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Poland Economy Watch





Updated: 2014-10-02T06:54:41.762+02:00

 



Biting The Fiscal Bullet In Poland

2010-07-14T16:53:14.213+02:00

There is a good deal of speculation in the press at the moment over the tricky issue of whether or not Poland will be able to comply with its agreed deficit-reduction deadline on the basis of the latest budget proposals announced by the government there. Personally, I tend to agree with those analysts who feel the spending and revenue assumptions being made by the Polish government are rather unrealistic, and that they will this be unable to comply with the terms of the Excess Deficit Procedure as laid down for them by the European Commission: difficult territory this in the "post Greek crisis" world, but it would not be the end of the world were the slippage to be justified. Unfortunately, as I will argue below, I don't think it is justified, indeed I think it is just the opposite of what sound economic management principles would prescribe in the Polish case, and seems to respond more to the impact of impending political pressures than to the precepts of good policymaking. So I do agree with the consensus here in feeling that Poland needs to do a lot more to reign in the deficit (which means unfortunately spending cuts, since I think raising taxes which will crimp growth and raise inflation is most undesirable at this point), although my reasons for arguing this are actually rather rather different from those that are normally advanced.One Fiscal Size Fits All?The facts of the matter are, more or less, as follows: the European Commission has given Poland until 2012 to meet its deficit limit of 3 percent of gross domestic product, after Poland’s shortfall swelled to 7.1 percent of GDP last year as the impact of the global economic crisis depleted government revenue and increased expenditure costs. Next year’s budget assumes something like 3.5% GDP growth and 2.3% inflation, with nominal wage growth rising by 3.7% employment increase by 1.9%.The EU Commission expect the deficit to only narrow to 7 percent of GDP next year following a 7.3 percent budget gap in 2010. But given that Poland's debt to GDP level is only around 50% of GDP, and that Poland is one of the few large EU countries to still have dynamic internal consumption, you might want to argue that stimulus should be maintained, if only to help Poland's export dependent neighbours.I want to argue that this view is basically wrong, and that far from needing more in the way of stimulus, what Poland needs to do is contain an overdramatic expansion of credit based domestic demand, an expansion which, if unchecked, could very easily lead to the sort of structural distortions and competitiveness loss we have just observed in the South of Europe and Ireland.Poland Largely Escaped The Great RecessionBut first, lets step back a bit and see what the problem is.Poland, as most observers note, escaped the worst of the 2009 great recession.Poland was basically able to endure without too much bloodletting for three principal reasons.In the first place the level of household indebtedness is still not excessively high. In the second place Poland had maintained a floating exchange rate which meant that it could let the zloty rise during the heady days of 2008, and then allow the currency to devalue when the crisis hit. An thirdly, the level of Forex lending never rose as high in Poland as it did in some of its East European neighbours, which meant that when the time came to devalue there was not such a threat of increasing the Non Performing Loan rate. As can be seen in the chart, it was starting to take off when the credit crunch came along and (fortuitously) stopped it dead in its tracks.Interestingly enough then, it has been the very fact of not having gone for early Euro adoption that left the Polish monetary authorities with the flexibility needed to respond to the crisis in an appropriate manner. As the IMF put it in their latest Article IV staff report:"Staff does not support early euro adoption. While this should remain an important goal, entering ERM2 any time soon would not be advisable in view of the uncertain global outlook and the rigidities in the macroeconom[...]



