Jobs for the boys
A chill wind blew through government corridors last week as Finance Minister Jaroslaw Bauc admitted that tougher times could be just around the corner.
His main fear was a rise in the budget deficit as inflation continued to tumble to 6.6%. A lower rate of inflation would mean a lower income from VAT and income taxes, leaving economists worried that an economic slowdown of more than 1% could be imminent.
Lower inflation could also create a possible zl 1.7 billion ($414 million) budget hole as a result of a drop in income. Analysts now seem to agree that an amendment to the budget will be necessary and that the country could even be headed for a recession. Such talk seems prematurely over the top, but it certainly illustrates the rising panic that has now gripped many economic commentators.
But if that news wasn't bad enough, the Central Statistical Office (GUS) reported that economic growth slowed to 2.4% in the last quarter of 2000 with unemployment rising to almost 16% last month.
Meanwhile, the number of people out of work will almost certainly continue if growth continues to fall: not the kind of news many were hoping for as they prepare for their Easter holidays.
At last week's meeting at the British-Polish Chamber of Commerce, Bauc tried to put a brave face on Poland's problems by stressing that past efforts to liberalize the economy and introduce key structural reforms had worked. But, revealingly, he said the country had now reached a new stage of development and faced new challenges and barriers.
However, with falling inflation and more possible cuts in interest rates, the government should be able to balance the books somehow, albeit precariously. Economists are still hopeful that gross domestic product (GDP) will stay at 4% for this year which, let's face it, is not too bad. After all, recession is actually defined as negative growth. But, nevertheless, the continuing sore point of unemployment will not be able to be swept away quite so easily.
Rural areas have been particularly hard hit during the past year, with unemployment rising above 16% in many provincial towns and villages. This is now putting enormous social pressures on local communities where the majority of the jobless are young men.
The question now is at what point will the government introduce key labor reforms to ease rising unemployment? Current rigid labor codes are stifling small businesses and heaping a huge burden on the country's welfare and tax regimes. With a freeing up of the labor laws, more people will get back to work, more companies will start to achieve significant levels of growth and the government may unburden itself of a variety of economic woes. What's needed is action. Over to you, Jaroslaw.
