Consumption as a Factor of Polish Economic Growth During the Global Recession of 2008/2009: A Comparison with Spain and Hungary

The economic recession of 2007-2009 proved to be a difficult period for most European economies. Poland was among the few countries that recorded positive gross domestic product (GDP) growth during that period. The main reason for its performance was that private consumption stimulated the GDP. The goal of this study was to explore the reasons that private consumption in Poland did not collapse during the economic recession through the substantial economic literature on this topic. The study compared Spain, Hungary and Poland from 2007 to 2009 to find differences specific to the latter. The most important factors differentiating Poland identified in this study were the confidence of Polish consumers in the economy and a high propensity to spend resulting in lower savings. Additional factors were a relatively low unemployment rate and relatively easy access to credit.


Introduction
The second goal is to compare and contrast consumption patterns in those three countries. Finally, this study seeks to identify potential areas for further research based on the initial findings of this article.

Consumption and Its Determinants
The research was a retrospective study focused on the 2007-2009 period and the determinants influencing consumption patterns in the selected countries. The research was primarily based on available secondary data pub- The economic literature does not provide a single, common definition of consumption. However, the consensus is that consumption is a process (Zalega, 2007, p. 12) that results in the satisfaction of needs. Those needs can be fulfilled by the intake or usage, over a period of time, of a certain good or service. For the purposes of this study, consumption will be defined as This definition is well connected to the economic meaning of consumption, meaning transforming one's share of income into goods and services.
Consumption alone amounted to approximately 57% of the EU's GDP creation from 1996 to 2006 (Dreger & Reimers, 2006, p. 2). As it plays a major role in GDP creation, it seems reasonable to begin by identifying the factors that influence it and will later be used as the basis for the cross-country comparison. Identified factors include: • Disposable income; • Expectations of the future; • Influence of the shadow economy.
These factors are described below along with their respective characteristics and sources of influence and were also used in the empirical analysis.

Disposable Income
For consumption to be possible, there must be money to spend. Such free resources are called disposable income. This value represents how much a household is actually able to spend as it pleases (Samuelson & Nor-dhaus, 1992, p. 231). It is obtained by subtracting taxes from income and adding transfer payments from the government. Each household can either spend (consume) or save the money it receives.
There is evidence of a long-run relationship between disposable income and consumption (Paap & van Dijk, 2003, p. 4). Data analyzed for the U.S. suggest that there is a linear relationship between the two values. Moreover, as the research indicates, "the growth rate in consumption is larger than the negative growth rate in income during recessions… even expected income growth in the market sector predicts growth in market consumption" (Baxter & Jermann, 1999, p. 3). This is especially important for the analysis of the economic downturn conducted in this study.
When analyzing disposable income, it is important to highlight the role of private savings. Although decreased saving rates mean that a household is able to consume more, there is evidence from South Africa that a very low level of private savings may, in the medium-run, "hinder investment driven growth" and "…falling saving rates imply reliance on foreign capital inflows" (Aron & Muellbauer, 2000, p. 3). Moreover, "borrowing or saving allows consumption smoothing" (Jenkins, 2000, p. 4). It is important to note that "due to a shortage of household data, most work on saving has used only aggregate data" (Schmidt-Hebbel, Webb & Corsetti, 1992, p. 9). It is significant "that most determinants of savings identified in the literature also apply to transition economies" (Chowdhury, 2004, p. 1).

Expectations
Economists have widely confirmed the impact of expectations on private consumption (Stephens, 2004, p. 3). These expectations may be measured using the Consumer Confidence Index (CCI), which refers to a key determinant of near-term economic growth (Ludvigson, 2004, p. 2). Expected job losses are one of the factors influencing the consumption level. It would seem that to prepare themselves for a future job loss shock, households decrease consumption and revert to saving.
Although there is a significant correlation between job loss expectations and actual job loss, the expectations do not noticeably influence household consumption patterns (Stephens, 2004, p. 5 In addition to expectations concerning job stability, the analysis of unemployment rates may be helpful due to the assumption that high unemployment will result in lower consumption, leading to a smaller contribution towards GDP formation. The negative relationship between unemployment and consumption is believed to be expectations based (Barhoumi et. al., 2007, p. 3). It is also believed that "economic growth is the panacea solution for unemployment" (Wolnicki, Kwiatkowki & Piasecki, 2006, p. 1). Thus, it can be assumed that relatively low unemployment should be associated with relatively high GDP growth.
The economic literature regards the role of expectations as vital: "Economic theory without an explanation of expectations will not be able to contribute towards an understanding of macroeconomic phenomena" (Kantor, 1979, p. 17).

