Position Statement 29: Low vaccination rates in Poland are harming the economy
With the MDDV principle (mask, distance, disinfection, and ventilation) often being ignored, the low vaccination rate of Poland’s population is hitting the Polish economy. The epidemic we are currently facing is likely to die out soon. However, it will inevitably be followed by others. Let us remember an important lesson learned from the current epidemic – strict adherence to prevention and widespread vaccination protect the population’s health and the country’s economy.
This pandemic is usually viewed from two perspectives. One is the health perspective, and the other is the economic perspective. Measures that protect the health of the public and those that shield the economy appear to be mutually exclusive. For example, the restrictions placed to reduce the number of cases in the first months of the COVID-19 outbreak – which included shutting down many businesses – significantly weakened the economy. Conversely, implementing “weak” restrictions later in the outbreak, when the economy had already been hit hard by the epidemic, often did not decrease the number of infections in the intended fashion.
But actually, the notion of an “either-or” choice between the health of citizens and a healthy economy is bogus. The opposite is true. A healthy population contributes to a functioning economy, and a functioning economy is necessary to protect the population’s health. We currently have the tools to fight this pandemic without shutting down the economy. These include vaccination and the MDDV principle (mask, distance, disinfection, ventilation). The example of Taiwan, which we described in our Position Statement 26, shows that rigorous application of the principles of prevention (MDDV) positively impacts both people’s health and the economy. Moreover, COVID-19 vaccines are the best-studied vaccines in the history of medicine, and we know that refusing to take them increases the risk of infection, disease, complications, and even death. Failure to act decisively to promote vaccination and comply with MDDW weakens population health, strains the health care system, and undermines the economy.
Economy during the pandemic
The main factors that will negatively affect the Polish economy in 2022 are: a) the still ongoing COVID-19 epidemic caused by currently known and probable new variants of SARS-CoV-2, b) low level of vaccination in the population, c) high inflation, d) strained public finances. This means that the pandemic should be viewed as a phenomenon in which the health of the citizens and the economy of a country are inseparable. At present, there is a rising risk that the economy will become increasingly vulnerable to possible subsequent waves of the pandemic.
In 2020, like most global economies, the Polish economy entered a recession. Its severity was at an average level compared to other EU countries. In 2021, again in line with most of the world’s economies, there was a strong economic rebound [1]. A combination of three factors saved us from a deep crisis in 2020 and enabled a rapid economic rebound in 2021.
The first factor was the worldwide rollout of generous and widespread fiscal packages. In Poland, they were introduced as “crisis shields.” As a result, bankruptcies of businesses were prevented, and unemployment did not rise, which tends to be the case with crises. This allowed the economy to maintain its production potential (supply side) and ensure incomes (demand side). This was an appropriate response to the crisis – common to all economies affected by restrictions – and it was in line with the scientific consensus and recommendations of the international institutions [2, 3].
The Polish economy was additionally affected by two factors. One was related to the specific structure of our economy – we have a smaller service sector than other EU countries, which is where losses during restrictions were the greatest. The second factor was the introduction of “weak” restrictive measures from June 2020, which hampered economic activity to a small extent, but, unfortunately, was not effective in containing the epidemic. This resulted in one of the highest waves of infections and deaths in the whole world. During the second and third waves in the fall of 2020 and spring of 2021, there were nearly 140,000 excess deaths in Poland, and by the fall of 2021, over 50,000 [4]. This means that the scale of restrictions applied in Poland was insufficient, due to inadequate application of the MDDV principle and low vaccination rates in the Polish population.
Balance of economic risks in 2022
At the beginning of the pandemic, when the “crisis shields” were introduced, the Polish economy was in a very favorable situation: we had a low level of public debt (46% of GDP at the end of 2019) and a historically low level of servicing costs [5], as well as high economic growth forecasts (3.1% according to the International Monetary Fund, [7]). However, inflation was already high back then (4.6% in March 2020, [6]). Today, the measures directed at combating the economic consequences of the pandemic have resulted in much higher debt levels (59% of GDP in Q2 2020, [5]) and even higher inflation, which reached 8.6% in December [6] and according to economists will continue to rise [7]. The increased level of public debt is the price for preventing high unemployment rates and a wave of bankruptcies during the COVID-19 crisis, but the inflation rate need not and should not have been so high. The risk of increased inflation was highlighted from the very beginning of the pandemic [8]. It is disturbing that monetary authorities did not communicate this risk to the public throughout the pandemic. This poor communication on the part of the central bank may lead to an “unanchoring” of inflation expectations, which is a phenomenon where rising inflation prompts the public to anticipate continued increases in inflation. In such a situation, inflation begins to rise of its own accord – businesses continue to raise prices even when there is no direct cost pressure. We are beginning to see the first symptoms of this phenomenon in Poland. Therefore, today it is understandable why inflation causes so much emotion and legitimate concerns among economists and the society [9].
