Poland Picks Up

By McCrary, Ernest | Global Finance, January 2000 | Go to article overview

Poland Picks Up


McCrary, Ernest, Global Finance


The Polish economy is moving into a stronger growth phase after a slowdown during 1999. This year GDP should expand by more than 4% and progress is being made in curbing the government deficit - so Poland should be on track to joing the European Union by 2002-2003. Global Finance's Ernest McCrary moderated a discussion about the Polish economy at a roundtable in Warsaw hosted by central bank governor Hanna Gronkiewicz-Waltz.

GLOBAL FINANCE: What is your forecast for the key economic indicators over the next year? HANNA GRONKIEWICZ-WALTZ, governor, National Bank of Poland: We believe the GDP growth this year will be about 4%, partly driven by relatively strong domestic demand. Our growth has slowed, but then other countries, particularly in the European Union, are also seeing lower growth rates. Germany's slower rate is especially significant for Poland as Germany represents almost 36% of our trade, so it has a significant impact on our growth. The downside of high domestic demand is that it has driven up inflation, which will be around 8% this year. We aim to reduce it to between 5.4% and 6.8% next year. Our forecast budget deficit for next year is 2.3% of GDP, slightly higher than the 2.2% we expect this year. We also plan for the fiscal deficit as a whole to be lower. Last year, for example, it was 2.7%.This year it will be 3.47% and the next year 2.75%, a little lower than in 1999.

GF: As bankers, what are you telling your customers-and particularly foreign investors-about what's happening in Poland, and what's your fundamental advice to them about investing?

SHIRISH APTE, country manager, Citibank (Poland): We are saying that yes, there has been some slowdown, but we see it picking up now. Our estimate for the fourth-quarter GDP growth rate is in the 4% range. Next year [2000] we believe it will be around 4.4%. We are pointing out that the Russian crisis did affect Poland. Although official exports to Russia were low, there was unofficial border trade that was affected. That clearly had an impact on GDP growth at the end of last year and the beginning of this year. In the first half of last year the economy was growing at 6-7%. That's quite a fast chp.Whether the country wants to go back to those numbers is doubtful If 5% is sustainable and acceptable, then why let the economy overheat by going to 7-8% growth when it's not necessary?

BRUNON BARTKIEWICZ, president, Bank Slaski: All the figures are moving in the right direction, and stable growth is possible. But the key concern for us is how quickly we will convert the technology being imported into export competitiveness for the economy as a whole.

JOSEPH WANCER, president, Raiffeisen Centrobank (RCB):We are telling foreign investors that real GDP has improved over the past three months, the budget balance in percentage of GDP has improved, but the inflation rate is deteriorating. In other words, that's something we have to watch. We're also pointing out that the trade balance is deteriorating, direct foreign investment is improving, and foreign exchange reserves are improving. In summary, RCB is bullish on Poland in the year to come.

MAREK KULCZYCKI, president, PPA Bank: We specialize in servicing small and medium-size companies. The view coming from that sector is that the economy is stable and going in the right direction. Given that this sector represents a growing proportion of GDP, I think this is encouraging. Equally encouraging is the fact that the small and medium-size companies

GF: Are the economic factors hindering Poland's plans for entry into the European Union [EUI and European Economic and Monetary Union [EMU]? BJORK HUPFELD, treasurer, WestLB Poland: I think the official entry date of 2003 may be feasible from a political point of view. But from an economic and, say, structural point of view it's probably a little too early.We believe that if Poland has to meet EU standards before 2003, there may have to be massive layoffs, which would have some negative effects on the economy.

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