Shadow Economy
It is important to note that all of the theories presented herein are based on official data. Unfortunately, "crime and shadow economic activities are a fact of life around the world" (Schneider, 2005, p. 2). It appears logical to begin with a working definition of what a shadow economy (also known as black market or black economy) is.
It is described as a "market-based production of goods and services, whether legal or illegal, that escapes detection in the official estimates of GDP" (Smith, 1994, p. 3). It involves activities such as illegal drug trafficking, counterfeiting, piracy and prostitution. Thus, it is a market of banned goods. It can also represent income received from illegal activities, e.g., bribery or tax evasion. immediately spent in the official sector" (Schneider & Enste, 2000, p. 8). This is the primary reason that this phenomenon is being described in relation to consumption in this study. The assumption is that most, if not all, gains in the shadow economy are transferred into official consumption.
Due to its nature, it is difficult to obtain verifiable estimates of activity in the shadow economy. Schneider and Enste (2000, p. 10) used direct and indirect approaches. The direct approach is based on questioning and extracting data directly from the society. Although this approach can deliver quite detailed data, it is constrained by the respondents' willingness to provide true answers. Indirect approaches (also known as indicator approaches) are based on macroeconomic indicator analysis, such as comparing income and expenditures, discrepancies in labor market data or energy consumption. Therefore, the greatest limitation is that any data provided are derived from "guess-timating" (Thomas, 1999, p. 5), meaning making an educated guess based on indirect data. Table 1 provides a brief summary of the theories presented in this section.

Methodology and limitations
The first step of the study was a literature review concerning global consumption behavior. The aim of the following section is to identify the factors influencing the levels and patterns of consumption behaviors. This provided the theoretical framework used in the analysis. The next section presents a comparative analysis based on the secondary data. Finally, the last section presents the study's conclusions, highlighting the differences between Poland and the two comparison countries.
This article should be regarded as initial study of a broader phenomenon. Its findings could be used in the process of designing detailed econometric studies concerning each aspect of consumption with respect to recessions in the context of the Spanish, Hungarian and Polish economies.

GDP Component Factor
Author/s Impact

Private Consumption
Disposable Income Samuelson and Nordhaus (1992) The greater the disposable income, the higher the consumption

Expectations
Stephens (2004) The more positive the expectations of future incomes (employment), the higher current consumption

Shadow Economy
Shneider (2000) More developed grey market may dampen negative effects on consumption Smith (1994) Thomas (1999)   The authors also acknowledge that future studies could focus on other policy-making contexts in each of the countries considered here, which would improve understandings of the causes of some of the findings.

Empirical Analysis
This section analyzes the factors identified in the literature review as influencing consumption. An analysis of the data should identify factors that are specific to Poland and that helped to sustain its private consumption during the recession of 2007-2009.

Consumption Patterns in Spain, Hungary and Poland
As discussed in section 3, consumption plays a significant role in GDP creation. This is why it is described here as the first component of GDP and why a comprehensive analysis is required to describe it. It seems reasonable to begin with an analysis of private consumption with respect to GDP in the respective countries. Table 2

Consumption patterns in Spain
The rise in unemployment and GDP contraction led to an observable decline in disposable income. Spanish consumption was believed to be fuelled by a realestate bubble (Eurostat 2011). The burst of this bubble in 2008 made the recession even more painful. Table 3 presents the changes in the structure of Spanish consumption in this period.
First, the recession affected the housing market.
Spaniards retreated from impulse purchases and some branded products, primarily foodstuffs. They began to shop more price-consciously. Retailers' brands gained in popularity because price was the greatest concern (Euromonitor, 2011). Purchases were often made in outlet shops that offered discounts of up to 50% (Euro-monitor, 2011). Table 3 depicts small downward shifts in those categories. Housing spending, which refers to rent, gas, and heating expenses' share of total consumption, increased. Due to high unemployment and lower disposable income, Spanish restaurants suffered.
Although Spaniards tended to eat out less frequently, they spent similar shares of their incomes on hotels and catering as they had before (see Table 3). This means that, as with other products, they simply substituted less expensive alternatives, such as fast food.
To conclude, as overall nominal consumption in Spain decreased over the observed period, the consumption patterns (i.e., each consumption category as a percentage of total consumption) did not change significantly.

