Pest Analysis of Polish Construction Market

PEST analysis of polish market with a particular focus on the polish construction industry has been conducted in order to investigate the important factors that are influencing the industry in this country and having an impact on the companies operating or planning to operate in Poland in the construction sector. This analysis has been conducted in order to help assess how attractive the construction industry in Poland is and what factors can help it to develop or stop the development of it. Political Factors http://www. warsawvoice. pl/view/21753/! Political situation in Poland is very stable .

The process of EU accession provides a guarantee that Poland remains a established democracy, with a market-based economy and with property rights respected. Poland went through a very tragic test of its political stability after 10 April 2010 when the President of Poland and many official notables (head of national bank, ministers, vice presidents etc) have been killed in a tragic plane crash in Russia. Even though that at this day Poland lost many financial and organisational leaders, the country hasn’t experienced any political and economical instability.

Also the stock exchange didn’t undergo any serious shocks and there were no problems with maintaining the unchanged credit rating for the country. It proves that the country is stable in terms of politics, well prepared for potential dangers and there is no threat for this relatively new democracy. There are some concerns regarding the legislation issues. The construction law is considered by many specialists as too complicated and not coherent and large part of companies regard it as a great cause for concern.

At this moment the legislation for the construction industry is considered as the weakest point by some of the agencies (Poland’s score at for Legal and Regulatory risks is 51. 2 out of 100 according to Business Monitor International). To sum up, one of the biggest problems plaguing construction sector in Poland is that existing laws regulating construction projects are out of touch with the economic reality and often construction projects are hindered by incoherent regulations and inconsistent, arbitrary interpretation of legal procedures.

However in 2009 the Amended Construction Law has been agreed by the Parliament, which is hoped to bring revolutionary changes that simplify the construction process. This law should come into force very soon, but it is not known when exactly . According to specialists, the latest amendments to the construction law are crucial to meaningful change on the construction market and are are supposed to considerably shorten the time needed to plan projects. This is expected to boost the economy and make it more competitive.

One of anther issues that polish government has been trying to deal with is the burden of taxes and social security payments which are considered to be an obstacle for individuals and companies . So solving the problem of heavy tax burdens should be one of the priorities for the government. Political Swot Strengths ? EU membership and strong economic growth in 2008 and 2009 (projected at 5. 4% and 4. 6% respectively) should facilitate medium-term political stability.

?Following the Civic Platform (PO)'s victory in the snap elections on October 21, the new PO-led coalition is expected to make new advances with regards to structural reforms and rebuilding relations with the EU. Weaknesses ? Considering the long-standing animosity between the executive and the PO, the new government's capacity to push through its reform agenda might be at risk. Opportunities ? Poland's fundamental foreign policy bias is in favour of EU integration, but maintaining trans-Atlantic ties, is unlikely to be threatened.

?The new government has promised to rebuild ties with Poland's European neighbours, which were heavily bruised over the past year. While Poland is unlikely to significantly alter its tough bargaining stance, we believe that a softer rhetoric will bode well for Polish-EU business relations going forward. Threats ? The PO's aim to restructure the government's medium-term financial position by implementing expenditure cuts is likely to come into conflict with its own plans to reduce the tax burden. This will pose a risk to substantial fiscal reform over the medium term.

Country Risk High levels of policy continuity, a well structure economy and limited evidence of corruption are all strong points for Poland’s country risk score, however, the legal framework needs some attention, giving it only a middling score overall for this indicator. With elections due in 2010, there is heightened short term political risk, although this should not be overstated, with things expected to go smoothly and little substantial alterations to regulations expected.

Economic Factors – General Overview Poland’s economic performance in 2009 was strong, even though there was a heavy global downturn. Poland managed to achieve the best financial results in the whole EU community, hitting a GDP growth of 1. 7% while most of the countries were burned deep into the recession. This can be the best indicator to prove that the economy of Poland is in a very good shape and that the country went a long way since 1989. There are some strong indications that this economic growth will be sustained or even the economy can bloom more in the nearest future, when the global downturn and recession will be over.

The strong economic position that Poland managed to achieve that resisted recent global plus the fact that the country has become the largest recipient of EU cohesion funs and impact of large inward FDI inflows give widespread high growth expectations. There are some possible destabilisation’s risks connected with the potential euro adoption, but at this moment Poland is not very willing to join the euro community especially when recently some countries (Greece, Slovakia) have experienced strong economic problems related to sharp fall in the cost of capital because of joining the euro zone without proper adjustment of domestic economies.

