, similarity of mentality, proximity of cultures and the natural desire to help one’s neighbor.

Olgierd Cieślik, President of the Board of Totalizator Sportowy: “Totalizator Sportowy has always focused on being active – not only in terms of sports or culture, but also social and business activity. I am pleased that the Totalizator Sportowy Foundation, which we have established, supports such a valuable initiative as the Business for Ukraine Center. I am convinced that thanks to the center, entrepreneurs from Ukraine will gain valuable advice and support, and companies established in Poland will allow to build lasting business relationships to the benefit of both sides.”.

In turn, Ms. Izabela Wyżga, President of the Totalizator Sportowy Foundation, the founder of the program, referred to the aspect of uniqueness of the offer: “Through the Business for Ukraine Center program, we aim to provide Ukrainian citizens with comprehensive assistance for their business in the Republic of Poland and Europe. The program is gaining uniqueness and timeliness, as it offers systemic and comprehensive organizational, administrative, legal, as well as consulting and advisory support to Ukrainian entrepreneurs. First and foremost, this initiative makes it possible to provide custom support to companies that are interested in doing business in our country. Moreover, we firmly believe that our original program will contribute to the development of business relations between Ukrainian and Polish companies, and of international dialogue between Poland and Ukraine to build a Polish-Ukrainian community based on mutual trust, cooperation and openness.

Program Director, Bogusława Rudecka said, “Our offer is aimed at companies with an appetite for growth. In our opinion, the time has come for further development of cooperation with Ukraine and more direct and precise assistance measures tailored to the needs of specific companies. It’s quite a challenge, but we are full of energy to work and to serve Ukrainian companies who, in the face of war, do not give up and try at all costs to find a way out of the difficult situation in which they find themselves”.

The Business for Ukraine Center was established at the initiative of the Union of Entrepreneurs and Employers and the Totalizator Sportowy Foundation.

The program is financed by the Totalizator Sportowy Foundation, and operated by the Union of Entrepreneurs and Employers. The project will be implemented in January-December 2023.

The inauguration of the Business for Ukraine Center was held under the honorary patronage of the Ministry of Development and Technology.

Memorandum of the Union of Entrepreneurs and Employers: Ukrainian energy infrastructure in the face of Polish-Ukrainian cooperation

Warsaw, 18 January 2023

 

Memorandum of the Union of Entrepreneurs and Employers:
Ukrainian energy infrastructure in the face of Polish-Ukrainian cooperation

Since October 2022, Russia has systematically and methodically been destroying Ukraine’s critical infrastructure. The percentage of heavily damaged energy infrastructure is continuously growing and, according to partners of the Union of Entrepreneurs and Employers, already exceeded 60% before Christmas 2022. Thus, Russia is trying to take the entire Ukrainian nation hostage, including entrepreneurs who are still trying to run their businesses, notwithstanding the ongoing war. In mid-December 2022, as part of the “Europe-Poland-Ukraine. Rebuild Together” project headed by our Union, the Union’s Energy Forum organised a round table meeting “Energy in the context of reconstruction of Ukraine”.

Representatives of energy companies, organisations actively supporting Ukraine, as well as industry experts representing both Ukraine and Poland attended the round table, and among special guests were the following dignitaries:

  • Mateusz Domian, acting Director of the Representative Office of PKN ORLEN in Ukraine and Director of ORLEN Lietuva
  • Sławomir Gładykowski, Vice-President of the Electric Networks Department at MEGAPOL S.A.
  • Oleksandr Kharchenko, Managing Director at Energy Industry Research Center
  • Wojciech Tabiś, Director at the Polish Power Transmission and Distribution Association (PTPiREE)
  • Tomasz Tomasiak, Head of Energy Transition Department at the Polish Development Fund
  • Vadim Utkin, Innovation Manager and Energy Storage Lead at DTEK Group

Dominika Taranko, the Union’s Energy Forum Director and the round table’s host, at the beginning of the event asked about the current state of affairs in Ukraine. The participants of the meeting were told, among other things, that Russians were methodically damaging the country’s energy resources by consciously targeting the power grid with missile strikes so as to prevent its uninterrupted functioning. While the authorities and emergency services were trying to mitigate the effects of the bombings and were conducting repairs round the clock, in many cases, it would become impossible to repair energy facilities and restore power. This situation is a result, among others, of a growing deficiency of spare parts. Due to the lack of standardisation of network solutions in Ukraine, some components are difficult to obtain, even on a global scale. In cases like these, it is not price that is key, but time. For example, a declaration of delivery of a given transformer several weeks to several months from now is not really an option considering the upcoming cold winter months. And while the weather has thus far been rather mild (average air temperatures higher than in previous years), the situation is nonetheless dramatic.

As a consequence of no steady electricity supply, Ukrainian businesses and production have suffered severely, which constitutes a major blow to national economy. Oleksandr Kharchenko, Managing Director at Energy Industry Research Center, assured: “We keep a register of all damages caused by missile strikes and we will demand full compensation from Russia”. However, before this may happen, people and their companies must somehow survive. Our guests acknowledged that businesses have been very flexible. The country’s capital Kyiv is a perfectly exemplifies the fact that, even in a district where there is no electricity whatsoever, one can find restaurants, shops, and service facilities powered by small generators. This equipment ensures operations of cash registers making it possible to sell goods or of coffee machines making it possible to brew coffee in cafés, while customers get the chance to charge their mobile devices and phones.

“Businesses of all sizes reach out to people, supporting and supplying them with small power generators. We adapted to the situation as much as possible in order to keep jobs and help people earn a living. I am impressed with how well Kyiv is dealing with power outages, how Odesa is doing, how quickly entrepreneurs in Dnipro joined forces and ordered a huge number of generators to supply SMEs with electricity. In the city, there is now no shortage of these devices, which are able to provide a small private house with light,” commented Oleksandr Kharchenko.

The situation is very dynamic. When Ukrainians are in need of anything that is not readily available at a given moment, sales offers appear within a week or two. When there is considerable demand for certain products and they are relatively easily available abroad, they quickly reach Ukraine. Companies, especially smaller ones, swiftly organise themselves and deliver goods to Ukraine en masse.

Nevertheless, when it comes to medium and large enterprises, their situation is undoubtedly extremely difficult, as ensuring production continuity or their normal functioning under current conditions is impossible.

“What has been said about small businesses is absolutely true. Kyiv and other cities are ‘alive’. We shall not surrender. You can still drink fantastic coffee in a café. Yet speaking of big business, here’s an example. We produce transformers in Ukraine, for instance, at the Zaporozhtransformer plant. It’s a rather large enterprise and we ordered several transformers from them. They can even repair broken devices, but the problem is that they don’t have energy either. Look how it is all interconnected. We cannot get our equipment back up and running quickly despite a local supply chain in Ukraine, because there’s no power. A large business cannot function on a small power generator. Big business required megawatts of power. And for now, that is out of the question,” added Vadim Utkin, Innovation Manager and Energy Storage Lead at DTEK Group.

Our guests, when asked about their vision of the future, that is the reconstruction of Ukraine’s energy infrastructure, emphasised it would certainly not be restored one-to-one for a number of reasons. First and foremost, the post-war map of consumption will certainly be different. For example, the city of Mariupol was completely levelled along with all the production facilities that had operated there. All major energy consumers that used to operate there were destroyed. Is it then possible to restore the supply chain as it was before the war? Surely not.

