Public investment, transport infrastructure and growth in Poland

This Country Focus discusses the relation between public investment and economic growth in Poland. Theoretical and empirical work has shown that improvements in the quantity and quality of public infrastructure have a positive impact on growth in the medium and, possibly, in the long run. The effect is even more important for economies in transition engaged in a catching up process. The analysis presented supports these conclusions. It also provides statistical evidence suggesting that higher public investment stimulates growth in Poland. In recent years, a significant effort has already been made to increase public spending in infrastructure. This has contributed to smooth the economic downturn in Poland during the crisis. However, significant infrastructure investments are still needed, notably in the area of transport. In the current post-crisis environment, the envisaged efforts to further improve public infrastructure seem to be an appropriate way to support the recovery. Spending reallocation within the budget and a more extensive use of EU funds would allow financing these new investments. This would avoid increasing the budget deficit or introducing distortionary taxes, which would partly or fully offset the positive impact of the additional investments.