00:00This is a story about going home again.
00:02The narrative of Europe in recent years has too often been about lack of growth, but there
00:07are exceptions.
00:08It turns out that Poland is one of the world's fastest growing economies, and although it's
00:13now attracting its best and brightest to come home to build their businesses, tough challenges
00:18still lie ahead.
00:25Born and raised in Warsaw, Alexandra Pedraszewska followed a well-trodden path for young, ambitious
00:32Poles, and went abroad.
00:34I wanted to study abroad, and I started looking around, and my objective was getting the best
00:38education that I can get.
00:41So I left in 2013 to study at Cambridge.
00:45I didn't really make a choice after studies about which country I want to live in.
00:50It was very much driven by the opportunities, what could I do in different countries.
00:56And for me, it was natural to stay in the UK.
01:01But that was then.
01:03Now the well-trodden path is heading in the other direction.
01:06Poland is booming.
01:08Its economy topped $1 trillion last year.
01:11And this year, it will be invited to the G20 summit.
01:14And its count of citizens living abroad, a figure that was steadily climbing after it
01:19joined the EU in 2004, peaked in 2017 and has been dropping ever since, although Poland's
01:25National Statistics Agency adjusted its methodology in 2022.
01:30Among those returning is Pedraszewska.
01:32I think a lot has changed, and especially for people like me with a background like I had,
01:39I wanted to work on the edge of new technologies.
01:44I really wanted to be exposed to the best R&D, the best teams that are building effectively the
01:50future of what the technology sector is.
01:52I don't think that these opportunities were as obvious ten years ago and as available as
01:58they are now.
01:59Actually, our performance started in 1989.
02:05Andrzej Domanski is Poland's Minister of Finance and Economy.
02:09And 1989, we had GDP of 67 billion US dollars.
02:17Last year, GDP of Poland reached $1 trillion.
02:22There was only one country in that period that had higher pace of growth, and it was China.
02:31What were the things that drove that performance over that long period of time?
02:35Well, first of all, the reforms of the early 90s, strong institutions that were established
02:42here at that time, of course, the entrepreneurship spirit of Polish people who helped in this process.
02:54And of course, with no doubt, joining European Union in 2004.
02:59And frankly, we are often asked what is the most important sector or most important company
03:07of Polish economy.
03:08And it's very difficult to say.
03:09And I perceive it as a strength of Poland because we are really well diversified.
03:16Polish economy is well integrated with other European Union economies.
03:24We are well integrated with global value chains.
03:28At the same time, we are quite important market of 37 million people.
03:34So we have strong domestic markets.
03:36So there are many engines of Polish GDP growth.
03:42Drivers of Poland's economic growth include a range of services as well as manufacturing.
03:47More recently, the Russian invasion of Ukraine has led to a sharp uptick in defense spending,
03:53projected to account for almost 5% of GDP in 2025, the highest in the EU.
03:59Its digital industry is also growing fast.
04:01McKinsey estimates the current $44 billion sector will grow to $123 billion in 2030,
04:09accounting for 9% of GDP.
04:12That's Pedraszewska's domain.
04:14She co-founded VividQ, a British company developing holographic display technology in 2017.
04:20But on her return to Poland, she started VastPoint,
04:23a venture capital firm focused on tech startups in Central and Eastern Europe.
04:28The startup scene is very vibrant.
04:30And when I think about this word, I think it really represents what's currently going on.
04:34I think that this ambition and this certainty that whatever is being built from here or by Polish teams
04:42has this potential of becoming a global solution.
04:45Yet for all the optimism around Poland, there are some warning signs ahead.
04:50Maciej Albinowski is an economist at the Institute for Structural Research in Warsaw.
04:55The main short-term challenge for Poland is to consolidate public finances.
05:00Although public debt is still at moderate level of around 60% of GDP and public debt is safe in
05:08Poland,
05:09we are running large deficits.
05:11Last year, it was around 7% of GDP.
05:16So it is clearly not sustainable over the longer term.
05:20And we need to come up with a way to rationalize public spending,
05:25probably raise some taxes.