Consumption patterns in Hungary
Hungary began 2007 with sluggish car sales and a declining the restaurant sector (Euromonitor, 2011 Table 2). Moreover, contractions were reported in nearly all demand sectors in Hungary (Hungarian Office of Statistics, 2011). Table 4 depicts Hungarian consumption patterns throughout the period considered. It is worth highlighting that primary consumption categories in Hungary and Spain differ. The greatest share of Hungarian expenditures was devoted to housing (rent and utilities), food and transport (i.e., commuting). As nominal consumption declined and consumption patterns were not significantly affected, it can be deduced that Hungarians also shifted to less expensive, alternative goods.

Consumption patterns in Poland
According to the Polish Office of Statistics, all consumption categories were on the increase (Polish Office of Statistics, 2011). During the period considered, there were no major changes in Polish consumption patterns, and the composition remained nearly identical (Table 5). Moreover, Polish restaurant and fast-food markets did not stop developing and were expected to grow 8% annually (GFK, 2009). Based on this information, consumption in Poland remained high due to demand for non-essential goods and the lack of any significant changes in consumption patterns.

Summary
The role that consumption played in each of the studied economies seems similar to the findings presented in the theoretical review. Consumption's role in GDP formation only increased in Spain, while it fell in Spain in Hungary. As the Polish economy was the only one that did not contract, it can be assumed that nominal levels (in national currency) also increased while decreasing in the other two countries, which reported declines in GDP.
It is important to mention that consumption patterns in all three countries remained at relatively unchanged levels throughout the period considered, which covers data prior to the recession and employs 2007 as a base. It is important to note that the major expenditure categories in Poland were food, housing (which also covers utilities) and miscellaneous goods and services. These three groups accounted for approximately 20%, 24% and 13% of total private consumption, respectively (see Table 5). The first two groups can be treated as necessities and may simply reflect higher prices relative to earnings.
Hungarians' income allocations were similar, with food and housing representing the largest categories at 17% and 19%, respectively, and transport (15%) being the third highest. In this case, over 50% of consumption was devoted to necessities (see Table 4). This result assumes that transportation is connected to daily routines (e.g., commuting to work). Housing expenses also played an important role in Spaniards' total ex-penditures (approximately 17%). However, this category was not as large as hotels and catering expenditures (see Table 3), which continued to represent 19% of the total. This result demonstrates the importance of Spaniards' social lives.
The data show that the recession did not influence consumption habits in any of the observed countries.
Although greater emphasis might have been placed on the price or quality of products purchased, no shifts were made to accommodate new economic conditions. Therefore, any changes in gross consumption were the result of smaller amounts of money being spent and were derived solely from nominal changes.

Expectations
The reason to begin the analysis by considering expectations is to capture the general economic attitude for each of the selected countries. This approach should help to place the other consumption factors into a more specific context, which should facilitate understanding why certain processes occurred in a given country.
Consumer expectations can be measured using the Consumer Confidence Index (CCI), which essentially reflects general optimism in a given economy (1985=100 points). If the unemployment rate is low and GDP growth is high, the confidence level should increase. Based on these data, Polish consumers were the poorest (of the three countries) before the economic  (Herwatz, Schneider and Tafenau, 2010, p. 3).
The use of the NUTS 2 classification means that regions with populations of between 800 thousand to 3 million inhabitants were taken into consideration (European Parliament, 2003). The researchers were able to estimate each region's shadow economy level relative to the official GDP level (Figure 1). The study also permits  Based on the relevant literature, 3 main factors were considered factors influencing consumption levels.
Disposable income represents the amount that households had available for consumption. Of the three selected countries, Polish consumers were the poorest; however, not only did Polish consumers not reduce spending, they increased it. This might have been due to a reduced tendency towards savings. In contrast to their Spanish and Hungarian counterparts, Polish consumers began to increase spending rather than savings. Reduced savings during a period of uncertainty seem to contradict prior theories on the subject. Another question of strategic value arises from the theoretical argument that lower savings may be hazardous for a particular economy in the long run.
Poland exhibits different characteristics from the situation in 1992 when consumers were sensitive to shortrun shocks (Gorecki, 1994, p. 3) Polish consumers also did not lose the confidence in the economy and remained generally optimistic. though Hungary and Spain were also believed to possess well-developed grey markets, those countries suffered from decreases in consumption. Unfortunately, due to the illegal nature of this phenomenon, it is difficult to determine its actual influence. It can be treated as a supplementary factor to be used in conjunction with general consumption attitudes.
In summary, it seems that, unlike that in other countries, Polish consumption was rather unaffected by the global recession. Moreover, Poland reported an increase in consumption. It appears that this increase was primarily the result of high Polish morale. Confidence in the economy and a general propensity to spend rather than save was connected to the availability of credit. Additionally, relatively low unemployment also helped to sustain consumption.