A wave of “reverse migration” to eastern Europe – and an associated drop off in remittances as migrant workers return home – could prove a boon for Poland, Grzegorz Kolodko, the country’s former finance minister said this weekend.
The economist said that a surge in remittances in recent years has worsened the inflation picture and piled upward pressure on the currency, the zloty– a situation that could now change.“Now [remittances] are on the reverse as a proportion of GDP, there will be an easing of pressure on the currency,” Kolodko said.
He added that Poland’s exporters – who have been hit hard by falling profitability and competitiveness on the back of a strengthening zloty – will also benefit from an easing of currency pressure as homeward flows abate.
“The Polish economy is growing, but growth is slowing,” said Kolodko. “This year, GDP will increase by less than 5%, in large part because of a slowdown in exports caused by exchange rate pressure.”The zloty has gained around 80% against the US dollar and around 7% against the euro since January 2004.
Meanwhile, remittances from the more than two million Polish workers abroad – some 6% of the country’s population – last year reached almost $5 billion, or around 1.4% of GDP.
The real figure is likely much higher: Marcin Korolec, under-secretary at Poland’s ministry of economics, estimated earlier this year that remittances are closer to Eu6 billion a year. “Obviously this is a huge amount of capital, a huge amount of flow. It has an impact on internal consumption and internal growth,” he said.
However, according to a research report by UK think tank IPPR, eastern European migrant labourers are now likely to return home as the economic tables turn. “Better employment prospects at home are likely to discourage potential migrants from leaving and existing migrants to return home,” the report said.
Moreover, the study says that around half of Polish emigrants who arrived in the UK – the most common destination for Polish emigrants - between 2004 and 2006 had left the country by the end of 2007, while the rate at which Polish migrants are arriving in the country has slowed with the official number of workers approved under the country’s registration scheme falling 17% in the second half of 2007 to 104,370 from the year before.
Poland has taken big steps to attract workers home: in September last year, President Lech Kaczyski promised to introduce a range of measures to lure Polish migrants back, launching a “Return to Poland” website in October.
Unemployment has fallen 9 percentage points since 2004, although it remains above 10%. But the Polish economy has demand for a further 250,000 more qualified workers, a quarter of whom are needed in the construction sector, according to estimates last December from the Polish Confederation of Employers.
Labour shortages in certain sectors have also seen a sharp increase in wages over the last year - according to the British-Polish Chamber of Commerce, average private sector wages grew 12.8% in the year to February 2008.