From Original Sin To The Eternal Triangle - Lessons From Central Europe

2009-08-18T15:05:07.156+02:00

The non-biblical concept of original sin, as Claus Vistesen notes in this post, when propounded in its standard Obstfeld & Krugman textbook version refers to the situation where many developing economies who are not able to borrow in their own currencies feel forced to denominate large parts of their sovereign and private sector debt in non-domestic currencies in order to attract capital from foreign investors - as evidenced most recently in the countries of Central and Eastern Europe. Well, piling insult upon injury, I'd like to take Claus's point a little further, and do so by drawing on another well tried and tested weapon from the Krugman armoury, the idea of the "eternal triangle".As is evident, the reality which lies behind the current crisis in the EU10 is complex, and has its origin in a variety of causes. But one key factor has undoubtedly been the decisions the various countries took when thinking about their monetary policy and currency regimes. The case of the legendary euro "peggers" - the three Baltic countries and Bulgaria - has been receiving plenty of media attention on late, and two of the remaining six (Slovenia and Slovakia) are now members of the Eurozone, but what of the other four, Romania, Hungary, Poland and The Czech Republic? What can be learnt from the experience of these countries in the present crisis.Well, one convenient way of thinking about what just happened could be to use Nobel Economist Paul Krugman’s Eternal Triangle” model (see his summary here), which postulates that when it comes to tensions within the strategic trio formed by exchange rate policy, monetary policy, and international liquidity flows, maintaining control over any one implies a loss of control in one of the other two.In the case of the Central Europe "four", Poland and the Czech Republic opted for maintaining their grip on monetary policy, thus accepting the need for their currency to "freefloat" and move according to the ebbs and flows of market sentiment. As it turns out this decision has served them remarkably well, since the real appreciation in their currencies which accompanied the good times helped take some of the sting out of inflation, while their ability to rapidly reduce interest rates into the downturn has lead to currency depreciation, helping to sustain exports and avoid deflation related issues.The other two countries (Hungary and Romania), to a greater or lesser degree prioritised currency stability, and as a result had to sacrifice a lot of control over monetary policy, in the process exposing themselves to the risk of much more violent swings in market sentiment when it comes to capital flows. Having been pushed by the logic of their currency decision towards tolerating higher inflation, they have seen the competitiveness of their home industries gradually undermined, and as a consequence found themselves pushed into large current account deficits for just as long the market was prepared to support them, and into sharp domestic contractions once they were no longer disposed so to do.A second problem which stems from this "initial decision" has been the tendency for households in the latter two countries to overload themselves with unhedged forex loans, a move which stems to some considerable extent from the currency decision, since in order to stabilise the currency, the central banks have had to maintain higher than desireable interest rates, which only reinforced the attractiveness of borrowing in forex, which in turn produced lock-in at the central bank, since it can no longer afford to let the currency slide due to the balance sheet impact on households. Significantly the forex borrowing problem is much less in Poland than it is in Hungary or Romania, and in the Czech Republic it is nearly non-existent.The third consequence of the decision to loosen control on domestic monetary policy has been the need to tolerate higher than desireable inflation, a necessity which was also accompanied by a predisposition to do so (which had its origin in the erroneous belief[...]



Polish Industrial Output Falls Again In February (Updated)

2009-03-26T00:11:33.530+01:00

Polish industrial production fell for a fifth month in February, offering just the latest signal that the European economic crisis is really having an impact on Polish domestic growth. Annual output dropped 14.3 percent, following a revised decline of 15.3 percent in January, according to the Central Statistical Office. Output was however up 2.7 percent month on month.Industrial output is now declining across the export oriented economies of central Europe, including the Czech Republic, Slovakia and Hungary, as exports to the region’s main trading partners in western Europe drop and investment plans are halted, slowing economic growth and pushing up the jobless rate. We also learned yesterday that employment dropped in February ny 0.2 percent over February 2008, registering the first annual decline since 2004. At the same time, wages increased 5.1 percent, their lowest increase in 27 months.Another interesting detail here, for those who study the details of economics, is that theindustrial output numbers are not that far removed from the picture painted in the Purchasing Managers' Index (PMI) since the PMI for the Polish manufacturing sector rose in February coming in at 40.8 (from 40.3 in January). Thus the slight improvement in February's situation was already evident in the PMI. Analysts at the time said the February PMI figure more than likely marked a rebound after earlier sharp declines and suggested a weaker zloty may have helped cushion perceptions of the downturn by making exports cheaper.Polish Central Bank Cuts RatesPoland’s central bank cut its benchmark interest rate by a quarter point on Wednesday, to a record low of 3.75 percent as concerns that the economy is stagnating offset worries that the zloty is weakening.The bank, which has slashed official borrowing costs by 2 percentage points over the past four months, cut its 2009 economic growth forecast by more than half, to 1.1 percent, in February, with some rate setters saying there’s a risk of recession. JP Morgan and Bank of America expect a 1 percent contraction. Poland’s inflation rate rose in February, the first increase since July, boosted by higher energy prices and a decline in the zloty. The annual rate rose to 3.3 percent from a revised 2.8 percent in January. Consumer prices increased 0.9 percent from the month before after gaining a revised 0.5 percent in January. The EU Harmonised rate was 3.6% in February.The IPSOS Consumer Confidence Index fell by 4 points from the February level to 67 reach points. The decline is particularly marked in ratings for the economic climate, which fell by 7 points to 47. Such low ratings for the economic climate have not been seen since 1992. Poles evidently believe that the global economic crisis has now affected the heart of their country's economy.[...]