Government debt is now approaching 60% of GDP, the limit set by the Constitution, and further efforts to fight inflation will increase the debt servicing cost. Monetary authorities are faced with difficult choices when setting the interest rates, as every possible scenario carries associated risks. On the one hand, an insufficient response poses the risk that inflation will remain high, while on the other hand, an overreaction increases the risk of an economic slowdown. Polish economic policy-makers have come to a difficult moment, much more difficult than in March 2020. Today, implementing measures on the scale of an “anti-crisis shield” would be much riskier than at the beginning of the COVID-19 crisis. With the Omicron variant and low vaccination levels in the population, the Polish economy is in an extremely risky situation.
A number of economic risks accompany the continued uncertainty associated with the ongoing epidemic. To begin with, the health and lives of citizens are at risk. This means the direct risk of infection and disease and the indirect risk of health services being denied or delayed due to the burden on the health system from COVID-19. Failing to contain the epidemic also implies further economic and financial decisions, weak restrictions or lockdowns, which will be coupled with additional risks that will increase the level of uncertainty and make planning challenging. This will lead to a decline in investment in the business sector. Restrictions may increase unemployment and bankruptcies, and the generous state support will be harder to obtain than at the outset of the pandemic. Inflation, meanwhile, will make it harder to plan household budgets.
On top of these issues is a lack of trust in public institutions and mistakes made by the decision-makers in communicating with the public. Poles do not know how the government plans to counteract a new pandemic wave or how the monetary authorities plan to counteract inflation.
Dynamic recovery or recurring disease outbreaks
Unlike in 2020, we now have an effective tool to significantly reduce the abovementioned risks. That tool is vaccines. Individual-level immunization will not only allow people to avoid the severe health consequences of COVID-19, but it will also allow them to work, learn, and engage in social activities safely. And a community-level immunity will allow for households to safely budget, for businesses to invest, and for the government to make reliable economic and monetary policies.
Should the population be immunized against SARS-CoV-2 infection, the economy could experience a dynamic recovery. Failure to do so could result in pandemic recurrences and restrictions that would negatively impact the Polish economy. If widespread vaccination is not forthcoming, the current fifth wave of the pandemic, which caused severe health and economic consequences, may not be the last. We fear a scenario in which countries with high vaccination rates return to a rapid growth path, while countries with low rates develop much more slowly. International institutions such as the International Monetary Fund [10] and the European Bank for Reconstruction and Development (EBRD) [11] have also highlighted this risk. Examples from recent days prove that we are heading in this direction. When countries with almost fully vaccinated populations, i.e., Denmark, Great Britain, and Norway, have lifted the last restrictions, Poland has decided to close its schools again and switch to distance learning. Currently, there is no motivation or any real incentives for vaccination in Poland. Moreover, in contrast to most Western European countries, those who are unvaccinated do not have their participation in social life limited in our country in any way.
Economic Long COVID
The long-term health effects that COVID-19 infection cause have already been described. Similarly, a COVID-19 outbreak can leave long-term negative effects on the economy even after it has subsided. Three mechanisms could lead to this. The first is the long-term deterioration of population health due to delayed diagnosis and limited treatment of non-COVID-19 diseases because of the strain on the health care system during a pandemic and mental health damage. The second reason is reduced investment in workers, physical capital, and new technologies by businesses that have been forced to focus entirely on their survival during the pandemic over the past two years. The third could be the reduced human capital of students, affected by school closures during the pandemic. Deficiencies in their education could lead to lower skills, which could translate into lower wages in the future and thus a weaker economy as a whole in the very long run [12].
European recovery plan
In this situation, the joint economic recovery program of the European Union, NextGenerationEU [13], is a highly praiseworthy initiative. It is meant to provide funds for rebuilding European economies after the COVID-19 pandemic. Funds for the program will be raised at the level of the whole community through issuing common debt and introducing new taxes at the Union level (e.g., digital tax and carbon border tax). Poland could receive almost €60 billion from this program, including about €24 billion in non-refundable grants and the rest in the form of low-interest loans [14]. The benefits of the European recovery program are twofold. Firstly, it means a transfer of resources to the Polish economy that could not otherwise have been obtained at such a low cost. Secondly, it provides targeted funds, which are to be invested in digital transformation and green energy, in keeping with EU guidelines and the principles Poland’s own National Recovery Program. The most significant advantage of this program is that it provides investments with direction and a long-term perspective, which is usually challenging to achieve for national policy-makers. The current political conflict between the Polish government and the European Union has already led to a delay in allocating funds from the National Recovery Plan. Its rejection would be an unforgivable mistake. Not only would it worsen the number of risks to the Polish economy, but it would also damage Poland’s long-term development prospects.