Furthermore, industry experts are convinced that Ukraine’s energy infrastructure will be rebuilt coal-free. Reconstruction of power generation units as well as the distribution and transmission networks will be carried out in accordance with the principles of the European Green Deal and in line with European standards of energy network development. Virtually everyone who works in the energy sector in Ukraine shares this conviction.

Another aspect one must take into account while rebuilding Ukraine’s critical infrastructure is the constant looming threat from the country’s northern neighbour. The risk of a terrorist attack by Moscow will forever remain with Ukrainians. Therefore, the energy network must be rebuilt in a way that guarantees the security of future supply.

Ukrainians are not, however, considering an island mode of operations comprised of local transmission and distribution systems. They are convinced that the system must be cohesive and connected. Still, what is most important is that all links of this system should be as dependable and as resistant to possible future attacks as possible. Discussions on the subject are already being conducted at the country’s highest levels. The goal is to rebuild the system so that it is not susceptible to outside interference.

The general vision of infrastructure reconstruction in Ukraine is of dual nature. On the one hand, traditional nuclear energy will be developed. The country has expertise in this field, human capital, and an existing structure ready for further post-war development. Energoatom employs a large number of qualified, certified specialists and engineers who have everything it takes to take nuclear power generation to another level.

On the other hand, it is clear that renewable energy sources will also be in the centre of attention of the Ukrainian energy system. This applies primarily to energy from wind farms and biomass combustion.

Ukraine has also for some time been working on concepts of systemic electricity storage, including those based on battery systems.

Moreover, experts expect that energy generation from water will gain significance in the form of pumped storage power plants that might be built after the war in Ukraine has ended.

“Ukraine has a vision how to rebuild its energy infrastructure. Of course, we’ll know more when the war is over, because right now we have no idea what will outlast the war. To precisely determine what we should rebuild, we first need to see our post-war shape and which infrastructure survived,” remarked Oleksandr Kharchenko.

According to our guests, both state-owned energy companies and private Ukrainian companies should now strive for the best possible conditions to restore the energy sector on the following principles: independence from carbon, innovation, energy security, full integration with the European energy network, and maximum cooperation with partners in the EU. Efforts are already being made in this direction.

Polish and Ukrainian energy sectors have much in common. Both in Poland and Ukraine, coal-fired power plants have had until this day a rather large share in the energy sector. An extensive energy transformation has already begun in Poland, and over time, coal-fired heat and power plants will be phased out. In this context, Ukrainian specialists focus not only on the domestic, but also on the Polish market for energy storage systems, including battery energy storage systems, which Ukraine is working on.

Vadim Utkin, Innovation Manager and Energy Storage Lead at DTEK Group, stressed: “Every energy system is characterised by two indices: sufficiency, or how many energy generators we have, and flexibility, whether our generators can address the demand for electricity with no hiccups. In terms of sufficiency, before the war, everything in Ukraine was fine. Our country had numerous nuclear power plants, but flexibility had always been a problem.”

Before the war, Ukraine was of course developing renewable energy, but its share was quite low – approx. 10% of all power. In other countries, problems with flexibility are observed only after reaching a share of at least 30% of RES in the energy mix. Ukraine struggled with grid flexibility with a 10% share of renewable energy in the power grid. As a result, renewable sources were often disconnected from the power grid, what translated directly into inflated costs. This was very disappointing for the green energy supporters, because the efforts and financial resources devoted to increasing the share of RES in the system did not translate into Ukraine actually consuming more clean energy.

For this reason, projects involving the creation of energy storage systems were so necessary in Ukraine. The war became, in a sense, a catalyst for these activities. Currently, Ukrainians are developing several scenarios how to expand the Energy Storage System project. A large part of the infrastructure is planned in the west, close to the Polish border. A major challenge in this project is to guarantee its physical security. Looking at the energy storage system, a seaport comes to mind, as there are numerous containers visible on the surface, which are potential targets for missile strikes.

In this context, ideas of cooperation between Poland and Ukraine are quite obvious. As our Ukrainian experts remarked, there are many municipalities on both sides of the border. Poland also experiences periods of energy deficiency, during which it starts looking closely at foreign exports. But it has also identified challenges on its territory related to the flexibility of the system. Therefore, deploying battery systems in Poland seems like a worthwhile idea, while operators on both sides of the border, working under an agreement, could provide system balancing services. This could prove to be a smart and quite unexpected solution to the problem, effective even in wartime. The issue of the physical protection of such facilities becomes irrelevant in this scenario, since Poland is a member of NATO and its situation is far different from the position of Ukraine.

Ukrainian experts believe that ideas of building underground infrastructure are misplaced. On the one hand, the cost of such projects is exorbitant, because issues related to drainage or temperature control are major problems in such systems. This also applies to energy storage systems and substations. On the other hand, all protection systems have their weaknesses, and the first question should be what we are protecting ourselves from. Are we protecting ourselves from X55-class drones and missiles, which are widely used by the Russians? Or are we protecting ourselves from ballistic missiles? These are vastly distinct levels of protection. And this should also be considered.

Energy storage systems are now extremely sought after in Ukraine, because energy reserves are very scarce. Power reserves and energy storage systems help a lot in such demanding situations when the frequency in the grid drops by 50%, as it did happen on 23rd October 2022.

During the meeting in December, Mateusz Domian representing the ORLEN Group described the company’s pre-war involvement in the Ukrainian market, and concerned, among others, the fuel market. Presently, one of the problems in Ukraine is the lack of continuity of electricity supply, which is why energy from generators that run on fuel has become a natural substitute. Small business, by using low-power devices such as cash registers or company lights, have the ability to cope with power outages. However, in order to maintain the operation of activities with higher power consumption, such as petrol stations, the waiting time for the appropriate generators equals as much as even 2 months.

Currently, there is no fuel production in Ukraine, and all fuels are imported. The availability of engine fuels in Ukraine has become problematic, there is no indication, however, that they would run out. Not everyone can afford it, but it is available. Generally, in previous years, the period between autumn and winter was characterised by lower fuel supply both in Europe and in Ukraine. However, during the war period, in particular in autumn 2022, the demand for fuels in Ukraine increased by 30%. Due to the greater interest in fuels on the part of our south-eastern neighbour, the price of fuels in Poland and Lithuania also increased, which, however, is not a factor limiting supplies, as the most important thing is to ensure the availability of fuels on all these markets.

Mateusz Domian claimed: “The Ukrainian fuel industry is extremely efficient and there are no serious problems with the availability of fuels”. In fact, the first quarter of last year in Ukraine was difficult and it was hard to come by fuel, for example in Kyiv. At the outbreak of the war, more than 60% of Ukrainian diesel fuel was imported from Russia or Belarus. However, these import channels were rapidly replaced. Currently, fuel reaches Ukraine from many directions, such as Poland, Romania and Hungary. Nevertheless, it is Ukraine itself that must ensure that the channels remain available. The main logistic connections in fuel transport are operated by rail, which requires improvement, for instance on the Polish-Ukrainian border. As of now, half of fuel transports are carried out by fuel trucks, which are currently lacking on the market. Thinking about substitutes for grid power, which is non-operational during the war due to damages, the most important thing is to develop logistics of liquid fuel supply.

