Norbert Kołos, Piotr Jutkiewicz
The SOFI “Baseline” for Poland is a result of taking into account the last 25 years of historic data (since 1995) and looking 10 years into the future, to 2025. The historic data has been obtained from various sources, as described in an earlier chapter. The future outlook is a result of both external analyses and our own extrapolations, but does not include the results of experts’ opinions in a Real Time Delphi study, so there are no scenarios.
Figure 1 SOFI Baseline for Poland. 2014=1
For the first ten years – until 2005 – progress was slow to say the least. The biggest leap in SOFI value can be observed from 2005 until 2007-2008: an over 10% increase in the SOFI value over a relatively short time period. After this big leap, correlated strongly with Poland’s first years in the European Union, progress continued at a slower, but steady pace of around 2% per year. As can be expected, SOFI baseline suggests a continuation of this trend, as it is based on predictions and forecasts which usually assume no discontinuities.
The Monte Carlo analysis of 250 scenarios, which are based on the results of a Real Time Delphi study regarding the probability of the increase or decrease of specific constituent variables of SOFI, has been illustrated in Figure 2 below.
Figure 2 The results of Monte Carlo analysis for Poland: Simulated scenarios
The most important insight from the graph above is that, although the SOFI baseline looks relatively optimistic, there are still a lot of ways in which we can fail to make it a reality. In the most extreme scenarios, after a few years of the continuation of the current improving trend SOFI index decreases so that in the year 2025 Poland would be still in the same place as it was in 2014. Considering that the world would probably keep moving on, this is most definitely not a desirable situation. On the other hand, the Monte Carlo analysis shows that with a carefully planned strategy we can not only keep the current trend, but we can also speed up progress – in most optimistic scenarios reaching SOFI values 25% better than the present.
The identification of the biggest opportunities and threats has been done in the next stage. Figure 3 illustrates the most important areas in which we should work to improve. It shows how big is the deviation between the optimal value of a certain variable and its value predicted in the best, worst and middle (projected) scenario. It can be seen that some of the most important areas in which Poland should improve include, not surprisingly, variables concerning healthcare, equal rights, energy production, education and unemployment.
Figure 3 Standardized weighted deviation of a given scenario from SOFI max value
Another way to look at the areas in need of improvement is to consider them to be both risks and opportunities. Figure 4 below shows the standardized weighted differences between the worst and best case scenarios for all the SOFI constituent variables. In this way, it shows where we have the biggest chance for improvement, but also the biggest chance to miss an opportunity for a development boost.
Figure 4 Standardized weighted differences between worst and best case scenario for a given variable
R&D expenditures is the most important of the challenges identified. It is currently at a relatively low level, which hinders Poland’s development. This issue should not be neglected since it seems to be both the biggest opportunity to speed up progress and the biggest risk of holding it back. The best, middle and worst (projected) scenarios of R&D expenditures are shown in the graph below. It is a pressing matter which calls for immediate action since the projected value is not far from the worst one.
Figure 5 R&D Expenditures (percent of GDP) – Scenarios
A more in-depth analysis can be done for each of the variables, thus showing the strategic directions of future development. SOFI should be calculated on a regular, e.g. annual basis in order to track progress. A country report card can be prepared to better and monitor new opportunities and threats as they arise. This will be especially valuable when a country or Europe-specific set of variables is developed in the future. It is also worth mentioning that during the Real-Time Delphi study, for each of the variables, apart from the probabilities and values in various scenarios, a qualitative list of events and developments is put together. Those events and developments are vital to a successful creation and deployment of specific strategies and action plans for making the most desirable scenarios a reality. They will be further analyzed in later work which will also be focused on improving the methodology and developing a Europe-Focus SOFI, better applicable to all European countries.