The news is mixed concerning the Polish economy. On the bright side, the budget deficit in July was PLN 1.6 billion lower than in July, but it was still almost 83% of the planned deficit, amended just in July. According to the central bank’s survey, the majority of sentiment indicators of Polish companies saw a rise as they have faith in a pending recovery. In a survey conducted by the United Nations Conference on Trade and Development (UNCTAD), Poland classified as one of the top 15 most FDI friendly countries in the world, the only CEE country on the list. Government officials expect GDP growth around 0.5% in the second quarter. On the bad side, the Polish deputy finance minister Ludwik Kotecki admitted that adopting the euro in 2012 is unfeasible, making him the first government official to admit this. The stagnation of real estate market continued, in the first half of 2009 the total volume reached only EUR 118 million, a 90% decrease y-o-y. The selling of the shipyards at Szczecin and Gdynia still hasn’t gone through as the Qatari investors haven’t paid yet. Unemployment also rose by 0.1%, bringing the rate up to 10.8% from June.
Analysis and forecast: increasing risk
The positive economic news won’t save the government from enacting measures that will certainly bring about political and social conflicts, but these steps are necessary to plug holes in the budget without tax hikes. The announcements show that the government is serious about getting as much revenue as possible from privatization: it sold its 1.9% stake in Bank Zachodni WBK, sold 6.8 million shares in Pekao Bank, and, despite the threat of strikes, it intends to go through with the sale of 10% stake in the copper miner KGHM. The government also wants to save 8% on administration costs by laying off at least 10% of the civil workforce. This could amount to 32 000 firings, bringing about a clash between Tusk and the President, not to mention a loss in popularity. They plan to cut PLN 0.5 billion in 2010, about PLN 1.26 billion in 2011 and a further PLN 1.2 billion in 2012. Additionally, salaries could be frozen until the end of 2011, on 92% of this year’s wages. Also, the conflict between the PM and the President is likely to intensify, as according to the latest polls support for the President’s party, Law and Justice (PiS) has weakened, while the PM’s party, Civic Platform (PO) has held onto its 40% popularity. Unemployment will nevertheless be a major problem in Poland even if the optimism concerning the growth rate for the second quarter is grounded. Analysts’ consensus is that by the end of the year it could top 13%, and only a slow reduction is expected. As for the forecasts for 2009, S&P maintains that Poland will see a GDP contraction of around 1%, but JP Morgan now predicts 0% growth as opposed to an earlier forecast of 1% GDP drop.
Source: Public Opinion Research Center (CBOS)
Source: Central Statistical Office of Poland, Polish Labour Ministry