Poland Embraces Growth Principles And Becomes World’s Best Performing Investable Country

Posted by Jerry Bowyer on 2/21/18 1:11 PM
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Last year Poland had far higher than average earnings growth than the world average. In addition it had the highest investment performance in the world.

2017 country returns.png

This performance is even more amazing when one realizes that at the beginning of the year Poland was substantially less attractively valued than the global average, weighing in with a PE of 22.5 in comparison with average of 20.4.

Country

Returns

P/E

Earnings

Commentary

Story

Poland

Extremely high.

Slightly unattractive

Very high

Ruling party pro economic reform, opposition very ineffective

G

Austria

Extremely high.

Attractive

Very high

Pro-market and nationalist parties took power

G&V

Chile

Very high

Slightly attractive

Extremely high

 Generally pro-growth culture, by a left of center leader who was expected to be more anti-growth.

G

Peru

Very high.

Unattractive

Very high

 

G

           

South Korea

Very high

Very attractive

High

Export growth, delay in rate hikes

G&V


So what is going on in Poland? It is frequently mentioned by left-of-center commentators as one of the nations which is allegedly falling into 'illiberalism'. Hungary is another frequently-mentioned example. Part of the reason for this is that both countries are reasserting their historical Christian faith and defending their European distinctiveness. In fact, at the end of 2016 the President of Poland attended a ceremony that declared Jesus to be the King of Poland. The government has exhibited tendencies towards populism, conservatism, and nationalism, which has made it a target for criticism from European elites.

However, the ruling Law and Justice Party has switched focus to economic reform. In addition to being Christian, nationalist, and culturally assertive, the party is also ostensibly free market, and opposition parties are highly ineffective. A dual-rate tax system, 18% and 32%, was implemented in 2015. This makes the top rate considerably lower than US top rate AFTER recent tax cuts.

Poland, along with Hungary and to a lesser degree Austria, are spearheading a new and yet very old combination: A synthesis of an unashamed assertion of national sovereignty, cultural traditions, Christian faith, and economic growth, and an unwillingness to bow in response to accusations of illiberality by utopian, transnational elites. Will it work? We don't know for sure, but so far it has delivered outstanding financial results.

Topics: Principles-Based Investing, Global Economics

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