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Poland: A tough sell for investors?

Catherine Boyle, reporting from Warsaw
Thursday, 21 Nov 2013 | 6:25 AM ET
Krzysztof Dydynski | Lonely Planet Images | Getty Images

Poland has been one of the more resilient post-Communist states in Eastern Europe, but with growth slowing, how can its new Finance Minister drum up international investment?

Mateusz Szczurek, an economist with no political experience and currently chief economist for Central and Eastern Europe at ING Bank in Warsaw, was a surprise appointment to succeed Jacek Rostowski, one of Europe's longest-serving finance ministers, on Wednesday.

Read more: How Poland's new Finance Minister will affect markets

He faces complaints about Poland's slowing growth and hefty deficit (the amount by which government expenditure exceeds income). The European Commission has warned that the country needs to take more action to bring its deficit down to 3 percent by 2014 – a deadline which has already been extended by a year. The budget deficit is set to reach 4.2 percent this year as gross domestic product growth slows to around 1.5 percent, according to ratings agency Fitch.

Controversial plans by the government to reduce the deficit by effectively commandeering bonds owned by pension funds met with disapproval from the markets when they were announced in September.

Jan Krzysztof Bielecki, a former prime minister of Poland and one of the current Prime Minister Donald Tusk's advisers, argued that the government is torn between two vocal opposition groups: the nationalist Law and Justice (PiS) party, which is resistant to reform, and Warsaw-based intellectuals, who think the pace of reform should be stepped up.

"We have to think about fiscal discipline," he told CNBC.

"The scale of change is being underestimated by some people in Poland."

Tusk is eyeing elections in 2015, and is currently trailing the PiS in opinion polls.

"No-one expects any reforms ahead of elections," Krzysztof Rybinski, rector of Vistula University, told CNBC.

"The key thing for him (Szczurek) to do is to go around Europe and around the world telling good stories about Poland.

Rybinski, who taught Szczurek in his early days at university, described the former ING economist as an "excellent economist."

Poland, together with Hungary and the Czech Republic, have held up well in recent months, according to David Bloom, global head of foreign exchange strategy at HSBC. He argued that the zloty is currently well-supported.

(Read more: Emerging market currencies Fed tapering can't touch)

Companies which capitalize on the burgeoning e-commerce trade in Eastern Europe are worth investing in, according to Tomasz Czechowicz, managing partner of MCI Management, a Warsaw-based fund manager. His fund, which has more than 1 billion zloty under management, has invested in companies like Answear, dubbed the Eastern Europe equivalent of online fashion retailer Asos.

A traditional high street-style shopping culture hasn't really developed in Eastern Europe, because it was underdeveloped during the Communist era. Now, it looks as though many Eastern European consumers may leapfrog the high street stage of evolution and go straight to e-commerce, according to Czechowicz.

"Amazon and eBay and the other Western players are coming too late to the market," he argued. "You already have strong local players."

The government is focusing on continuing to make Poland a good climate for entrepreneurs, according to Bielecki.

"The difference between today and the post-transition time is that, in those early days, there were no regulations at all," he said.

"Now, we have developed institutions, but they are sometimes good and sometimes obsolete. We need to improve the quality of our institutions."

-By CNBC's Catherine Boyle. Twitter: @cboylecnbc.

This article has been clarified to reflect that Law and Justice (PiS) is a nationalist party.

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