Poland Growth and Resilience DPL2

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This second loan in a programmatic series of two development policy loans (DPL2) is structured around three pillars. These are: (i) enhancing macroeconomic resilience, by reducing the general government fiscal deficit and debt levels toward the Medium Term Objective (MTO) and bolstering macro-prudential oversight; (ii) strengthening labor market flexibility and employment promotion; and (iii) improving private sector competitiveness and innovation. The main objective of the operation is to support macroeconomic growth and resilience, leading to more dynamic job creation and shared prosperity. The DPL series is at the core of the Bank’s engagement in Poland, as described in the Country Partnership Strategy presented to the Board on July 15, 2013. The amount for the loan (DPL2) is EUR 912.7 million (approximately US$1 billion equivalent). To sustain the recovery the authorities prioritized reforms to strengthen public finances and financial sector oversight, supplemented by reforms aimed at bolstering the economy’s long-term competitiveness. Challenges remain to achieve sustainable growth: future growth is less likely to rely on relatively cheap labor, with a large share of exports to Germany as part of their export-led supply chains. The new macroeconomic framework is therefore designed to help Poland cope with future shocks, while strengthening labor markets (in terms of both flexibility and raising participation rates), the business environment and promoting innovation. These reforms are critical to ensure that the economy remains competitive as it seeks to increase productivity and diversify into new product markets. Continuing to bolster financial sector resilience will also support a more sustainable recovery in credit and investment and further reduce risks from such factors as the divergent monetary policy in the EU and US or from regional geopolitical instability.