A new World bank Report, Critical Connections: Promoting Economic Growth and Resilience in Europe and Central Asia, has revealed that Poland’s international connectivity – through trade, investment, migration, communications, and transport – is among the highest in Europe.
“This report shows that greater economic connectivity leads to the spread of knowledge and higher income growth for societies, but even more so for the bottom 40 per cent of the income distribution,” says Hans Timmer, the World Bank’s chief economist for Europe and Central Asia.
“Our analysis shows that increased international integration, through a network of connections, facilitates the transfer of technology and ideas between countries, firms, and people – which is essential for boosting long-term growth and shared prosperity,” added David Gould, World Bank lead economist for the Europe and Central Asia region and lead-author of the report. “Moreover, like social networks, being connected to well-connected countries brings more knowledge and technology than being connected to isolated partners.”
Poland is listed among the most connected countries in Europe mainly because of its strong infrastructure transport links, which spur international trade of goods and services. During its economic transition, Poland also boosted its links with Germany, the best-connected country in Europe. Additionally, Poland leveraged its growing ties to Germany to develop connections with that country’s trading partners and expand trade to broader markets within Europe and beyond.
“The ‘neighbourhood effect’ of bordering Germany has helped Poland integrate into German networks and thus participate in global value chains. At the same time, however, in the case of an economic shock in Germany, Poland would be the most affected country in the European Union due to its high reliance on connectivity with Germany,” says Carlos Piñerúa, World Bank country manager for Poland and the Baltic States.
The new report measures connectivity by creating a new indicator, the Multidimensional Connectivity (MDC) index, that combines several channels of international connections, including: trade, FDI, migration, information and communication technology (ICT), and transport links. According to the report, the best-connected sub-regions are Western Europe, followed by Northern, Central, and Southern Europe. The Western Balkans, Central Asia, and the South Caucasus have the lowest levels of overall connectivity.
To maximise their exposure to international knowledge flows and benefit from integration, countries should maintain low barriers to international transactions, keep minimal constraints on inward and outward FDI and participate in deep multilateral trade agreements that support integration of services markets. Adopting international best practice for standards governing product markets, worker protections, and the environment would also encourage international connectivity.
According to the report for the emerging Europe region, Poland takes first place (11th out of all ECA countries), followed by the Czech Republic (14th), and Hungary (15th).