Executive Summary

• In the best fiscal and financial condition among the new EU member states, Poland, the biggest CEE country in the EU, offers both a promising consumer spread and a gateway to both Eastern and Western Europe over the medium to long term.

• Between 2007 and 2013, Poland will be the EU's largest recipient of funding. The €67.3 billion grant will certainly act as an unrivalled advantage over other emerging markets in CEE to weather the current global economic storm.

• Integration of Poland into the EU plays no small part in the country's rising purchasing power and in turn demand for domestic and imported goods and services, while facilitating upgrading and consolidation of Poland's retail sector.

• The dearth of broad-based production of light consumer items such as consumer electronics, clothing, footwear, toys and giftware, however, provides plenty of room for Hong Kong-style products with decent branding and quality.

• That said, Poland is not immune to the accelerating recession pressures applied by the global credit crunch. Faltering exports, return of migrant workers, bureaucracy and competition from still buoyant informal and second-hand markets may hinder penetration of Hong Kong companies.

Biggest and Strongest CEE Country in the EU

Poland, with some 38 million inhabitants, is by far the most populous CEE (Central and Eastern Europe) country in the EU. Enjoying an average annual growth of 5.3% in GDP during 2004-2008 (compared with 2.3% during 1999-2003) and a CAGR of 20% in per-capita GDP, Poland has clearly benefited from its EU membership. The four freedoms of movement of labour, capital, goods and services within the single European market not only provide plenty of job opportunities for Polish workers, but also raises their purchasing power and in turn living standards. While Poland is apparently not immune to the financial crisis currently sweeping across Europe in the short term, Poland is in the best fiscal and financial condition among the new EU member states, and is expected to outperform its weaker counterparts in the region as well as most developed economies from a medium- to long-term perspective.

Indeed, EU membership has not only afforded Poland tariff-free access to a 500-million-strong EU market, but also generous EU structural funds. Following its accession, Poland is eligible for structural funds to implement development projects to level out developmental and economic differences between the country and the “old” EU members. Between 2007 and 2013, Poland will be the largest recipient of EU funding. Under the current convergence policy, €85.5 billion have been earmarked for Poland during 2007-2013, including €67.3 billion from the EU budget and €18.2 billion from the Polish state budget. Although the tariff-free access to the EU market may not make Poland any better than its counterparts in the emerging world right now amid the crisis battering most European countries, the bounteous EU funding will certainly act as an unrivalled advantage for the country over other emerging markets in the CEE.

Host of Euro 2012

Being one of the hosts of the 2012 UEFA European Football Championship (Euro 2012), the country is budgeted to inject some €23 billion for stadiums, hotel and transport infrastructure investments for the organisation of the event. Not only does this infrastructural spending help the economy out of economic hard times, but also provides a golden opportunity for Poland to modernise its infrastructure and improve its international status. While new stadiums, roads, railway lines and airports are being built or existing ones refurbished to cope with the expected high demand during the holding of the games, the football fever will also stimulate sales of various consumer products, including TV sets, toys and sporting goods, as well as tourist-related products like gifts and souvenirs.

Rising Consumerism but Limited Production

Lacking a broad production base of consumer goods, the rising demand for items such as consumer electronics, household electrical appliances, clothing, footwear, toys and games, jewellery and timepieces has to be met by imports. While Poland maintains sizable production of some consumer items, mainly domestic appliances like LCD TV sets and refrigerators, this accounts only for a small share of total industrial sales. Also noteworthy is that although the more competitive manufacturers still produce for export, especially to Western Europe, and some of these higher quality outputs are also sold in the domestic market, they tend to be out of the reach of average consumers. By any measure, domestic production of consumer products, especially trendy consumer electronics, fashion products, toys and games, gifts and premium, etc. is falling short of the ever-growing domestic demand, providing therefore plentiful room for imports.