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Impact of cohesion policy on the Polish economy.

Ministry of Regional Development. Impact of cohesion policy on the Polish economy. Results of macroeconomic modeling of ex-post impact and forecasts for 2014-2020. Robert Dzierzgwa Department of Structural Policy Coordination Ministr y of Regional Development.

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Impact of cohesion policy on the Polish economy.

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  1. Ministry of Regional Development Impact of cohesion policy on the Polish economy. Results of macroeconomic modeling of ex-post impact and forecasts for 2014-2020 Robert Dzierzgwa Department of Structural Policy Coordination Ministryof Regional Development

  2. Project’s main assumptions Research isbased on two macroeconomic models (EUImpactMod and Hermin) at national and regional level, with the following assumptions: • Models estimate the impact of the EU funds on an uniform set of indicators, defined by the Ministry of Regional Development, which reflect the objectives of the National Development Plan and of the National Cohesion Strategy; • models conform to the methodology set out by the European Commission; • models use the same statistical data on historical periods (these data is derived from official statistics); • models use uniform financial data on expenditures co-financed from the EU funds; • results are presented in the form of reports, which have similar structure and graphical form. 2

  3. Impact of the EU fundson the GDP rate of growth In the period 2007-2012, Poland was the country with the highest GDP growth in the European Union with annual average of about 4.0%vis-a-vis 0.4% in the EU-27. Polish economy remained on the path of economic growth even in the crisis years of 2009 - 2010. In 2012, Poland, with the GDP growing by 1.9% (as opposed to 0.3% in the EU-27) was in the group of growth leaders together with other NMS (Slovakia, Estonia, Lithuania and Latvia). The access to the EU funds essentially contributed not only to the relatively high economic growth but also to avoiding recession in 2009. It is estimated that the EU funds allowed the GDP growth in 2012 to be higherby about 0.8-1.1 pp, than in the scenario without EU funds.According to economic models, in 2004-2015 GDP growth is higher about 0.7 pp. than in the scenario without the inflow of EU funds. GDP rate of growth in the years 2007-2012, selected EU-27 countries

  4. GDP changes in the EU GDP per capita (PPS) in 2012 (EU-27=100) Average GDP growth in the years 2007-2012 Source: Eurostat Poland has recorded the higest GDP growth, i.e. thanks to the highest cohesion policy’s monetary transfers in the country’s history. 4

  5. Impact of the EU funds on the GDP In the period until the end of 2012, the impact of cohesion policy on therate of growth and on the nominal level of GDP derived mainly from demand factors, ie. increasing aggregate demand through the use of EU funds. It is estimated that the EU funds allowed the GDP growth in 2012 to be higherby about 0.8-1.1 pp, than in the scenario without EU funds, and that in 2013 the positive impact on GDP growth will amount to 1.2-2.1 pp. According to both models, in 2004-2015 GDP growth is higher about 0.7 pp. than in the scenario without the inflow of EU funds. In 2012, the GDP volume (in current prices) was higher thanks to the EU funds, by respectively 6.2% (model EUImpactMod) and 16.1% (Hermin model), while in 2013 it will be higher by 7,5-19,9%. In the coming yearsthe inflow of the EU fundshave-in most years- a positive impact on the level of real GDP growth, while the impact on GDP volume will bepositive throughout the enitre analyzed period. 5

  6. Impact of the EU funds on the level of GDP per capita (at PPS) compared to the EU-27 average In the period 2007-2012, the gap between Poland and the EU-27 average level of GDP per capita (in PPS) decreased markedly - by 14 pp. Due to the relatively high rate of GDP growth, Poland was the EU leader in term of the speed of convergence in economic development. The impact of the EU funds on bridging of the gap is estimated at least 15-20%. Nevertheless, the difference in the level of development between Poland and the EU remains significant (in 2012 Poland’s GDP per capita was about 66% of the EU-27 average). It is expected that in 2015, the progress in „catching-up” process due to the EU funds will amount to 5.0 pp., allowing Poland to reach 70% of the EU-27 average level of GDP per capita. GDP per capita PPS (EU-27=100) in selected countries

  7. Impact of the EU funds on the level of GDP per capita (at PPS) compared to the EU-27 average The acceleration of economic growth in Poland resulting from the inflow of the EU funds makes those resources an increasingly important factor behind thebridging of the development gap between Poland and the EU. It is estimated that by the end of 2012, the gap between the level of Poland’s GDP per capita and the EU-27 average was reduced by between 3.8 pp (model EUImpactMod) and 4.3 pp (Hermin). In 2015 the said „catching up” due to the EU funds will amount to 5.0 pp (according to both models), allowing Poland to reach 70% of the EU-27 average level of GDP per capita. 7

  8. Impact of the EU fundson investment rate The investments in infrastructure and support to enterprises financed from the EU funds contribute significantly to the revival of investment activity in Poland, leading to both higher growth rate of gross fixed capital formation and to an increase in the rate of investment. Since the increase in investment takes place simultaneously with the GDP growth, the resultant impact on the level of the investment rate is not straightforward. However, simulations show that investment growth is faster, leading to an estimated increase in the investment rate of about 2,6-4,3 pp. compared to a scenario without the EU funds.

