Poland did well in supporting the corporate sector and labour market during the COVID-19 (coronavirus)-induced recession and is now “well-positioned for a durable recovery,” the International Monetary Fund (IMF) said on February 8.

Much uncertainty remains, however, and Poland needs to retain “continued vigilance and flexibility in the near term” in terms of response to the crisis, the IMF said.

To that end, the IMF suggested that Poland ensured adequate coverage for those sectors that are more indirectly affected.

That is currently a subject of political controversy, with a number of sectors asking the government for more help or to end restriction so that they can resume operations.

“Once the recovery is firmly underway, a gradual reduction of the fiscal deficit would be needed over the medium term to replenish fiscal buffers, including through improved revenue administration and expenditure efficiency,” the IMF said.

Poland’s accommodative monetary policy should also remain in place until the recovery is “well established.”

Looking forward, the IMF said that Poland should prioritise “labour market reforms that encourage participation and foster the reallocation of labour in the post-pandemic economy.” 

Poland should also boost public investment, including through digitalization and green investments, supported by the Next Generation EU funds. 

The coronavirus pandemic triggered a recession in 2020, though the estimated contraction of 3.4% would be among the least severe in the European Union, the IMF said.

Poland’s own recession estimate of just 2.8% is even more optimistic. 

“Economic growth in 2021 is projected at 2.7%, likely limited by ongoing restrictions early in 2021 but expected to rebound later in the year as vaccine access improves, with a further acceleration in growth expected in 2022,” the IMF said.