This situation will only improve following the restoration of infrastructure (if the Russian shelling stops) or with the beginning of warmer months in March 2023 and a reduced demand for power.

The representative of the ORLEN Group also did not want to elaborate due to the ongoing conflict on the company’s current plans for Ukraine. However, Ukraine has always been of interest to Poland’s domestic multi-energy concern, also in terms of acquisitions. As our guests emphasised, all plans would be implementation-ready when the country become stable again – a problem since 2014. It is expected that the challenges related to economic stability in Ukraine will change from month to month, along with the cessation of hostilities. Only then companies will be able to return investment negotiations and to resume their broad involvement activities on the Ukrainian market. The ORLEN Group sees immense potential in Ukraine, if only because of its population size that is comparable to Poland. The Ukrainian side has also asked the Polish market leader to work hand in hand in fuel market development. However, it is currently difficult to discuss restoring fuel production in Ukraine. Any business can see that in the face of active military aggression by Russia, it is difficult to develop an infrastructure that can be destroyed in the blink of an eye.

Polish Power Transmission and Distribution Association Director Wojciech Tabiś highlighted the fact that cooperation in the field of power engineering with the Ukrainian side had taken place for many years. He pointed out that Poland changed its power system in 1995 to a UCTE standardised one, while Ukraine looked into this process for its own needs before the war broke out. The hitherto long-term cooperation between the two parties resulted in the creation of the so-called Khmelnytskyi Island, which operated in Ukraine within the UCTE system. The current cooperation with Ukraine consists of, among other things, analyses of operations on a voltage of 230V. Before the war, activities were carried out over a long period of time aimed at Ukraine joining the standards of the European Union. The war certainly accelerated these changes.

Currently, the Polish side is receiving lists materials required to reconstruct the power grid in Ukraine on an ongoing basis. The power grid is highly fragmented. The cooperation of Polskie Sieci Elektroenergetyczne (Polish Power Grids) with UKRENERGO and DETEK requires coordinated efforts based on an agreement between the ministries of both countries – the Polish Ministry of Climate and Environment and the Ukrainian Ministry of Energy. What constitutes a challenge is the structure of the Ukrainian energy sector, which is technologically different from the Polish energy sector. In Poland, we have other voltage levels than the Ukrainian power industry and we are therefore unable to provide either equipment or spare parts. The Polish side has already transferred almost all the equipment of the Widełka 750 kW substation (autotransformers, circuit breakers, disconnectors), because it could be applied in Ukraine due to the right voltage levels. We do not have, however, the right equipment of grids of 800 kW, 500 kW, 300 kW that are used in Ukraine. They are non-standard power levels. We are unable to assist our neighbours in this case. Wojciech Tabiś stated: “We hit a brick wall, so to speak, which means that in this case we have already used all the reserves that Polish energy companies had at their disposal. By sending those reserves to Ukraine, we are only left with the bare minimum, a necessary level to, among others, undertake current repairs domestically.”

Therefore, there are no more reserves in Poland that the Ukrainian transmission system could make use of. Consequently, it would be appropriate to approach the problem now from a different angle, namely, to begin cooperation in Poland in terms of production of materials and equipment that would meet Ukrainian standards. The Ukrainian side even asked their Polish counterparts to send them broken switches or disconnectors, but the applicable regulations prohibit the imports of such devices to Ukraine, because according to the law they are waste. This requires an urgent liberalisation of Ukrainian import regulations.

In principle, all energy companies in Poland are open to cooperation with Ukraine. This also concerns, perhaps above all, distributed energy. This branch of energy production, based on renewable sources, has already grown in Poland. It is very difficult to import and produce high-power generation sources, and these are long-term processes, requiring time that Ukraine does not have. However, it is easy to install photovoltaic sources, locate low-power transformers, and build such energy facilities from scratch. It also seems natural that the destruction of the Ukrainian energy system should constitute an impulse to rebuild the network in accordance with the UCTE standard enforced in Europe. Primarily where this infrastructure was completely destroyed.

What also characterises the crisis is the fact that certain processes have accelerated and Ukraine may use this opportunity to rebuild its infrastructure basing on European standards.

As far as the transfers of electricity between Poland and Ukraine are concerned, it was possible to separate the already mentioned Khmelnytskyi Island from the Ukrainian energy system, powered by a local nuclear power plant, which produced energy that was later sent to Poland. Operational tests of this system had already been carried out. However, due to the ongoing Russian aggression, there is currently no exchange of energy between the two countries. The idea of supplying energy from Poland to Ukraine is also unfeasible at the moment, as both high-voltage connections are currently non-operational. At the same time, debates and works are underway to create connections at a lower voltage, for which devices transforming the different Polish and Ukrainian voltages would be necessary. In order to implement this, initiative is required on both sides of the border.

Sławomir Gładykowski, Vice-President of the Electric Networks Department at MEGAPOL S.A., predicts that the reconstruction of Ukraine will take place in two stages. First, power must be restored to industrial production. Second, a national post-war concept must be drafted. However, as it is impossible to foresee the end of the conflict, the network should now be rebuilt with cable lines instead of overhead lines. Building power stations underground is also worth considering. This process is more costly, but it provides greater security.

As far as the post-war reconstruction is concerned, it is a matter of legislation, so the legal foundations must first be laid. It is necessary to define priorities that will allow for faster reconstruction in the Ukrainian reality than it would take place in Poland, in our local legal system.

Tomasz Tomasiak, Head of Energy Transition Department at the Polish Development Fund, is also of the opinion that Ukraine will be rebuilt in two stages. The first stage is winning the war, because there can unfortunately be no question of new investments due to the ongoing military operations and the risk of their immediate destruction. At this stage, Ukraine can count on support and financial aid from EU countries. As for the post-war situation, talks are already in place on the reconstruction of Ukraine, both by the EU countries along with the United States and business communities. Ukraine’s potential as a neighbouring country of the EU is noticeable. And the prospect of it becoming a member of the Community in the near future is real. Other countries and the world of business have already realised this truth. After Ukraine wins the war, funding will surely not be an issue. The Polish Development Fund has two types of instruments at its disposal: aimed at supporting and investments (commercial ones). If the PDF received funds to support Ukraine, it would distribute them. The Fund already now possesses funds that can be invested, but it is difficult to make use of them in rebuilding Ukrainian infrastructure while an active armed conflict is still ongoing. This does not mean, however, that these funds cannot be invested in Poland for such purposes as for instance the production of parts or components for Ukraine’s present needs.

Tomasz Tomasiak also addressed the issue of rebuilding the power system. In his opinion, the example of Ukraine shows that distributed, local, cluster systems, or the so-called energy islands, will be a principal element in Ukraine’s power industry of the future. It seems that these systems are the future, they guarantee energy security for local communities, and at the same time unburden the transmission system. The energy from large power plants can be then transferred to production plants.

Certainly, the goal itself is to standardise the Ukrainian power industry in accordance with European standards. In the power industry, the production of certain devices or equipment that are uncommon required sometimes up to 2-3 years. Meanwhile, standard devices can be purchased directly on the market. Moreover, cheaper, used ones are also readily available.

