Poland could emerge from recession in 2010, say experts

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Like France and Germany, Poland could buck the EU trend and emerge from recession early next year, according to recent forecasts by Polish economists. However, the IMF warned that such predictions could be premature. EURACTIV Poland contributed to this article.

Poland is forecasting gross domestic product (GDP) growth of 1.0 percent this year, which would make it a notable exception in the EU, particularly among ‘new’ EU member states, fighting their way out of the economic crisis (EURACTIV 18/08/09).

The International Monetary Fund (IMF) is more pessimistic, however, and has stressed that Poland’s economy will likely shrink by 0.7 percent.

During the second quarter, the Polish economy grew by 0.3%, according to an announcement by Deputy Minister of Finance Ludwik Kotecki on Monday (17 August).

“Poland and Slovakia have fared better than their neighbors in the second quarter of this year compared to the first quarter,” Romanian economic analyst Aurelian Dochia told AFP.

Indeed, the outlook for Polish industry is improving, Polish newspaper Dziennik reports. While July witnessed the tenth consecutive month of decline in production output, the figure was clearly lower than in June, analysts stressed.

The most optimistic forecasts claim that in July, industrial production decreased by only 1.5% (after falling in the previous month by 4.3% and about 15% at the beginning of the year). According to the most pessimistic figures released, the decline reached 4.3%. “This gives an average of 2.9%,” Dziennik reported.

Tomasz Kaczor, chief economist at the Polish state-owned Bank BGK, emphasised the positive impact of the German and French recovery, announced by the European statistical office Eurostat (EURACTIV 18/08/09).

But Ludwik Sobolewski, president of the Warsaw Stock Exchange, said in an interview with Rzeczpospolita yesterday (18 August) that “talks about the end of the crisis are only marketing”. However, he is optimistic for the Polish market. “It is certain that the financial depression which touched Western Europe is not going to reach us at a later stage,” Sobolewski told the national newspaper.

Analysts are convinced that the situation will improve month by month, Dziennik reported. “In August, industrial output will be even greater than last year, as August last year was exceptionally weak,” said Grzegorz Maliszewski, chief economist at Millennium bank.

Marcin Mrowiec, the chief economist of Pekao bank quoted by Dziennik, is convinced that from the fourth quarter of 2009 the dynamics of production will be positive.

Large economy and few credits

These developments beg the question: Why is recession in Poland less severe than in the other central and eastern countries? Following the demise of U.S. investment bank Lehman Brothers, the Polish interbank market froze, as happened elsewhere, the IMF said.

But thanks to its large domestic market, Poland’s growth remained slightly positive in the last quarter of 2008 and first quarter of 2009, the IMF reported.

Unlike the Baltic countries or Hungary, Poland entered the crisis with relatively healthy fundamentals. Thus, “the government has been able to implement countercyclical policies,” the IMF explained.

Moreover, the credit system is less developed in Poland than in the USA. “Leave credits and learn to live without artificial support” in order to stop the recession, Witold Gadomski wrote in an op-ed in the Gazeta Wyborcza Monday (17 August).

“Despite the revival in the coming years we will face a high budget deficit and growing debt,” Gadomski warns. “These problems do not remain indifferent to the real economy,” he writes. “It will require a reform of public finances, of the tax system, a flexible labor market, better public investments, and an increase in the level of education,” he concluded.

Moreover, to achieve a successful and sustained recovery, Poland ultimately needs its neighbors and trading partners to emerge from recession as well, the IMF warned. 

Financial markets across the globe went into a tailspin following the US sub-prime mortgage crisis in early August 2007, forcing central banks to make massive cash injections to keep the system rolling and fend off a possible liquidity crisis.

In September 2008, the crisis stormed into Europe, pushing member states to rescue banks and help the economy to recover from the worst depression in decades.

The Euro-zone entered into recession in the second quarter of 2008 when the overall GDP fell by 0.3%. The downturn hit its current lowest point in the first quarter of 2009, with GDP shrinking by 2.5% on a quarterly basis and by 4.9% compared to the same quarter of 2008.

Central European countries have been particularly hit by the crisis, especially the Baltic States (EURACTIV 29/07/09) and Hungary (EURACTIV 14/04/09).

Last autumn Prime Minister Donald Tusk made the surprise announcement that Poland would join the euro by 2012. But the government recently recognized that it would be delayed because of the “completely different macroeconomic situation” (EURACTIV 26/06/09).

France and Germany this month published statistics indicating that their countries are emerging from the economic slowdown (EURACTIV 18/08/09). 

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