WBJ: How are primarily export-oriented Polish entrepreneurs describing their current situation? How significantly did inflation and high production costs reduce the competitiveness of Polish goods?

Polish exporters, like their counterparts in other countries, have witnessed higher production costs and costs of raw materials over the past few months. However, despite this, they are continuously increasing their sales, which means that their competitiveness persists, although it should not be taken for granted. 

Fortunately, more and more entities have started to understand that it’s not easy to offer quality when they are only competing on a price basis. Therefore, they are increasingly looking at quality and delivery speed, with some are even working hard to improve their organizational structures to further increase their performance, all in the interest of staying competitive. 

It’s worth stressing that local companies have learned to adapt multiple pricing strategies to increase sales, especially during times of uncertainty and ever-changing market conditions. This shift can be seen in the export statistics.  Our analysis indicates that the current global situation is not an easy one. However, what’s positive is that Polish companies are actively looking for new clients abroad, improving production processes, and searching for new product niches. 

For years, Polish exports were based on lower production costs than in Western Europe and the USA. 

That’s true. However, please remember that countries where production costs are high, e.g. Switzerland, Sweden or the USA are still maintaining their lead as the most competitive economies in the world. One of the main reasons for that are the unit labour costs, defined as the average cost of labour per unit of output produced. What we really need in Poland is to boost productivity growth. 

So, what are the other competitive advantages of Polish producers except for lower costs?

Some of the main competitive advantages of Poland are location, area, and population size. Furthermore, it possesses a diversified manufacturing base, a sizeable skilled workforce and a ready domestic consumer market. Last but not least, it has a modern infrastructure that supports economic activity and attracts international investors. All of that explains why Poland has recently become a manufacturing and logistics hub in Europe. Today our country is considered as a gateway to Europe by more and more businesses.

Which sectors will be more and more present on global markets in upcoming years? 

Over the past several years, technology has completely reshaped the market. The COVID–19 pandemic made companies and industries move faster than ever before. New services were offered within a matter of days. Numerous businesses went digital overnight. 

In coming years, it is likely that we will see continuous developments in green energy, digital services, sustainable food, sustainable mobility, sustainable urban development, advanced manufacturing, biotechnology, quantum information science, digital health and more. The competition is fierce. Start-ups, SMEs and large corporations are all seeking to innovate, go to market, and grow their businesses quickly, all while competing for scarce resources. 

And which sectors that currently dominate Polish exports will be overtaken by companies from other countries?

It's hard to point out those sectors. One can assume though that labor-intensive industries might face greater challenges than others as unit labour costs are often viewed as a measure of price competitiveness. 

What actions have the government and current administration taken to support Polish exporters in the face of such high inflation?

The Polish government has implemented certain tax cuts under the Anti-Inflation Shields. For several months, Poles have been paying less for fuel, basic foodstuffs, natural gas, system heating, as well as fertilizers. Further, the reduced VAT rate on electricity has been in effect for several months. It was one of the most extensive anti-inflation programs in Europe. In total, the government measures saved Poles nearly PLN 25 billion.

Okay, but most of that money went to final consumers and did not support exporters. What about PAIH’s activities? You are one of the leading government agencies whose goal is to support Polish companies in their foreign expansion. What projects and programs is PAIH currently directing towards Polish entrepreneurs?

We naturally see ourselves as the first point of contact for all Polish companies wanting to expand globally, whether through exports or investments. Currently, alongside our statutory tasks, PAIH is running the project “Polish Tech Bridges” which provides SMEs with professional tools that prepare them to expand outside the EU. The maximum grant for one SME is PLN 200,000. 

Soon, we will have more information about the “Go To Brand” program. Micro, small and medium-sized enterprises registered in Poland and operating in highly competitive and innovative sectors such as IT/ICT, medical equipment, automotive and aviation components, biotechnology and pharmaceuticals can receive funding to participate in fairs, exhibitions, business missions or conferences abroad, as well as benefit from consulting services to help them promote themselves in foreign markets. 

Additionally, I recommend checking PAIH’s website for the latest news and insights about PAIH’s upcoming events and information about foreign markets. It’s also worthwhile to bookmark trade.gov.pl. This portal provides useful  information about exports and foreign trade. 

According to PAIH, what are the biggest threats to exporters in the coming months and quarters?

We don’t quantify it as a threat but as a challenge. Polish entities, if they are willing to be part of global value chains, need to put greater attention to issues related to ethical and environmental, social, and corporate governance (ESG). National security rules and human rights certifications will continue expanding into ESG programs. More customers may start requesting these types of certifications. At PAIH, we strongly recommend that Polish entities start carefully mapping their supply chains. 

Other than that, we should not forget about environmental, societal, economic, and geopolitical threats that materialize every now and then such as climate action failure, extreme weather, biodiversity loss, human environmental damages and natural resource crises. 

What about strictly economy-driven threats or challenges?

Economically, it’s worth observing how global economies develop, especially emerging ones. As of now, nine countries are in debt distress, twenty-seven countries are at high risk, twenty-six countries are at moderate risk, and seven countries are at low risk of debt distress. Recently, Sri Lanka has defaulted on a massive debt. We may hear more such stories in the future. 

Considering the above, what do you forecast for Polish exports in 2023 and 2024?

The value of Polish exports reached an all-time high of $363.3 billion in 2022, an increase of more than 6% compared to 2021. The more positive the growth prospects for the world economy are, the better the exports results of Poland may be in 2023 and in 2024. Any result close to $400 billion worth of products exported by the end of 2023 should be considered a success for Polish businesses. I assume the value of products exported from Poland may exceed $400 billion in 2024. Consequently, Poland will be strengthening its position as one of the 20-largest exporters worldwide.