Impact of Covid-19 on Polish wooden furniture industry.

Introduction

Since liberalization of Polish economy in the 1990’ this industry steadily increased by around 10%[1] annually. Today Polish wooden furniture industry stands besides same industries of more developed or larger countries such as Germany or Italy, and Polish furniture are very sought after by western customers [2].

Polish wooden furniture industry is one of Poland’s biggest industrial sectors, according to GUS encompassing more than 2% of Polish GDP[3]. In 2019 Polish wooden furniture industry was the largest exporter of furniture in EU. In a wake of Covid-19 pandemic and following lockdowns and restrictions Polish wooden furniture industry was in small group that weathered the crisis in good position in comparison to other industries of Poland and even same industries in western European countries.

Goal of this paper is to find and show the effects of Covid-19, and related lockdowns, restrictions and Covid-19 related supply chain failures on polish wooden furniture industry and its recovery after the government lifted those restrictions. To achieve this the author used various statistical sources, primarily GUS and articles form journals covering this topic, as well as data from members of companies inside this sector. Author also used KRS data to cross check information gathered from mentioned individuals.

As this sector is vital to Polish economy and export, knowing what caused its recession in 2020, and subsequent recovery in 2021 is crucial in understanding how to propel this sector even further and avoid another recession which could be a fatal mistake because of its size and volumes of goods which are produced by it and sold to domestic as well as foreign markets.

Also as the topic is quite vast and in 2020 many different factors than lockdowns played a role in recession, they need to be analysed and explain in order to avoid misconceptions which can lead to bad policy changes on corporate and governmental scale.

Polish wooden furniture industry in the wake of Covid-19

At the end of 2019 Polish wooden furniture industry had estimated value of 50,5 billion PLN, but then the pandemic in Poland had show its effect and government imposed harsh restrictions on all sections of industry. wooden furniture industry experienced a rapid decline in sales in comparison to previous year. In march, April and may sales declined by 15%, 50% and 20%[4] respectively in comparison to precious year.

Main cause of this losses was decline in demand after the government “froze” the Polish economy, but decline in international commerce hit this industrial sector hard as Polish wooden furniture industry is primarily an exporter. Less demand resulted in less money, which in turn impacted financial liquidity and less cashflow. This situation was magnified by the fact that prior to Covid-19, industry was continuously growing and expanding.

Many small and medium size enterprises didn’t expect to suddenly stop producing and earned money was primarily invested into new machines and labour. That meant that many companies did not have resources to survive long without new orders.

The fact that in this sector remote work is only possible for a fraction of total employees did not brighten the outlooks. After those first few months situation was beginning to turn around.

Governmental restrictions were beginning to subside and economy was “unfrozen”, loses of other branches of economy, especially tourism, meant that consumers had more money to spend on renovation and buying new furniture as well as more time to renovate their dwelling, which lead to new records of production experienced by furniture industry until November 2020.

Another factor which contributed to recovery was lowering price of VAT in Germany, which is the largest European consumer of Polish furniture. Another positive factor in rebound was expansion of internet sales of furniture which before the crisis were between 7% and 20% of all transactions.

Polish wooden furniture industry in comparison to other European producers.

As European Union’s response to the pandemic was not unified across all member states it is known that some countries went through lockdowns better that others. Poland was one of countries least severely influenced by the Covid-19 in terms of economy.

Polish wooden furniture industry also survived it better that it’s rivals in western Europe. German furniture industry experienced comparable declines In sales to polish one, but was forced to cut lose 5% of workforce. Italian government imposed restrictions much harsher than those of Poland and Germany.

This lead to nearly stopping all production in furniture sector. Italian industrial leaders petitioned the government in April 2020 to loosen restrictions on work, but the Prime Minister of Italy, Giuseppe Conte only extended full lockdowns to May.

As covid impacted all branches of economy the loss of income from tourism in Italy, made matters worse as Italy is “exporter” of tourism, so many people lost income that they would otherwise spend on furniture.