How Not To Manage Eastern Europe's Financial Crisis (Part 1)

2009-03-04T21:15:10.619+01:00

"Saying that the situation is the same for all central and eastern European states, I don't see that......you cannot compare the dire situation in Hungary with that of other countries."Angela Merkel, Brussels, Sunday"Happy families are all alike; every unhappy family is unhappy in its own way"TolstoyIn Europe, leaders rejected pleas for a comprehensive rescue plan for troubled East European economies, promising instead to provide “case-by-case” support. That means a slow dribble of funds, with no chance of reversing the downward spiral.Paul KrugmanBank regulators from Bulgaria, the Czech Republic, Poland, Romania and Slovakia met today and issued a joint statement, ostensibly to reduce the some of the impact of what they term "alarmist comments" from the Austrian government about how the regional banking system is now in such a precarious state that it requires urgent action at EU level to prevent meltdown. The Austrian government are, of course, concerned about the impact of any meltdown on their own banking system. The result of this "reassuring statement" can be seen in the chart below (10 years, HUF vs Euro).Within minutes of the joint statement Hungary's currency plummeted to an all-time low against the euro and to a 6.5-yr low versus the US dollar. In fact the HUF rapidly depreciated to 312 per euro from 307.50 before climbing back in later trading to 310. And the reason for this swift reaction? Hungary was not invited to join the statement. As the forint plunged, Hungary 's banking regulator hurriedly signed up to the statement, blaming the original omission on a communications mess-up, but the damage was already done. “Each of the CEE Member States has its own specific economic and financial situation and these countries do not constitute a homogenous region. It is thus important first to distinguish between the EU Member States and the non-EU countries and also to clarify issues specific to particular countries or particular banking groups." Well this just takes us back to Tolstoy, each of them have their own specific problems, but the underlying reality is that they all face problems, and are vulnerable, each in their own way.Hungary's economic fundamentals are clearly much weaker than those to be found in the Czech Republic and Poland as things stand, but what about Bulgaria and Romania? And the Czech Republic and Poland are about to have a pretty hard time of it as a result of their export dependence on the West, and Poland has the unwinding of the zloty options scandal still to hit the front pages. So there is plenty of food for thought here before throwing Hungary to the wolves. A default in Hungary could very easily lead to contagion elsewhere, and then the impact in the West is very hard to foresee. We should not be playing round with lighted matches right next to our fireworks stock. "Hey, it's dark in here" and then "boom".Yesterday it was Latvia's turn, and the cost of protecting against a Latvian default (Latvia is the first European Union member priced at so- called distressed levels) rose to a record following the announcement that the unemployement level rose from 8.3% in December to 9.5% in January, the highest level in nearly nine years. In fact credit-default swaps linked to Latvia increased nine basis points to an all-time high of 1,109 basis points, according to CMA Datavision in London. The cost is above the 1,000 level, breached last week, that investors consider distressed, and is now about 270 basis points above contracts linked to Lithuania, the next-highest EU member. So two countries are being systematically detached here - Latvia and Hungary - and statements by EU leaders are unwittingly aiding and abetting the process. But we should all remember, after they have eaten Latvia and Hungary for breakfast, the financial markets will undoubtedly chew on other luckless countries over lunch (Romania's Q4 GDP data was out today, and it was a shocker, and S&P have already said they are "closely monitoring"[...]



