Industry

During the period of communist rule, remarkable quantitative advances in industrial production were overshadowed to some extent by shortcomings in quality and by problems of organization. Moreover, industrial production in Poland--governed almost solely by quantitative requirements and dependent on inexpensive raw materials provided through Comecon--was largely inefficient and poorly prepared to compete in the global marketplace. Industrial output fell dramatically after the demise of communism, especially during the first years of shock therapy, with declines of a third or more in almost all of manufacturing and mining following the freeing of prices and the collapse of Comecon. As Polish industry began to downsize, however, production improved, and by the mid-1990s industry accounted for about two-fifths of GDP. The principal branches of the manufacturing sector are machinery and transport equipment, food products, metals and metal products, chemicals, beverages, tobacco, and textiles and clothing. All but a small portion of the total electrical power output is derived from thermal plants using bituminous coal and lignite. Natural gas has largely replaced manufactured gas. Almost all petroleum and petroleum products are imported.

Finance

All financial institutions were owned by the state after 1944-45 and formed an integral part of centralized economic planning after 1949. The National Bank of Poland (Narodowy Bank Polski) acted as the main agent of the government's financial policy, managing everything from the currency and money supply to wages and prices, credit, investment, and the detailed business of all state enterprises. Other important banks included the Commercial Bank of Warsaw (Bank Handlowy w Warszawie) for foreign trade and the General Savings Bank (Bank Polska Kasa Opieki). In the late 1980s and early '90s, the banking industry was reorganized. The National Bank became an independent central bank, with responsibility for regulating the banking sector and the currency. A number of private banks also were established.

Until 1990, internal monetary operations were conducted in inconvertible local currency, while external operations were conducted either in foreign currency, especially U.S. dollars, or, for the Soviet bloc, in special units of account such as convertible rubles. Exchange rates against foreign hard currency were flexible according to the needs of the state bank. In 1990, as part of a government program to move the Polish economy toward a free-market system, the exchange rate of the zloty, Poland's currency, was allowed to be set freely on the international currency markets. In 1991 Poland established a stock exchange.

Trade

Poland's trade was greatly affected by the fall of communism. Hitherto, much was conducted within Comecon, including the export of coal and machinery to the Soviet Union and other countries in eastern Europe. Since 1990, however, two-thirds has been with western Europe, nearly half of which has been with Germany. Less than one-sixth has been with other former Comecon countries. Machinery, metals, textiles and clothing, coal, and food account for the bulk of exports, and machinery, chemicals, and fuels are the major imports. Germany is the largest market for almost all categories of exports, while Russia remains by far the most important source of energy imports, and Germany and Italy the chief sources of foreign machinery and chemicals.

Transportation

Railways

The communications system in Poland developed in the 19th and early 20th centuries, when the country was divided between Russia, Germany, and Austria. The three areas thus developed in different economic and political conditions, and the main railway lines were centred on the capitals of the three empires. The density of the railway networks in the three sectors was uneven. In 1918 independent Poland took over the system and redesigned and rebuilt it according to the standard European gauge. Among the most important railway lines built after that date were those linking Warsaw with Poznan and Kraków and a coal trunk line linking Upper Silesia with the newly built seaport of Gdynia. After the devastation of World War II, the railway system was reconstructed once again, and the most heavily used lines were converted to electric power. Because of the location of the country, Polish railway lines were important in the carriage of transit freight among the socialist countries of eastern Europe, notably between the Soviet Union and East Germany and between Czechoslovakia and the Polish ports. Demand for rail transport fell sharply, however, after the end of communism, both for freight and passengers. The railways are administered by the Polish State Railways (Polskie Koleje Panstwowe).

Highways

The highway system originally showed disproportions similar to those of the railways; that is, the densest network was on lands belonging to Germany and the least dense on lands belonging to Russia. An attempt to remedy this situation was made between 1918 and 1938 and again, but more intensively, after 1945. Modern multilane highways designed for high traffic volumes have been built in Warsaw, and projects have been undertaken to link Warsaw to provincial centres, but the road system in general is of low quality.