Long abstract

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Poland’s economy has performed well in the last two years. Real GDP has grown faster than in almost all other OECD countries. Unemployment has fallen sharply, as employment has surged while participation has declined. The benefits of this robust growth performance have been shared between capital and labour: wages have picked up sharply. The immediate challenge is to head off overheating by an appropriate policy mix. Looking further ahead the primary objective should be to reform labour market, tax and other structural policies so as to boost effective labour supply in a way that will sustain the process of convergence of per capita incomes with those of the more affluent OECD members. That will mean: increasing labour market flexibility, further reducing the tax wedge on labour income (especially for the least skilled), closing off the remaining routes to early retirement, and improving labour mobility by strengthening housing markets (particularly for rentals) and enhancing transport infrastructure.