  9. Impact of the EU fundson investment rate The investments in infrastructure and support to enterprises financed from the EU funds contribute significantly to the revival of investment activity in Poland, leading to both higher growth rate of gross fixed capital formation and to an increase in the rate of investment. Since the increase in investment takes place simultaneously with the GDP growth, the resultant impact on the level of the investment rate is not straightforward. However, simulations show that investment growth is faster, leading to an estimated increase in the investment rate of about 2,6-4,3 pp (respectively according to Hermin and EUImpactMod) compared to a scenario without the EU funds. 9

  10. Impact of the EU fundson the employmentrate (15-64) In 2012 the employment rate amounted to 59.7% and in recent years (since 2008)remained stable. At the same time, an average employment rate in the EU-27 fell from 65.8 to 64.2%. At the time of Poland’s accesss to the EU, the country was characterized by the lowest employment rate in the EU, anduntil the end of 2012 it has recorded the highest growth rate of this indicator - by 8.3 pp. The EU funds stopped the employment rate in Poland from falling even in the times of crisis. According to the models, it is estimated that in 2012 the use of the EU funds led to the growth of the employment rate by 2,6-3.5 pp. In the entire 2004-2015 period the average annual impact of cohesion policy amounts to about 1.6-2.4 pp. Employment rate in the selected EU-27 countries

  11. Impact of the EU fundson the employmentrate In the period 2004-2011 the positive impact of cohesion policy on the labor market was observed, and the recent estimates of both models indicate that the most significant impact is predicted to take place in the period 2012-2015.According to the EUImpactMOD, it is estimated that in 2012 the use of the EU funds led to the growth of the employment rate (in the age bracket of 15-64 years) by 3.5 pp. The most profound impact (4.2 pp) is projected for the period 2013-2014, whilein the entire 2004-2015 period the average annual impact of cohesion policy amounts to about 2.4 pp. On the other hand, the Hermin model estimates that in 2012, the impact of the EU funds on the employment rate amounted to 2.6 pp, and that in 2013 it will amount to 3.4 pp. In the period 2004-2015 average annual impact of the EU funds on the said indicator is estimated at 1.6 pp. 11

  12. Impact of the EU fundson the unemploymentrate In recent years, the unemployment rate (annual average) in Poland stood at roughly the EU average. The crisis has contributed to the rise in the unemployment rate, though in 2012 (at 10.1% in Poland) this indicator was lower than the EU-27 average (10.5%). In the period 2007-2012 Poland recorded the second biggest drop(3.8 pp.) following the Germany (4,8 pp.). The EU funds allowed to moderate the growth in the unemployment rate in 2012. According to the models, in 2012 the unemployment rate was lower thanks to EU fundsby 3.5 – 3.9 pp.,while in the years 2004-2015 the average annual impact of cohesion policy on the reduction in unemployment rate will amount to 2.1-2.5. pp. Unemployment rate in selected countries EU-27

  13. Impact of the EU fundson the unemploymentrate According to the model EUImpactMod in 2012 the unemployment rate was lower thanks to EU fundsby 3.5 pp,in 2013 it will be lower by 3.9 pp, while in the years 2014-2015 the average annual impact of cohesion policy on the the reduction in unemployment rate will amount to 2.6 pp. The Hermin model indicates that the EU funds caused the unemployment rate to be lower by 3.9 pp compared to the counterfactual scenario, and that their impact will be the most profound in 2013 (5 pp). In the years 2014 to 2015 the enemployment rate is on average 3.7 pp lower than it would have been without the cohesion policy 13

  14. Impact of cohesion policy on the Polisheconomy - summary - • the GDP growth in 2012 higherby about 0.8-1.1 pp due to funds; in 2004-2015 GDP growth higher about 0.7 pp. than in the scenario without the inflow of EU funds; • the GDP volume (in current prices) in 2012 higher thanks to the EU funds by about 10% on average; • the gap between the level of Poland’s GDP per capita and the EU-27 average reduced by about 4 pp. In 2015 the said „catching up” due to the EU funds will amount to 5.0 pp, allowing Poland to reach 70% of the EU-27 average level of GDP per capita; • increase in the investment rate of about 3-4 pp. compared toa scenario without the EU funds; • the EU funds stopped the employment rate in Poland from falling. In 2012 the employment rate higher due to EU funds by about 3 pp. • the unemployment rate lower thanks to EU fundsby about 4 pp. 14

  15. Ministry of Regional Development Thank you very much for your attention Ministry of Regional DevelopmentWspólna 2/4 Street Warsaw, Polandwww.mrr.gov.plwww.funduszestrukturalne.gov.pl monika.mackiewicz@mrr.gov.pl

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