An essential issue from the point of view of power supply is the availability of power sources, that is fuels or renewable energy. At the same time, greater independence, which works well during a conflict, can apparently be achieved from such sources as water, wind or sun, which do not need to be imported. The use of renewable energy is also related to thinking about energy efficiency, and it often turns out that in winter months considerably less energy is needed to heat a house after thermal modernisation.

Europe’s pursuit of electric solutions, for example switching to electric transport or the everyday use of heat pumps, may also be vital in the reconstruction of Ukraine. The Green Hub project implemented by the Polish Development Fund, which aims to implement Poland’s energy transformation, has already been recognised in the European Union, according to the Fund’s representative. Green Hub could function as a role model for Ukrainian energy transformation. The more so that renewable sources will play a rather key role in its future development.

Gennadiy Radchenko, Director of the Ukraine Business Center at the Union of Entrepreneurs and Employers, was asked to summarise the round table discussion. He pointed out that not only Ukrainians suffer from power outages, but so does the industry. However, the industry was able to adapt to the new reality astoundingly quickly. Entrepreneurs do their best to meet their needs by importing large power generators, for which there is currently a huge global demand, disproportionate to the available supply. It is worth mentioning that the production of energy from power generators costs 10 times more than grid energy, which translates into significantly higher production costs. According to Radchenko, considering the current state of affairs in Ukraine, far-reaching international cooperation should be established between industries in Poland and Ukraine. Business ought to be included in creation of solutions needed on the Ukrainian market. A good answer to present challenges would be to establish production facilities for Ukraine in Poland, which would carry out the most necessary orders for reconstruction. It would be beneficial for both countries. It should be noted that after the war, the entire Ukrainian energy system will turn away from Russian solutions and switch to European standards. At the same time, it is necessary to deal with legal solutions and start executing projects that, while they take time, may materialise soon. Therefore, red tape and bureaucratic barriers to post-war reconstruction should be eliminated as early as now. Because it certainly is much easier nowadays to solve engineering problems than bureaucratic ones.

Radchenko also expressed his gratitude for the support that Poland has given to the Ukrainian nation, stating that we are now in the best time for cooperation between the two nations ever in history.

See more: 18.01.2023 Memorandum of the Union of Entrepreneurs and Employers Ukrainian energy infrastructure in the face of Polish-Ukrainian cooperation

Updated Economic Forecast of the Union of Entrepreneurs and Employers (the ZPP) for 2022

Warsaw, 30 December 2022 

 

Updated Economic Forecast of the Union of Entrepreneurs and Employers (the ZPP) for 2022

 

GDP growth

Formerly: 3.7%
Now: 4.5%

Inflation

Formerly: 12.5%
Now: 14.2%

Unemployment

Formerly: 5.1%
Now: 5.3%

Investments

Formerly: 16.2%
Now: 16.5%

Forecasts of international institutions

Recent years have not been conducive to macroeconomic forecasts. Traditional time-series econometrics works well especially in conditions of relative calmness.  Although a properly constructed model is resistant to shocks (those fade over time), geopolitical chaos makes forecasting based on the past complicated. Under such conditions, machine learning models or neural networks can be used.

Regardless of the situation, some institutions are obliged to publish forecasts and models.  This must be done, for example, by the Ministry of Finance in the draft budget law.  For 2022, the Ministry of Finance forecasts real economic growth of 4.6%, a registered unemployment rate of 5.0% (LFS 2.7%), inflation of either 13.5% (CPI) or 13.3% (HICP) and investments of 4.9%. The forecast of the European Commission, available on the website of the Ministry of Finance, assumes real GDP growth of 4%, HICP inflation of 13.3%, unemployment of 2.7%, and an investment rate of 3.7%.

With regard to the GDP growth, the OECD is slightly more optimistic than Eurostat and  forecasts 4.5% for 2022. Inflation is to amount to 14.2%, of which the core inflation (without food and energy components) is to be 8.7%. Unemployment is forecast at 2.9%.  With regard to the forecasts of the World Bank for Poland in 2022, GDP growth of 4% is expected,  gross fixed capital formation (investments) of 4.9%, inflation of 13.2%.

To sum up, the consensus of international institutions for Poland’s GDP growth can be set at 4%, inflation at 13% and unemployment at 3%.  The Ministry of Finance is slightly more optimistic and assumes higher economic growth and single-digit inflation.

Forecast of the ZPP


GDP growth

In 2022, GDP will increase but at a slower pace than expected.  The government faces difficult decisions – inflation is one of the most urgent areas in this regard.  Private investments are determined by the current condition of the global economy, which is recovering after the COVID-19 pandemic.  The choice of location is also influenced by its security, and the outbreak of war in Ukraine has placed Poland dangerously close to the front.

The GDP dynamics observed in the first half of 2022 is encouraging  as, compared to the same period in 2021, GDP increased by  more than 16% in nominal terms. Based on the ZPP forecasts for the second half of 2022, it  will amount to 14.8% year-on-year. This is very close to the forecasts of the Ministry of Finance, which assumes nominal GDP growth of 15.1%.  However, a large part of this increase is due to inflation, which causes a disproportionate increase in nominal GDP.

According to our estimates, real GDP growth will amount to 4.5%.

Year-on-year inflation

In all likelihood, in 2023, inflation will still be high, although it will slow down somewhat due to base effects. The fact that 2023 is an election year  is an issue. This limits the government’s room for manoeuvre.  Normally, an element of the fight against price increases is reduction of social packages.  The government is under strong pressure to maintain spending or even slightly increase it. For the time being, the continuation of payment of additional pension and child benefit has been confirmed.  The VAT reduction on food is also to be maintained but not on fuel.

The year-on-year inflation in 2022, observed so far, was 9.7% in Q1, 13.9% in Q2 and 16.3% in Q3, respectively. For Q4 of this year, the ZPP forecasts a year-on-year inflation of 17%. Therefore, for the whole of 2022, the inflation rate will amount to approximately14.2%,  in our opinion. Further slight increases are expected at the beginning of next year, although the pace of inflation has slowed down significantly.  We will experience a noticeable decrease only in 2024.

Unemployment rate

Traditionally, in a crisis situation, decision-makers choose whether to care more about fighting inflation or about employment. The government clearly appreciates the importance of employment.  Various measures are being designed to maintain or even reduce unemployment.  Ukrainian refugees are also being activated professionally.  Based on the data, a significant proportion of Ukrainian refugees, despite their specific demographic structure, have found work in Poland.  Previously, despite the pandemic, the government managed to maintain employment.

The Statistics Poland data for 2022 is as follows: 5.8% for Q1, 5.2% for Q2 and 5.1% for Q3.  For Q4, the ZPP forecasts an unemployment rate of 5.2%. This means the total unemployment rate of 5.3% in 2022. Moreover, the ZPP predicts that as a result of the slowly improving macroeconomic situation, as well as potential development opportunities resulting from the participation of Polish companies in the reconstruction of Ukraine, unemployment  will slowly decrease in 2023.

Investment rate

It can be said that for years, despite regular critical opinions, stimulating investments has not burdened Polish economic policy as much as, for example, social programmes. Obviously, the introduction of further benefits translated into an increase in consumption, and this, in turn, into an increase in GDP.  However, many experts pointed out that this consumption causes an increase in demand for goods that are easy to produce, which does not translate into an improvement in the competitiveness of the Polish economy. At the same time, the consumption booster works well in conditions of prosperity; however, it is investment spending that allows economic growth to be maintained during a period of slowdown.  Unfortunately, those predictions proved accurate. In 2021, the investment rate in the economy amounted to only approximately 17%.

