Transition of a country from the category of developing countries to developed one is a process that takes years. The change of category is a byproduct of institutional changes and accompanying increase in the level of living. Poland has been implementing reforms moving us toward market economy and democratic society since 1989.
As a result we were able to close significant part of the gap in standard of living between Poland and Western countries. It is too soon to compare Poland to for example Germany, but let’s consider Spain – In 1989, GDP per capita in Poland was just 48% of GDP per capita in Spain, which means that roughly speaking level of living in Spain was twice higher than in Poland. 28 years later we are still poorer than Spaniards but the difference is much smaller – our GDP per capita in 2017 was equal to 77% of Spanish GDP per capita.
Definition of “developed” country differs between organizations and for some Poland has achieved such level earlier than for FTSE Russell. For example World Bank, that labels developed countries “high income country” includes Poland in this category since 2009.
Also UN considers Poland developed country and since 1996 we are member of OECD, which is a club of developed countries. On the other hand IMF still counts Poland as developing country.
FTSE Russell is a company focused on providing stock market indices and associated data services, for which development of financial markets is crucial. Thus for FTSE besides general progress of Polish economy maturity of Warsaw Stock Exchange (WSE) was a particularly important factor. Similarly to overall development of the country maturing of WSE was not a onetime event, but a process that started in 1991 when the stock exchange in Warsaw was established.
Reclassification of Polish economy as developer one by FTSE does not significantly change perception of it by international investors. They also witnessed gradual progress of Polish economy after 1989. Overtime, as Polish economy matures, investors lower their expectations regarding rates of return as they perceive a decrease of investment risk.
It should be noted that Poland gained significantly from its membership in EU. It not only enabled free flow of goods, services, capital and people but also put rule of law high on public agenda and enabled the backstop of European institutions in case of conflict between investors and Polish government.
Recent actions by current government show that even within EU rule of law can be weakened and it also illustrates that although increasing number of institutions classifies us developed country we are still behind countries like Sweden, UK or US where both check and balances are stronger and level of living higher.
This is a commentary on the article published by Financial Times titled “Poland upgraded to developed market status by FTSE Russell”