2.8 The year 1997
This year the Polish economy once again had a significant growth. Poland’s GDP rose by 7.1 per cent,
giving the country one of the fastest growing economies in the world.
The difference between aggregate demand and domestic supply was made up by imports, which resulted in
increased deficit on the trade balance and on the current account.
To curb the growth in domestic demand and to avoid increased inflation-pressure the NBP raised its base
rates in August. This year the inflation was 14.9 per cent per cent compared to 19.9 per cent last year.
The year 1997 brought major advances in harmonising Polish legislation with the standards applicable in
the EU. A new Constitution of the Polish Republic was adopted, which brought the standard of the NBP more into
line with EU norms, e.g., by reinforcing the independence of the central bank, prohibiting the financing of the fiscal
deficit by borrowing from the central bank, and instituting a collective mechanism for the formulation of monetary
policy by establishing the Monetary Policy Council (MPC).
The current account of Poland showed a deficit this year amounting to USD 4 268mn, an increase by
almost 3 000mn from last year. The prime cause of such a profound current deficit was the deterioration in the trade
balance. This year imports increased by almost 16 per cent while exports increased by around 11 per cent, which
resulted in an increased deficit on the trade balance by USD 2 601mn, to USD 10 964mn. The sharp rise in imports
is the result of the maintenance of strong domestic demand within the Polish economy.
Foreign direct investment totalled USD 3 077mn, as against USD 2 768mn in 1996. One of the sources of
inflows from abroad were payments in the second half of 1997 connected with the privatization of large state
enterprises: Bank Handlowy w Warszawie SA, the KGHM “Polska Miedz” – Copper Mining and Smelting
Combine, and Powszechny Bank Kredytowy SA.
The strong increase in demand, where fixed capital formation and private consumption increased by 21.7
per cent and 6.9 per cent respectively, led to a significant decrease in unemployment. Unemployment went down by
534 000 people, from 2 360 000 to 1 826 000 or 10.3 per cent by the end of the year.