Therefore, we hereby call for real incentives to be implemented in Poland to encourage people to get vaccinated, for a credible program to be put in place to increase the level of vaccination against COVID-19, for the political conflict with the European Union to be ended, and for greaer collaboration with trade unions and employers’ organizations to introduce effective protective measures for workers and clients against COVID-19 infection. We also call for a credible program to return to the inflation rate target set by the National Bank of Poland within the expected timeframe. And above all, we call upon all political groups in Poland to present their proposals for how to strengthen the health care system, invest in education and science, and prepare Poland to effectively fight the subsequent COVID-19 waves and outbreaks that we will inevitably have to face in the future.
About the team
The Interdisciplinary COVID-19 Advisory Team to the President of the Polish Academy of Sciences was set up on 30 June 2020. The team is chaired by Prof. Jerzy Duszyński, President of the PAS, with Prof. Krzysztof Pyrć (Jagiellonian University) as deputy chair and Dr. Anna Plater-Zyberk (Polish Academy of Sciences) as its secretary. Other members of the team are:
- Aneta Afelt (University of Warsaw)
- Małgorzata Kossowska (Jagiellonian University)
- Radosław Owczuk, MD (Medical University of Gdańsk)
- Anna Ochab-Marcinek (PAS Institute of Physical Chemistry)
- Wojciech Paczos (PAS Institute of Economics, Cardiff University)
- Magdalena Rosińska, MD (National Institute for Public Health – National Hygiene Institute, Warsaw)
- Andrzej Rychard (PAS Institute of Philosophy and Sociology),
- Tomasz Smiatacz, MD (Medical University of Gdańsk)
References:
[1] Bukowski P. and Paczos W., Why is Poland’s economy emerging so strongly from the pandemic? A comparison with the UK, LSE European Politics and Policy blog, 2021, https://blogs.lse.ac.uk/europpblog/2021/05/19/why-is-polands-economy-emerging-so-strongly-from-the-pandemic-a-comparison-with-the-uk/.
[2] Baldwin R. and Weder di Mauro B., Mitigating the Covid-19 Crisis: Act Fast and Do Whatever it Takes, Centre for European Policy Research, 2020, https://voxeu.org/content/mitigating-covid-economic-crisis-act-fast-and-do-whatever-it-takes.
[3] International Monetary Fund, World Economic Outlook, 2020, https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020.
[4] Original calculations based on data from: Karlinsky A. and Kobak D., Tracking excess mortality across countries during the COVID-19 pandemic with the World Mortality Dataset, eLife, 2021, https://doi.org/10.7554/eLife.69336, https://github.com/akarlinsky/world_mortality/.
[5] Data for consolidated debt of central and local government institutions (known as the “EDP debt”) based on https://www.gov.pl/web/finanse/zadluzenie-sektora-finansow-publicznych.
[7] International Monetary Fund, World Economic Outlook, 2019, https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019.
[9] Bukowski P. and Paczos W., We need more progressive taxation, and a wealth tax, to pay for the Covid-19 rescue packages, LSE European Politics and Policy blog, 2020,https://blogs.lse.ac.uk/covid19/2020/07/07/we-need-progressive-taxation-and-a-wealth-tax-to-pay-for-the-covid-19-rescue-packages/.
[10] International Monetary Fund, World Economic Outlook, 2021,https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021.
[11] European Bank for Reconstruction and Development, Regional Economic Prospects: Bittersweet Recovery, 2021,https://www.ebrd.com/what-we-do/economic-research-and-data/rep.html.
[12] Covid-19 Advisory Team to the President of the Polish Academy of Sciences, Position Statement No. 10: Implications of the COVID-19 pandemic for the mental health and education of children and adolescents, 2021, https://institution.pan.pl/index.php/653-position-statement-no-10-of-the-covid-19-advisory-team-to-the-president-of-the-polish-academy-of-sciences-implications-of-the-covid-19-pandemic-for-the-mental-health-and-education-of-children-and-adolescents
[13]https://www.gov.pl/web/planodbudowy/czym-jest-kpo2.
[14] Paczos W. and Rachel Ł., Stanowisko 1/2022: Jak obniżyć inflację w Polsce: czy miękkie lądowanie jest jeszcze możliwe? [How to reduce inflation in Poland: Is a soft landing still possible?], 17.01.2022, https://napokolenia.pl/stanowisko-1-2022-jak-obnizyc-inflacje-w-polsce-czy-miekkie-ladowanie-jest-jeszcze-mozliwe/.