What Last Weekend's EU Summit Did And Did Not Achieve

2009-03-04T21:16:07.730+01:00

Well reading the press on Monday morning it would have been fairly easy to reach the conclusion that nothing really happened yesterday in Brussels, and that a great opportunity was lost. The latter may finally be true, but the former most certainly is not. Let's look first at what was not decided on Sunday. The leaders of the 27 member countries in the European Union most certainly did not vote to back a proposal from Hungarian Prime Minister Ferenc Gyurcsany for a 180-billion-euro ($228 billion) aid package for central and eastern Europe. They did not back it because it was not even seriously on the agenda at this point. These people move slowly and we need to talk them throught one step at a time. So what was on the agenda. EU bonds for one, and accelerated euro membership for the East for a second. And once we have the EU bonds firmly in place, then that will be the time to decide how we might use the extra shooting power they will bring us (boosting the ECB balance sheet would be one serious option they should consider, see forthcoming post from me and Claus Vistesen). That is when the emergency blood transfusion Gyurcsany was rooting for might come into play, but on this, as on so many items, the details of how we do what we do as well as the "what we do" will become important, so the moves we do take need to be well thought out, and systematic, they need to get to the roots of the problem, and not simply respond to problems on a piecemeal, reactive basis.As Paul Krugman puts it "In Europe, leaders rejected pleas for a comprehensive rescue plan for troubled East European economies, promising instead to provide “case-by-case” support. That means a slow dribble of funds, with no chance of reversing the downward spiral." Amen to that!But let's look at little bit deeper at what has been decided, or if you prefer, at what has been floated, and may be "decided" at the next meet up. Well for one, we have promised not to be protectionist, and for another, The World Bank, The European Bank for Reconstruction and Development (EBRD) and The European Investment Bank (EIB) have launched a two-year plan to lend up to 24.5 billion euros ($31.2 billion) in Central and Eastern Europe. This sounds a bit like trying to drain an Ocean with a teaspoon, and it is, so predictably the financial markets were not too impressed, expecially when they learned that not much of what was promised was going to be new money (as opposed to theacceleration of existing commitments), and especially when we take this sum and compare it with the likely quantities which are needed to "take the bull by the horms". EBRD President Thomas Mirow (who is more likely to give a low side estimate than a high side one) recentlly told the French newspaper Le Figaro that in his view Eastern European banks could need some $150 billion in recapitalisation and $200 billion in refinancing to stave off the risk of a banking failure in the region. At least."(It) sounds like a lot of money, but when (commercial) banks have lent Eastern Europe about 1.7 trillion dollars, 25 billion is peanuts," said Nigel Rendell, emerging markets strategist at Royal Bank of Canada in London. "Ultimately we will have to get a much bigger package and a coordinated response from the IMF, the European Union and maybe the G7."So let's now move on to the positive side of the balance sheet, since as we know our leaders are a slowish bunch when it comes to grasping what is actually going on here, and an even slower group when it comes to acting on that knowledge once it has been acquired. The biggest plus to come out of last weekend's thrash is most definitely the fact that the idea of accelerating membership of the eurozone for the Eastern countries has now started to gain traction, if with no-one else then at least with Luxembourg Prime Minister (and Finance Minister, he is a busy man) Jean-Claude Juncker, aka "Mr Euro", who was quoted by Reuters on his way into the meeting saying he[...]



Let The East Into The Eurozone Now!