With regard to 2022 and 2023, much will depend  on whether the government has sufficient resources to attract private investors through public investments.  A strong investment boost will come from increased spending on defence.  The energy sector also needs investments.  Unblocking funds from the National Reconstruction Plan will be important for digitisation and climate projects. In turn, ensuring relative regulatory stability will be of key importance to promoting private investments. Taking the above into account, for 2022, the ZPP forecasts the investment rate of 16.5%.

 

See: 30.12.2022 Updated Economic Forecast of the Union of Entrepreneurs and Employers (the ZPP) for 2022

Commentary of the ZPP: Activation of seniors as an opportunity to fill supply gaps in the labour market

Warsaw, 21 December 2022 

 

Commentary of the ZPP:
Activation of seniors as an opportunity to fill supply gaps in the labour market

 

  • The analysis of demographic trends, conducted based on the Statistics Poland data, indicates that persons at the age of 50 and over will constitute approximately 50% of Polish society in 2050.  This means the necessity of professional activation of that group, with special emphasis on persons of retirement age.
  • In Poland, approximately 90 % of people reaching retirement age decide to leave their jobs.  Experts point out that retirement is too often treated as a compulsion rather than an option.
  • In the coming years, the average age of an employee will increase and so will the average age of a customer.  Activation of seniors in the labour market may be a response to the inevitable change in consumer trends.
  • Shaping the senior policy in relation to the labour market should be preceded by a thorough diagnosis of the needs of the diverse group of people aged 50+.

In Poland, the number of persons receiving a pension is growing. Based on the Statistics Poland data, approximately 5.98 million persons were receiving pension in the period from January to April 2021. After a slight decline in the period from May to August, the number of beneficiaries increased to 5.999 million in September and was growing.  In October 2021, 6.02 million persons were receiving pension, 6.03 million in November and 6.04 million in December of the same year.

Conclusions drawn based on the Statistics Poland data make it necessary to analyse the forecasts related to the number of senior citizens in Poland. Statistical data analysts have calculated that the number of persons aged 60+ is expected to increase to approximately 10.8 million in 2030, reaching 13.7 million in 2050. This means, taking into account other demographic data, that persons aged 50 and over will constitute approximately 50% of the Polish population.  Polish residents at the age of 60 and over will constitute just over 40% of the population in 28 years’ time. This data involves an unprecedented increase in the burden on the pension system and a sharp reduction in the working-age population but not only.  On average, the group of professionally active persons will be much older than today.

The issue needs to be addressed now. In Poland, approximately 90% of persons who reach retirement age resign from work.  This is related to the perception that reaching the retirement age is a sort of compulsion to retire and not one of the possibilities.  Based on the Statistics Poland data, only 39% of persons aged 60-64 and only 6% of persons over 65 will be professionally active in 2020.  Although companies recognise the problem, the percentage of employed senior citizens is still significantly low in Poland, compared to most Western European countries.

The situation is partly made better thanks to the inflow of economic immigrants and refugees – especially from the territory of Ukraine. However, in any case, the scale of that phenomenon must not obscure the consequences of the ageing of the society, which will be of key importance for shaping the labour market in Poland. At the same time, one should not forget that, in addition to a larger number of older employees, there will also be a greater number of older customers in Poland. This correlation may have a positive impact on the already existing trend of employing senior citizens. In Poland, in the first quarter of 2021, the number of working women at the age of 60 and over and men over 65 years old was  687,000. In the second quarter, it was already 721 thousand persons, and  754 thousand persons in the third quarter.  This is a positive trend; however, it does not compensate for the persistently low fertility rate, which will amount to 1.4 children per woman in 2022. The economic indicators, which are worrying the society, will not bring a demographic miracle.

Adapting the labour market to the needs of older workers is becoming a great challenge. Shrinking down of the group of people in the traditionally-understood working age will translate into changes in the employment model in companies in the near future, and increase the number of senior citizens in professions where their representation is currently low. In addition to the increase in the average age of employees, the aforementioned increase in the average age of customers will also be a challenge for the market, which will translate into an evolutionary change in consumer trends.

There is no doubt that employers will have to implement certain methods to activate senior citizens in their enterprises, organizations or institutions.  Actions making the workplace more accessible to persons at the age of 50 or over should be subject to special supervision. The methods of implementing those measures should include special activation programmes, retraining courses (including language courses) and better use of flexible forms of employment.

The analysis of demographic and macroeconomic trends leaves employers no choice.  Already today, companies are forced to implement measures to build an inclusive organisational culture that takes diversity into account, i.e., a diversity and inclusion strategy. 
State structures – both at the central and local government levels – must also become more involved in the process of activating senior citizens in the labour market than they are today. Although initiatives such as “A skilful worker has no age” and other related initiatives are being implemented in the country, their scale and the response of the labour market still remain too small. In the meantime, although many companies still do not want to accept it, Generation X will be retiring in 15 years’ time.

Senior policy strategies must not take on the form of coercion. As practice shows, activation “with the use of force” does not bring the expected results.  The real needs of senior citizens must be taken into account and correlated with the needs of the labour market. It should not be forgotten, and many initiators of programmes addressed to the oldest citizens have fallen into this generalising trap, that the group of senior citizens is diverse in terms of age and territory – the perspective of the residents of large cities is different from that of medium-sized agglomerations and inhabitants of rural areas. It also seems economically justified – within a rational framework – to institutionally support forms of care for the elderly and children to increase the participation in the labour market of people who also have caregiving responsibilities.

Measures to increase the participation of professionally inactive senior citizens in the labour market can reduce the non-wage burden on salaries and increase the profitability of taking up work. The estimated number of persons at the age of 50 and over who could supply the labour market is 2 million. A bold move, albeit politically difficult, would be to raise the retirement age.  Such a decision would certainly increase the efficiency of the pension system, which will face an increased disproportion between the number of professionally inactive seniors and those of working age soon. Based on the Personnel Service report, professional activation of persons aged 50+ and bringing the level of participation of senior citizens in the labour market closer to the level in Western European countries “could, in the long run, bring an increase in GDP of up to USD 66 billion”.

Activating senior citizens in the labour market is not only an opportunity but also an obligation of employers. More effective integration of employees aged 50+ in the labour market is an opportunity to increase the economic and social well-being of Poles – all the more so that their health condition and life expectancy increase year by year.


See:
21.12.2022 Commentary of the Union of Entrepreneurs and Employers: Activation of seniors as an opportunity to fill supply gaps in the labour market

Commentary of the ZPP on draft Regulation of the Council of  the European Commission on the development of renewable energy as a key form of achieving energy independence of Europe

                                                                                                              Warsaw, 20 December 2022

 

Commentary of the ZPP on draft Regulation of the Council of  the European Commission on the development of renewable energy as a key form of achieving energy independence of Europe

 

The Council of the European Commission is proposing another instrument to speed up investment in RES (Renewable Energy Sources) – the Regulation of the Council of  the European Commission on the development of renewable energy as a key form of achieving energy independence of Europe;

Shortening the investment process in carbon-free energy sources is, in the opinion of Brussels, the basis for achieving independence from fuel from Russia;

The proposals of the Council could trigger a thaw for government-frozen solutions in the field of modern renewable energy;

Brussels does not look at the legal blockages in the area of renewable energy and speeds up the introduction of solutions for wind farms, district heating and even biomass and biomethane, one by one.

