It will be increasingly integrated with the world economy and exposed to the external economic environment, which will create both opportunities and risks. The changed environment allows for a more efficient allocation of resources while providing the growing Polish economy with the capital it urgently needs to close the gap between investment and domestic savings. The inflow of long-term capital will contribute to an increase in productivity through such means as the transfer of technology and introduction of better management techniques. The effectiveness of Poland's response to these and other external shocks or risks will be determined by the quality of the government's macroeconomic, structural, and institutional frameworks for decision making. Responsible economic policies will allow benefits to be maximized and the risks associated with integration into the world economy to be reduced.
Macroeconomic stabilization depends to a large extent on the consistency of economic policy.
Achieving a proper mix between fiscal and monetary policies and exchange rate policies remains relevant. Reducing current account and inflationary pressures is a priority. Poland's sizable current account deficit, which amounted to 7.6 percent of GDP in 1999, will continue to be a source of vulnerability. Any tightening of Poland's monetary policy in response to rising inflation will therefore have to be weighed carefully against the likely effects on the exchange rate and the current account. Poland's current account deficit is financed largely by foreign direct investment, and its gross reserves currently cover seven months of imports and 400 percent of short-term debt.