2009-02-22T21:27:55.250+01:00

“It’s 20 years after Europe was united in 1989 – what a tragedy if you allow Europe to split again.”Robert Zoellick, World Bank president, in an interview with the Financial Times(Click On Image To View Video)World Bank president, Robert Zoellick, made a call this week - in an interview with the Financial Times - for a European Union-led and co-ordinated global support programme for the economies of Central and Eastern Europe. I agree wholeheartedly, and even if I have, reluctantly, to accept the point made last week by our Economy & Finance Commissioner Joaquin Almunia that our pockets, though deep, are certainly not bottomless (and thus it is probably beyond our means right now to rescue the non-EU Eastern states), I still feel we should make good on our responsibilities to those who are EU members, and to do so by opening the doors of the Eurozone to those who wish to join. Since this proposal is fairly radical, the justification that follows will be lengthy.This is not a view I have arrived at lightly, but looking at the extent of the problem we now have before us, a problem which is growing by the day, and taking into account the fact that the origins of the economic crisis in the East must surely rest (at least in part) in the decision to make euro participation a condition for EU membership for these countries (a possibility which was subsequently withdrawn in the critical moment, when the going started to turn rough), and then assessing the risk to the Western European banking system which would be posed by simply sitting back and watching it all happen, I think this move is not only the least damaging of the policies we can now follow, it is the in effect the only viable path left to us if we are to keep the eurozone as an integral entity together. If this proposal were accepted a new set of membership criteria would need to be drawn up, of course, but the underlying principle would have to be one of offering the certainty of entry as guaranteed forthwith, for those who chose to accept. Rules were made to be broken, and nothing should be so inflexible - not even the Maastricht eurozone membership criteria - that it cannot be ammended as circumstances dictate. And at this point even the undertaking that this - like the long awaited US Stimulus programme - was on the table, would be sufficient to provide immediate, and much needed relief. Flirting with doing nothing here is, in my opinion, flirting with disaster, both in the East and in the West.Existing Maastricht CriteriaConvergence criteria (also known as the Maastricht criteria) are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union (EMU) and adopt the euro. The four main criteria are based on Article 121(1) of the European Community Treaty. Those member countries who are to adopt the euro need to meet certain criteria.1. Inflation rate: No more than 1.5 percentage points higher than the three lowest inflation member states of the EU.2. Government finance:Annual government deficit: The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not, it is at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases.Government debt: The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace.3. Exchange rate: Applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for 2 consecutive years and should not have devaluated its currency during the period.4. Long-term interest rates: The nominal long-term interest rate must not be more than tw[...]



Central Europe's Manufacturing And Consumers In A State Of Shock

2009-02-02T15:32:11.065+01:00

Central Europe's economies continued to contract in January - lead by their manufacturing industries - under the combined weight of a credit crunch and a slump in demand for their exports. My feeling as all three economies - Poland, the Czech Republic and Hungary - are now in recession. Hungary's is clearly the worst case, and events are moving rapidly and negatively there, but the slowdown in the Czech Economy is also very pronounced, and Poland seems finally to be falling into line, following some internal financial chaos back in October. Based on back of the envelope type calculations derived from the PMIs I would say their economies were contracting at the following pace in January. Q-o-Q Y-o-YHungary -1% -4%Poland -0.7% -3%Czech Republic -1% -4%These are only provisional assessments based on the PMIs and Consumer Confidence Indexes. They will be subject to calibration as we move forward and receive the real data, but all this should give us some general idea of what is happening, something which is badly needed in view of the suddenness of the change.Hungary PMIHungary's manufacturing purchasing manager index (PMI) fell once again to a all-time low of 38.6 in January, down from 40.8 in December, according to the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM) today. Any PMI index figure above 50 indicates expansion while a figure below 50 shows contraction in economic activity. The index hasd been above the critical 50 mark for more than three years before it dropped below (to 42.6) in October last year.The January figure is the lowest recorded since September 1995 and is a further sharp drop from January. The last time the January index was below 50 was in 2005 (48.5) and then in 1997 (49.1), but these contraction were much softer.“In view of the current situation we can confidently say that the five month negative record of 1998 will be broken. We are facing the gravest crisis of the manufacturing industry in almost 15 years," the HALPIM said. GKI Confidence IndexEconomic sentiment also plunged in January with the GKI index falling to a record. The overall index fell to minus 39.8, the lowest since measuring began in 1996, from minus 36.7 in December. The sub components for business and consumer confidence also fell to new lows.The outlook for industrial production and orders led a decline in the business confidence index to minus 30.5 from minus 28.2 in December. The outlook for export orders improved “minimally,”. Fifty-eight percent of exports are sold in the euro region, which is in its worst recession since the single currency began trading a decade ago. Concern about future job losses dragged the consumer confidence index to a record of minus 66.1 from minus 60.8 in December.Polish PMIMorale in Poland's industrial sector rose for the first time in almost a year in January, but output growth remained mired firmly in negative territory, according to a purchasing managers' index survey published Monday. The survey of 300 industrial companies prepared by Markit for ABN AMRO showed Polish manufacturing PMI increased to 40.3 in January, from 38.3 in December. This is an improvement, but the contraction is still a strong one."Though slightly improved from the exceptionally weak December data, the latest survey findings underline the headwinds confronting Polish manufacturers in January. Output, new orders and employment all contracted sharply and, overall, the first batch of 2009 PMI data point to further aggressive rate cuts by the central bank in the first quarter following greater than expected reductions in the main policy rate in both November and December. Inflation concerns have eased despite the falling zloty, as the PMI showedfurther falls in price pressures in manufacturing." - Trevor Balchin, Economist at Markit EconomicsPolish Co[...]