When reading the draft Regulation of the Council of the European Commission establishing a framework to accelerate the introduction of renewable energy solutions, it should be noted that most of the regulatory dispositions of the Regulation are in line with the expectations of the green energy sector in our country.

On many occasions, as the ZPP (the Union of Entrepreneurs and Employers), supported by the RES industry in Poland, we have drawn attention to the need to facilitate investment in that sector, which could primarily include post-mining and industrial areas. It seems reasonable to introduce regulations obliging administrative bodies, entities that deal with energy transmission and distribution, to determine appropriate areas for RES installations, where significantly simplified administrative procedures would be introduced to allow investors to quickly implement projects (e.g. road lanes along motorways, former landfill sites, large surface car parks) both for environmental (negligible, minimal impact on the environment), social (lack of conflicts and acceptance of residents) and technical (grid connection conditions) reasons. In this way, the installation of renewable energy generation infrastructure would be facilitated as administrative bodies, local authorities and grid companies would have to verify the compliance of such installations with local environmental and technical requirements. The issue of selecting areas for faster RES investments is proposed in the from of yesterday’s amendment to REpowerEU approved by the European Parliament – discussed at the end of the text.

With regard to photovoltaic investments, the Commission suggests reducing the time limit for issuing a building permit to one month, which seems a bit too short in our national circumstances.

The Regulation demonstrates the determination of the European Union countries to develop renewable energy sources and there is no doubt that the war in Ukraine will speed up decarbonisation processes in Europe.

The future economic image of Europe will be shaped based on green energy. This should be a supra-political guideline for the decision-makers in our country, which does not mean us giving up defending our energy interests, even those based on fossil fuels for a long time to come.

An example of reconciling energy interests is the assumptions of the programme “Bloki 200+”, as part of which the development of renewable energy is based on stabilising our own coal sources. Such a policy is certainly in line with the Regulation of the Council and it just needs to be properly presented and justified.

The fact of diversity of energy and heating situation in Poland must be understood in Europe, especially considering the new geopolitical conditions we find ourselves in after Russia’s aggression against Ukraine.

It should be noted that the draft Regulation does not refer to combined heat and power plants but only to the expansion of renewable energy power plants. Given the challenges of the heating sector, in terms of the need for its transformation, which is linked to, among other things, the proposals of the ”Fit for 55 package”, we believe that it would make sense to introduce a principle based on which the construction of RES installations in existing district heating systems could also benefit from accelerated procedures. This could be expressed as follows: The authorisation process for the expansion of district heating systems to include renewable energy projects and authorisations related to upgrading the assets necessary for their connection to the grid, should not exceed six months, including environmental impact assessment, if required by the relevant legislation. To be consistent, in the draft Art. 2 sec. 2, after the word “power plant” the expression “or combined heat and power plant” should be added, and in Art. 4, after each word “power plant” the expression “or combined heat and power plant” should be added.

We need to be aware that, in the future, it will be renewable energy sources that will be the basis of the European energy market and that Poland, with its huge burden of the energy sector with coal sources, must remodel its energy market to a much greater extent than other EU countries.

Observing the costs of generating energy from renewable sources today, it is already possible to predict the costs of energy and heat on European markets once energy independence is achieved. Poland cannot remain outside that market as high-cost sources and a loss of competitiveness would threaten our entire economy.

The Council formulates the need for immediate action and this requires more details  as some of them will require statutory changes. Although the Council indicates that this is an internal regulation with the possibility of extension, it can be considered that it will be in place for a very long time and is likely to take a permanent form.

The Regulation draws attention to further works on the rules for direct contracting, the so-called CPPAs (Corporate Power Purchase Agreement), which is an extremely important form of the bottom-up shaping of energy market. This is closely linked to the development of distributed energy. Further on, the Regulation draws attention to the need to disperse energy and heat generation sources. So far, the Polish energy sector has been moving towards centralisation, i.e., in the opposite direction.

The document emphasises the need to reduce procedures for those sources that have particularly high generation potential and investment in which will bring rapid results for the system. This concerns onshore wind farms and large-scale photovoltaics. Meanwhile, the 10H rule blocking the development of that form of energy generation is still in force and the investment in photovoltaics is currently not particularly supported in our country. The sdherence of a Polish legislator to the assumptions of the proposed Regulation would increase the potential of onshore wind farms by at least 10 gigawatts of installed capacity, and perhaps as much as 20 gigawatts of installed green energy in solar sources, which could translate into the production of 40 terawatt hours of green energy per year in 2030. The acts allowing that level of green investment are being prepared. Today, their adoption depends solely on the political will of decision-makers.

The Council encourages joint action and cooperation within the framework of the Single Market Enforcement Taskforce (SMET ), which seems particularly relevant for our energy sector as we could assimilate some best practices and also, through such cooperation, we could participate in shaping the future energy market in Europe.

According to the proposal, the Regulation would have direct and immediate application, which is expected to lead to a swift, uniform and EU-wide approach to the various legislative procedures in the green energy investment sector. The Commission plans to consult stakeholders to ensure that the Regulation is implemented as effectively as possible.

The strategic objective of the Regulation is to reduce energy demand and replace natural gas, oil and coal supplies with renewable energy – within a foreseeable time horizon.

The Regulation of the Council also draws attention to connection problems and suggests connection facilitation for renewable sources, which, in turn, fits in with the Direct Lines Act currently being developed.

The expansion and modernisation of existing power plants, in the opinion of the Council, is an extremely important part of increasing the generation potential of renewable energy sources. Maintaining or increasing the capacity of wind farms based on fewer, but more efficient, wind turbines should be an administratively straightforward task that would require no special paperwork.

This fits in with the law on the joint use of connection infrastructure by renewable sources (cable pooling) which the Ministry of Climate and Environment is currently preparing.

The Regulation pays particular attention to heat pumps as an extremely important solution for the future of modern district heating. District heating accounts for half of energy consumption in the EU countries. Heat pumps may also be of particular importance in Poland, especially in rural areas and small towns. Perhaps this is a solution for the country’s district heating systems, where heat pumps could be combines with a gas source – measurably reducing gas consumption.

The reality of ground pumps with a vertical collector and water pumps currently looks as follows: building permit is required to install a heat pump if the works are to be carried out in a building listed in the register of historic buildings. If the building itself is not listed in the register but the area is – an application must be submitted. Both of the above applications must be supplemented with a consent of the conservation officer. A building permit may also be required for the construction of a facility in ‘’Natura 2000’’ area. Additionally, ground and water pumps require geological works. For that purpose, a project of geological works needs to be created, which needs to be presented to the district governor. Water heat pumps also require a water permit if groundwater extraction of more than 5 m³ per day is planned or extraction from a water intake of more than 30 m depth is necessary. All of the above-mentioned permits are issued by the district governor, and the same applies to the applications – they must also be submitted to the district governor. However, it is a different unit in the district governor’s office each time. Furthermore, pursuant to Art. 29, sec. 4, pt. 3 c of the Act of 7 July 1994 Construction Law (consolidated text Dz.U. /Journal of Laws/ of 2021, item 2351), the installation of heat pumps with an installed electrical power of no more than 50 kW does not require a building permit or application.

