Poland Politics


Poland takes a turn to the right in general elections

The general elections that took place in Poland on 25 October resulted in the large victory of the opposition right-wing and slightly eurosceptic Law and Justice (PiS) party over the ruling pro-European and center-right Civic Platform (PO) party. The PiS has campaigned heavily on nationalist and, to a certain extent, populist policies, such as increasing taxes on foreign retail chains, protecting industries that are threatened by international competition and increasing the tax burden on the banking sector. Fears of the implementation of such policies led to increasing bond yields and a devaluation of the zloty as PiS’ victory became more and more likely. However, Mai Doan and Arko Sen, economists at BofA Merrill Lynch, temper:

“Post elections, the market should shift the focus back to Poland’s strong fundamentals, as the Law and Justice Party’s (PiS) policies are likely less negative for the market than feared. [...] The winning PiS’ large-scale populist pledges were part of its election campaign to attract voters. We believe the incentive to fully deliver on these promises will likely diminish once it is in power, and any implementation will likely be gradual. [...] We expect the new PiS government will respect the 3% Maastricht budget deficit threshold. By now, any EU government should be fully conscious of the psychological importance of the Maastricht limits for investors. For Poland, the large stake in EU funds is another big constraint on fiscal planning.”

Despite a strong political shift to a nationalist party that is widely seen as unfavorable for international investors, Poland’s economy remains solid. In addition, the government is expected to water down its electoral promises and should respect European budget constraints, which would ultimately cause the political shift to only have a moderate impact on growth.

PiS won an absolute majority in parliament with 235 out of 460 seats, compared to the 134 seats they won in the previous elections, which marked the first time in Poland’s post-communist history that a single party has an absolute majority. The result follows the surprise victory of PiS’ candidate Andrzej Duda in the presidential elections that took place on 10 and 24 May, leaving PiS with full control over the country’s policy making and signaling a major shift in Poland’s political landscape, following eight years of PO’s domination. Beata Szydlo, PiS’ vice-chairman, has been designated as Prime Minister, succeeding Ewa Kopacz (PO). Szydlo is expected to take office and form a government in the upcoming weeks.

The Central Bank expects GDP to expand 3.6% in 2015 and 3.4% in 2016. FocusEconomics Consensus Forecast panelists expect that the economy will expand 3.5% in 2015, which is down 0.1 percentage points from last month’s forecast. For 2016, panelists foresee the economy growing 3.6%.

Author:, Economist

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