05:29And probably we need to face the fact that elevated military spending requires some tax hikes.
05:37We don't want to start consolidating our public finances when we are under external pressure,
05:45because then it's more painful.
05:46We spend close to 5% of our GDP on defense.
05:52This is close to 50 billion euro per year.
05:56So, of course, we run high deficit.
06:01We take some steps to lower it gradually.
06:05We believe that we are not in a position to cut spendings on defense.
06:13Another challenge lies in demographics.
06:15For Poland, as in much of the Western world.
06:18By 2050, our labor force will shrink by about 20%.
06:24So this is one large factor.
06:27Secondly, the average age of an employee is increasing.
06:31And it also matters for the productivity.
06:35While older workers can certainly work with modern technologies,
06:39they may need some more support than younger workers.
06:43So we need to invest more in policies that allow upskilling, reskilling,
06:50adjusting skills to these new technologies.
06:54And currently we are not doing much in this direction.
06:59How do you address that economically?
07:01So we are running many programs that are supporting Polish families with some additional income.
07:09We have also started in vitro program.
07:13Already 13,000 children were born thanks to this program in Poland.
07:21And I want to say personally that we are really proud that after eight years of very right-wing government
07:30that stopped this program, our government reintroduced it.
07:34And we already have, as I said, 13,000 young Polish people because of that.
07:41But it's not enough.
07:43We need to create new incentives for people to be more willing to work.
07:49And our government is doing that.
07:51Foreign investment is both an opportunity and a challenge for Poland.
07:55Many foreign investors have become more confident in the sustainability of the Poland story.
08:01But Domanski says the war in Ukraine has made some wary.
08:04We see that some investors, especially from non-European investors,
08:10are a little more reluctant to invest in especially eastern parts of Poland recently.
08:17That being said, Poland will be the biggest, of course, apart from Ukraine,
08:22beneficiary of peace in Ukraine.
08:25So we want just and lasting peace for Ukraine.
08:30First of all, of course, we need to end this brutal Russian aggression.
08:37It would be also very good for Polish economy.
08:42Foreign direct investments were absolutely crucial in building strength of Polish economy.
08:48And this is a matter of fact.
08:51It's not an opinion because of the investments from other European countries,
08:57countries, of course, US investors.
09:01Right now we see more and more interest from Asian investors investing in Poland.
09:08We certainly need to invest more in research and development.
09:12We need to invest in our academic sector.
09:15We also need to rethink our educational policies, both aimed at children and adults.
09:23Because this is what more successful Western economies are doing.
09:29And in Poland so far, we relied much on competitive labour supply, on cheap labour costs.
09:38But if we want to reach higher level of wages, if we want to converge not to 50% of
09:47German wages,
09:47but to 80% or 90%, we certainly need to invest more in education, in research and development and in
09:58other pro-growth policies.
10:00We are quite satisfied with our present growth trajectory.
10:04So we may not be well motivated to invest in research and development,
10:09to invest in new educational policies, because so far it's good.
10:16But in future, current growth model of Polish economy may not be sufficient.
10:22As they say, getting to the top is one thing, staying there is another.
10:27Poland's growth is a success story, but its next test will be sustaining it.
10:31A lot of the success of Poland so far has been, unfortunately, playing catch-up.
10:37I think once you join, you know, 20 biggest economies in the world or 20 economies with the biggest GDP
10:46per capita,
10:47it really becomes about what is the limit of your growth and where do you need to seek it if
10:57playing catch-up is not going to work out that well anymore.
11:00But in the end, for Poland, as it is for many countries, the key is making sure that the best
11:06to the brightest can go home again and stay there.
11:10I could have stayed in London, raise a fund there.
11:12I could have thought about maybe moving to the U.S. and effectively starting over.
11:18But I decided to take a step, which I don't think is a step back, but step into something entirely
11:24new,
11:25but just in the place which I used to call home as a child.
11:28So it feels really special to be able to do that.
11:30It feels also really special because I don't feel like I have to give up on anything.
11:34It is a very special for the U.S.
11:34It is a very special for people in the U.S.
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