Poland and Ukraine: A tale of two economies by Simon Tilford
Ukrainians would be forgiven for casting envious glances at their Western neighbour. Poland – especially its deprived eastern regions – may still be relatively poor compared with most of Western Europe, but it looks like a veritable Tiger economy compared with Ukraine. In 1990 the two economies seemed pretty similar: both were populous, one a former Soviet state and one a Soviet client state. Both shared a legacy of uncompetitive, inefficient Soviet heavy industry, environmental degradation and poor physical infrastructure. Why have the two countries fared so differently since being freed from communist control? Partly, because they were less similar than they seemed and partly because Poland was treated by the EU, Russia and the US as a sovereign country with the right to determine its own future. Ukraine was not. Poland faces no shortage of challenges. Slowing growth rates and weak productivity growth suggest that the country could struggle to make the transition to a high-income economy, languishing instead in the ‘middle income trap’. Still, the contrasting fortunes of Poland and Ukraine since 1990 could not be starker. In 1990 the Polish economy was just 20 per cent larger than the Ukrainian one, but by 2012 it was three times bigger. Between 1990 and 2012, Ukraine’s economy shrank by over 30 per cent; Poland’s more than doubled in size, with the result that Polish per capita incomes are now five times those of Ukrainians. Polish exports increased six-fold between 1991 and 2012, whereas Ukraine’s fell 40 per cent. Meanwhile, Ukraine’s population
declined 12 per cent between 1990 and 2012; Poland’s edged up slightly. Ukraine has performed particularly badly even by the standards of ex-Soviet republics. This is partly down to the country lacking significant mineral resources, coal notwithstanding. The Russian economy, for example, would look little different to Ukraine’s were it not for the bounty of oil and gas. But Ukraine’s dire performance also reflects the legacy of competing identities, a high degree of sovietisation of its economy, Russian meddling and a cynical EU. Poland is an old nation-state, albeit one with mobile borders. There was a robust sense of Polish