The introduction of the proposed rule that the authorisation process for the installation of heat pumps should not exceed three months will help to unify the regulations in force in Poland.

The principle of energy solidarity, which is a general principle of the European Union invoked in the Regulation, may be of particular significance for Polish industry as it will make it possible to purchase green energy until the time the domestic sources will meet the needs of domestic factories. Although the Regulation only refers to new authorisation procedures, in our Polish circumstances it should be extended to include already initiated procedures for obtaining building permits and connection conditions.

Despite so many positive stimuli in the Regulation, the reality of the Polish energy market shows that the amendment of Directive (EU) 2018/2001 to increase the EU target for 2030 to 45%, compared to 40% in the previous proposal of 14 July 2021, is unlikely to be achievable in our country.

An EU-level approach is needed to create the right incentives for the Member States with different levels of ambition to accelerate, in a coordinated manner, the energy transition from a traditional fossil-fuel-based energy system to a more integrated and energy-efficient one based on renewable energy, which is rightly indicated in the Regulation with the statement “a higher level of funding should be introduced for investments in renewable energy sources for companies and individual citizens”.

What the Regulation does not contain, and should, is considering the specificity of the Polish market.

To simplify the licensing and operation of renewable energy power plants, they should be within the competence of a special administrative unit at a voivodeship level.

The authorisation process for the installation of solar energy equipment and associated storage and grid connection facilities in existing or future constructions created for purposes other than solar energy production should be handled by the aforementioned special administrative unit.

The process of issuing permits for the construction of large PV farms should also be shortened (DSO grid connection conditions).

To achieve a rapid transition and to use renewable sources in Poland, the modernisation and construction of new grid infrastructure should be a priority – the grid is currently outdated and it is not possible to distribute renewable energy.

A system of gratification should be introduced for investors in the field of RES installations: PV installations, heat pumps, windmills, geothermal, biogas plants, hydrogen, etc. – introducing incentives to encourage entrepreneurs to invest in RES.

It should be possible for electricity or heat producers to demonstrate/report the percentage of RES (company- and country-specific) in the energy production process in return for appropriate incentives/allowance to reduce the financial burden on energy producers to invest towards climate neutrality.

Taking into account the direct cooperation of parties in the field of RES investments, rules of cooperation between the state, the energy generation company and a private person should be introduced: provision of property by a private person for a renewable energy investment to an energy generation company in exchange for discounts in the form of a lower price for electricity or a percentage share of the generated energy. The terms of cooperation could apply to individual persons as well as to a group of residents in a local community where the RES investment would be carried out. This would speed up the implementation of the tasks without having to go through the process of acquiring land for renewable energy investments.

We would like to request the deletion of the provision in Art. 4, sec. 2, ”unless there are justified safety concerns or there is a technical incompatibility of system components”. This provision leaves a lot of room for interpretation and may constitute a false argument based on which administrative authorities may refuse to grant permission for the expansion of RES power plants.

Last minute information

In the opinion of the ZPP, the proposal of the Regulation is a clear signal of the direction in which the European energy industry will go and that the decarbonisation process is irrevocable.

The issue of accelerating investment in RES is wildly topical. On 14 December, the European Parliament voted in favour of amendments in the REPowerEU document to speed up the licensing of renewable energy sources. An essential element of the document, which is part of the REPowerEU strategy, concerns the creation of “renewables acceleration areas”.

The purpose of the proposed law is to speed up the procedure of granting permits for new RES power plants, thereby increasing the domestic production capacity of the EU. The EU Member States still need to approve the text before it comes into force. The EU countries are currently examining the proposal of the Commission and are expected to take a position next Monday paving the way for talks with the Parliament with a view to finalise the bill after the new year.

The amended text proposes shorter deadlines for the approval of new installations – up to a maximum of nine months for the so-called “renewables acceleration areas”, which will be defined individually by each EU country depending on local circumstances. Under the principle of “tacit consent”, an application will be considered approved if the competent authority does not respond within the set deadline. Outside those areas, the acceleration process should not last longer than 18 months.

Under the proposal, renewable energy projects will be considered as projects of
“overriding public interest” and may therefore benefit from simplified procedures and specific derogations from EU environmental legislation.

Furthermore, the EU countries will have to ensure that permits for the installation of photovoltaic devices on buildings will be issued within one month, and a notification procedure will be sufficient for smaller installations, below 50 kilowatts.

While biomass incinerators were not part of the original proposal, a last-minute amendment by the EPP group gives the possibility for the EU Member States to include them in the fast-track permitting system.

“Renewables acceleration areas should be created at least for wind turbines and photovoltaics and could be created for biomethane plants”, reads the final text voted on by the MEPs. And while biomass plants are generally “excluded from renewables acceleration areas”, an exception could be made “for installations located in outermost regions”, it is added in the text.

According to the approved proposal, no revewables acceleration areas can be designated in nature conservation areas or bird and marine mammal migration routes – with the exception of artificial and built-up areas such as rooftops, car parks or transport infrastructure.

However, environmental groups have expressed concern that projects in “focal areas” will be exempted from environmental impact assessments (EIAs), such as those required under the Birds and Habitats Directives.

The Union of Entrepreneurs and Employers follows with interest the process of establishing the EU consensus in the area of accelerating investments in renewable energy sources and declares its readiness to issue an opinion on draft Polish laws arising as a consequence of that process.

See: 20.12.2022 Commentary of the ZPP on draft Regulation of the Council of the European Commission on the development of renewable energy as a key form of achieving energy independence of Europe

Report Conference – Summary of the Rebuild Together Programme

Warsaw, 13 December 2022

 

Report Conference – Summary of the Rebuild Together Programme

 

On 13 December, a conference summarising the project of the ZPP (the Union of Entrepreneurs and Employers), “Europe – Poland – Ukraine. Rebuild Together” took place. This was another initiative of the ZPP, following the social campaign “We help Ukraine”, the purpose of which was to create and strengthen the relationship between European, Polish and Ukrainian business communities and to prepare a framework for cooperation in the future reconstruction of the Ukrainian state and economy.

As Marcin Nowacki, the Vice President of the Union of Entrepreneurs and Employers, pointed out: “The essence of the project is to support Ukrainian business in the process of entering the Polish market and cooperating with Polish companies. Based on this, we want to establish an agreement, so that the Polish business will play a major role in the reconstruction of Ukraine in the future”.

The first stage of the project was the organisation of a series of meetings – five meetings in a form of round table talks – the goal of which was to establish a dialogue, discuss expectations and priorities related to the reconstruction of Ukraine and to identify industries and companies ready to cooperate to strengthen the Ukrainian economy. As part of that initiative, face-to-face meetings were held with Polish and Ukrainian representatives of industries crucial to the maintenance and reconstruction of the Ukrainian economy. Additionally, two main events were organised within the scope of the Rebuild Together programme – in Warsaw, on 6 October, and in Kyiv, on 28 November.

The reconstruction of Ukraine will be a multinational action of the EU, G7 countries. Nonetheless, the  funds for the reconstruction of Ukraine from individual countries will be allocated based on the preferences of business – noticed the Vice President of the ZPP.