The Polish economy for the next few years will be impacted mainly by the economic situation in Europe and the rest of the world. But there are several crucial factors which will reduce the impact of the global economic downturn on the Polish economy and situate the country in a more favourable position in the region, but also in Europe as a whole and will have an important effect on the construction industry in Poland. Of course one of the most vital factors is the inflow of EU funds, which is expected to reach by 2013 the total amount of 67 billion Euros.

These funds are intended to be used on developing mostly the infrastructure. The Polish economy and internal demand will also benefit from the reduction of maximum income tax rate from 40% to 32%. Another important factor is the organisation of the EURO 2012 football championships that will be co-hosted by Poland and Ukraine. This is a huge stimulus for the country’s economy as a whole, but also in a great deal it will impact the construction industry. This is because this major international event means not only the inflow of cash from fans which will be visiting Polish hotels, restaurants, tourist attractions, etc.

This also means accelerating the work on transport infrastructure and also building the whole tourist infrastructure like hotel etc. Many economic analysis (BMI, Economist Intelligence Unit) are standing on the position that the Polish economy is on the good way to remain an outperformer in the wider region. Economic SWOT Strengths ? EU entry has provided a basis for sound economic expansion over the forecast period, with access to EU fund flows (Poland is the largest beneficiary of any member state) helping the current investment boom.

?Polish exports have proved remarkably resilient to the appreciation of the local currency, due to strong increases in labour productivity. Weaknesses ? Social protection largesse – including eligibility for early retirement schemes, payments to farmers and disability pensions – needs to be reduced to improve economic competitiveness and mitigate the associated fiscal burden. Opportunities ? Strong levels of growth provide an excellent opportunity for implementing fiscal reforms, which are likely to be taken advantage of under a PO-led coalition. Threats ?

Monetary policy credibility is under increasing threat, with planned changes to the central bank mandate and a new banking supervisory body. The overall bias of the new National Bank Of Poland Governor Slawomir Skrzypek remains to be seen. Socio-Cultural Factors – General Overview Poland is the sixth largest country in the EU and in 2009 it has recorded a positive birth rate. Poland’s population has increased by more than 37 thousand as compared to 2008. This means that Poland is experiencing a stable demographic situation. Additionally the increase in society’s wealth

can be observed as Poland has been consecutively reducing the gap separating it from the ‘old’ EU members. Poland also has recorded a steady increase in consumer expenditure at an average annual rate of 5 percent. Poland remains one of the youngest countries in Europe. The median age in the 2002 census was close to 35 years (37 for women, 33 for men) and working-age population will rise, even though total population will drop For the construction sector the most meaningful societal factor is the mass outflow of the workforce to other EU countries since joining the EU in 2004.

This migration impacted heavily polish construction sector as many highly skilled builders and engineers have decided to go abroad, mainly to the UK and Ireland, in order to be better remunerated by foreign employers. However the recession that started two years ago affected Irish and British economies to a high degree and especially the construction industry in these country have been undergoing through very difficult phase. As a result many of the polish construction builders and engineers decided to come back to Poland in 2008 and 2009.

This trend of Poles coming back to their country is still visible. Another factor that can impact on their decisions of return is the rise in the labour wages and still relatively low costs of living in Poland in comparison to the western countries. In terms of the cultural dimension, Poland has been always a very westernised country and has been always considered as being closer to the West than East in terms of culture. That makes it easier to make businesses here than at other Eastern European markets. Bibliography "Stable economic climate in the Polish construction industry - April 2010.

" Market analysis in Central and Eastern Europe - PMR Publications. 2010. 27 Apr. 2010 . "Construction Law at a Crossroads. " The Warsaw Voice - Poland. 27 Apr. 2010 . "Weaker outlook for the construction industry in Poland - PMR press releases. " Market analysis in Central and Eastern Europe - PMR Publications. 27 Apr. 2010 . "What Hinders Construction Projects? " The Warsaw Voice - Poland. 26 Apr. 2010 . "Wzrost produkcji budowlanej w Polsce w 2010 r. siA™gnie 8% | PRportal. pl | kategoria:Biznes, autor:PRportal. pl. " PRportal. pl - bezpA‚atne informacje prasowe dla biznesu. 27 Apr. 2010 .