21st in the region and 45th in the world – Poland improved its rank in this year’s Index of Economic Freedom published by The Heritage Foundation and The Wall Street Journal.
The index of economic freedom in Poland amounted to 68.5 points, which places our country in the 45th place in the world and 21st in the regional breakdown. This is how much Poland scored in the Index of Economic Freedom 2018 prepared by The Heritage Foundation and The Wall Street Journal and presented by the Warsaw Enterprise Institute Foundation on Friday February 2nd, the exclusive Polish partner of the global report. The aim of the Index is to rank countries and evaluate their governments’ policies in terms of economic freedom. According to this year’s edition, Poland remains in the group of “moderately free” countries.
In case of Poland, the index slightly improved compared to the previous year – by 0.2 points. This small increase results mainly from an improvement in the level of fiscalism (+5,4) and a higher score for the labor market (+2,4), which balanced and outweighed the decline in the following categories: reliability of the state “Government Integrity” (-4,6) and judicial effectiveness (-1.4).
It is noteworthy that Poland’s rating is slightly lower than the regional average (68.8 points), yet definitely above the global average (61.1 points).
In this year’s edition of the index, higher scores for public spending (+0.9) and property rights (+1) deserve attention. However, we score worse in the category of business freedom (-0.6), which is affected by high non-wage labor costs. In the market openness category, we noted only one change – in trade (-0.1). The authors of the report emphasize that an open market and monetary stability are Poland’s fortes. Nevertheless, the most important systemic challenges facing our economy are a rigid labor code, inefficient economic judiciary system, bureaucracy, an onerous tax system and deficiencies in road and rail infrastructure. Substantial reforms are necessary to strengthen the judicial system, which remains inefficient, poorly administered, and understaffed.
In the medium term since 2013, Poland can in general still boast an impressive increase in economic freedom by 2.5 points.
“The Ministry of Entrepreneurship and Technology is a ministry created for entrepreneurs and with their needs in mind. From the very beginning, we focused on three main pillars in our work. These are the following: a law that should be clear, unambiguous, and transparent, less bureaucracy, as well as more money in the pockets of Polish entrepreneurs. We hope that Polish companies will feel the improvement of business conditions in Poland,” said Jadwiga Emilewicz, Minister of Entrepreneurship and Technology. “In this year’s ranking, there is much to be happy about. Public debt has improved radically. Income is also definitely higher than estimated. This is the best argument for the great shape that the Polish economy is in. We believe that the Constitution for Business adopted by the Sejm (Lower chamber of the Polish Parliament) will bring us tangible results and will contribute to an even better position of Poland in next year’s ranking. Our goal is to make the best conditions for running business in Poland,” she added.
In the commentary to this year’s scores, the authors draw attention to the still excessive burdens resulting from the structure of the tax system.
“The Warsaw Enterprise Institute appreciates the government’s efforts to curb fraud and improve tax collection, but our tax system is still one of the most unfriendly systems in the world. Hence, our endless appeal for a deep reconstruction of the entire tax system in line with the proposals of the coalition for simpler taxes, ‘Płaca Plus, Podatki Minus’ (‘Salary Plus, Taxes Minus’),” said Tomasz Wróblewski, President of the Warsaw Enterprise Institute.
Among European countries, Switzerland, Ireland, Estonia, the United Kingdom, Iceland, Denmark, and Luxembourg are at the top of the ranking. Altogether, 44 European countries were compared in the Index, the vast majority of which are at least “moderately free”.
There are currently 5 economies in Europe with very limited economic freedom (ranked as “mostly unfree”). Unlike last year, the index makers did not distinguish economies where freedom is suppressed (“repressed”) – in the previous ranking, both Ukraine and Belarus fell into this category. Analyzed as a whole, Europe is still struggling with administrative barriers that distort trade, high labor costs, high tax-related burdens and problems in public finance management.
“A higher position in the Index of Economic Freedom and Poland’s competitiveness are confirmed by the GDP growth in 2017 by as much as 4.6%. From the point of view of a natural gas supplier that PGNiG is, economic growth and market competitiveness find confirmation in the rapidly growing demand for gas supplies in 2017 as well, mainly to industrial recipients who are dynamically developing their businesses. PGNiG is changing the direction of gas imports for supplies from the East to the North Sea and LNG supplies, because the free market rules guarantee market prices of gas purchases. Unlike gas supplies from the East where prices are encumbered with geopolitical factors,” said Maciej Woźniak, Vice President for Trade of the Management Board at PGNiG SA.
Globally at the very top of the ranking, the following countries, fully free in terms of economics, are invariably to be found: Hong Kong, Singapore, New Zealand, Switzerland, and Australia, which places them at the forefront of the richest countries in the world. In total, 180 countries were considered in the study.
“This is yet another report that leaves no doubt as to the fact that the level of prosperity and quality of life of citizens depend on the level of economic freedom,” believes professor Robert Gwiazdowski, President of the Warsaw Enterprise Institute Council. “We would like politicians to familiarize themselves with this data and take it deeply into their hearts whenever they consider adopting new laws or regulations,” he added.
The Index of Economic Freedom – prepared by The Heritage Foundation and The Wall Street Journal for over 20 years – has become the most popular ranking in the world. The objective of the Index of Economic Freedom, from the very beginning in 1995, has been to rank countries according to their systemic solutions, policies implemented to increase economic freedom, and thus promote the development and multiplication of national prosperity. The Index of Economic Freedom analyzes the following aspects: the rule of law (property rights, level of corruption) size of the public sector (fiscalism, public expenditure) regulatory efficiency (business conditions, monetary policy, labor market), and market openness (trade, investments, finances).
The presentation of the Report for the whole region, including a comparison of the Czech Republic, Estonia, Georgia, Lithuania, Latvia, Germany, Poland, Slovakia, Ukraine, and Hungary, was carried out by the Warsaw Enterprise Institute, the foundation of the Union of Entrepreneurs and Employers, the report’s strategic partner in Poland.
In the debate that accompanied the presentation of the Report the following invited experts participated: Jadwiga Emilewicz, Minister of Entrepreneurship and Technology, and Maciej Woźniak, Vice President for Trade of the Management Board at PGNiG. The Warsaw Enterprise Institute was represented by Tomasz Wróblewski, WEI President, and professor Robert Gwiazdowski.
The full and unabridged version of the Index of Economic Freedom 2018 is available at www.wei.org.pl.
Photo David McKelvey/ Creative Commons licence / flickr.com