The Vice President of the ZPP was supported by other participants of the conference. As Bartosz Marczuk stated, “The reconstruction of Ukraine is an opportunity for cooperation and building our position in the long term perspective – the fact that we are talking about that now is of great importance, as the process of rebuilding Ukraine has already begun.

There should be as many micro-level relationships as possible. It is necessary to network and use the capital of Polish business”-  emphasised the Vice President of the Management Board of the Polish Development Fund.

Energy security will undoubtedly play a key role in the reconstruction of Ukraine and its economic activity. Mateusz Domian spoke in that context.

The lack of electricity affects all industries, the whole business” –  said the acting Director of the Representative Office of PKN ORLEN in Ukraine, “The lack of electricity can be compensated with the use of other raw materials, especially diesel oil; however, the situation in Ukraine is also difficult in that respect. It is extremely important for Ukraine to maintain, after the war, its independence from Russia and Belarus in terms of raw materials and continue its cooperation with Poland and the European Union in that respect.

With regard to the opportunities and possibilities for the development of Polish business in the present situation, the last speaker at the conference agreed with the previous speech makers saying: “Geographically, Poland is in a privileged position when it comes to the possibility of expanding economic activity in the process of rebuilding Ukraine and cooperation with Ukrainian business. Polish logistics is definitely attractive for Ukrainian companies”.

All conference participants emphasised the need for further action in terms of implementation of the objective of the programme ,,Europe – Poland – Ukraine. Rebuild Together”. The Vice President of the ZPP stated that the activities to establish and strengthen the relations between the European, Polish and Ukrainian business communities have only just started and added that the ZPP wanted to continue to take an active part in them.

The summary of all the activities under the “Rebuild Together” project, which has been implemented for more than six months, is the report which contains the conclusions and a description of individual actions undertaken as the result of the meetings of the representatives of economic sectors in the form of round table talks and conferences.

 

See: 13.12.2022 Report: Summary of the project “Poland-Europe-Ukraine. Rebuild Together”

Commentary by the Union of Entrepreneurs and Employers: economic regulations should come into force once a year, after at least 12 months – a recipe for regulatory instability

Warsaw, 24 November 2022 

 

Commentary by the Union of Entrepreneurs and Employers: economic regulations should come into force once a year, after at least 12 months – a recipe for regulatory instability

 

  • According to a Grant Thornton study, in the period from January to September 2022, the average vacatio legis period for laws and regulations governing business in Poland was 31.9 and 6.9 days respectively.
  • Year on year, the tendency to reduce the length of the vacatio legis period increases, forcing businesses to implement new regulations immediately, which becomes particularly difficult with the start of each new calendar year, when the accumulation of the introduction of new regulations is observed.
  • Too short vacatio legis period is a real barrier to the development of Polish business, with particular emphasis on micro, small and medium-sized enterprises, which account for 99.8 per cent of businesses in Poland.
  • For years, the Union of Entrepreneurs and Employers has been calling for the introduction of a principle whereby all economic regulations come into force only on 1 January of a given year and are preceded by at least 12 months of vacatio legis.


The stability and predictability of the legal and regulatory environment is one of the basic elements necessary for the continuous development of domestic enterprises. Meanwhile, the law in Poland changes too often and entrepreneurs have far too little time to adapt to new regulations. Companies’ confidence in the state therefore remains limited, and this translates into a decline in investment potential.

The Union of Entrepreneurs and Employers has long taken the view that all new economic regulations should come into force simultaneously on the first day of January with a 12-month vacatio legis. This will give businesses a year to adapt to the changes in the law and reduce the amount of time needed to implement new procedures and requirements. This bold move would definitely change entrepreneurs’ perception of Poland as – in many cases – a business-hostile environment in terms of the quality and pace of legislative change. Such a pro-business refocusing would also help officials, who, with more time to refine documents, could improve the quality of legal acts, which today are often drafted in haste and enacted in the same way – many times with numerous errors.

As calculated by Grant Thornton analysts in the study Zwolnij, szkoda firm! Vacatio legis w polskim prawie gospodarczym as recently as 2011, the average vacatio legis of legal acts regulating the rules of conducting business activity in Poland was 53.2 days for acts and 19.8 days for regulations. At the time – from today’s perspective – it was a relatively comfortable situation. In 2022, in the period from January to September, as the referenced report reads, this time has decreased to 31.9 days for acts and 6.9 days for regulations. At a time of rising business costs, these figures cannot instil optimism – especially when one considers the continuing trend of reducing “response times” to new legislation.

Data provided by Grant Thornton also shows that as many as 44 of the 78 laws that came into force in 2021 had a vacatio legis of between 0 and 14 days. Similarly, as many as 178 of the 355 regulations that came into force in 2021 were implemented “on the fly”. Of the 78 laws that came into force last year, only 4 were subject to a minimum six-month vacatio legis. Similarly, only 4 out of 355 regulations received a vacatio legis of minimum three months. Statistics show the abuse of Art. 4 of the Act on promulgation of normative acts and certain other legal acts, and the use of provisions on “important state interest requiring immediate entry into force of a normative act”.

The tendency to abruptly shorten the vacatio legis in the context of laws entering into force with the arrival of the new year is also worrying. Here, the average vacatio legis for laws is 25.8 days, and for regulations 5.9 days. This only demonstrates an unnecessary haste in the creation and implementation of laws, which entrepreneurs often cannot keep up with. However, once they manage to implement the new regulations in their business, it often turns out that – while the vacatio legis is still in effect or immediately afterwards – numerous amendments are introduced, destroying the new order that has just been established.

Meanwhile, while in 2021 the average vacatio legis of the Polish law was 33 days, in the Czech Republic it was 98.7 days, and while in the same year the average vacatio legis for regulations was 7.2 days, in Sweden it was 76.6 days. Both countries compared with Poland are members of the European Union, so they are bound by similar procedures to our country. 

The problem is relevant for all businesses operating under Polish law, but it is most acutely felt by representatives of the SME sector, which often does not have specialised units responsible for thorough analysis of legislative acts. It is worth mentioning that SMEs account for as much as 99.8 per cent of domestic enterprises, while employing 67.4 per cent of those working in the business sector. Therefore, the “problematic” vacatio legis particularly affects companies generating every second zloty (49.6% of GDP according to PARP data), which are the flywheel of the Polish economy.

It should be remembered that the creation of a business-friendly legal and regulatory environment should be one of the main objectives pursued by the state. This is particularly important at a time of economic turbulence and general uncertainty about the development of the macroeconomic situation. Today, however, the legislative environment forces companies to adapt immediately to new regulations, which is time-consuming and costly – often companies in the SME sector have to use the services of specialised external entities in order to implement new regulations immediately. The lack of order in the issue of vacatio legis – bearing in mind also the tendency to reduce it every year – already makes companies take a close look at the issue of planning investments in Poland, which should be treated as a priority in the current economic situation. The uncertain legislative environment disturbs continuous economic development.

For years, the Union of Entrepreneurs and Employers has been calling for the introduction of a principle whereby all economic regulations come into force only on 1 January of a given year and are preceded by at least 12 months of vacatio legis. We believe that this solution would be a good answer to the problem of an increasingly unstable regulatory environment for companies.

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