Poland's Economy Contracts In Q4 2008

2009-02-07T12:13:30.645+01:00

Poland is probably sliding into a “technical recession” as the slowdown in its biggest trading partners batters the economy in the largest of the European Union’s eastern members, Citigroup Inc. said.Poland’s economy probably contracted as much as 0.2 percent in the fourth quarter from the prior three months and will shrink about 0.5 percent this quarter, according to Citigroup’s Warsaw-based economist Piotr Kalisz. The slump may mean the government risks missing its budget-deficit goal of less than 3 percent of gross domestic product, he said.“The slowdown could be a surprise to the government, which still counts on almost 2 percent economic growth,” Kalisz said. “The Polish government could be forced to revise the budget in mid-2009 and raise the deficit ceiling. However, the government prefers to stick to fiscal discipline rather than fiscal stimulus,” limiting the size of the revision, he added.Poland’s central bank lowered its key interest rate by three-quarters of a percentage point as slowing economic growth forces companies to cut investments and employment, capping inflation. The Narodowy Bank Polski lowered the seven-day reference rate to 4.25 percent.“The recent macroeconomic data justify such a scale of reduction as a reactionto slowing economic growth and waning inflationary pressure,” said JaroslawJanecki, chief economist at Societe Generale in Warsaw. “We expect the end ofthe easing cycle in May or June, with the key interest rate at 3.5 percent.”Barlinek SA, Poland’s largest maker of wooden floors, fell in Warsaw trading after a decline in the zloty caused losses on its hedging transactions.Barlinek declined 0.06 zloty, or 3.8 percent, to 1.52 zloty, after earlier declining to a record low. The WIG Index rose 0.9 percent.Kielce, southeast Poland-based Barlinek said its loss on currency deals that will be settled in 2009 and 2010 stood at 51.3 million zloty ($15.6 million) as of Dec. 31. The company recorded a profit of 10.4 million zloty on currency contracts settled in 2008, it said in a regulatory statement yesterday.Echo Investment SA, a real-estate developer also controlled by investor Michal Solowow and based in Kielce, gained 0.05 zloty, or 2.6 percent, to 1.96, rising for the second time this week and recovering from a 10 percent drop.Echo had a total loss of 238.6 million zloty on zloty contracts last year, it said in a regulatory statement yesterday. Net income for the year will be at least 100 million zloty because the company increased the value of property on its balance sheet.“The information” from Echo “is positive for investors, since until now it wasn’t known what type of hedging the company had,” Maciej Wewiorski, an analyst at Dom Maklerski IDMSA, said by phone today. “It’s apparent that the company didn’t speculate on currency moves,” he said, adding that the hedging strategy was “very clear” and it “worked as it should.”Cersanit SA, Poland’s largest producer of bathroom fittings, also controlled by Solowow, fell 0.3 percent to 9.75 zloty after falling 6 percent yesterday.The company’s loss on outstanding currency contracts stood at 52.9 million zloty at the end of 2008 and it recorded an 11.7 million-zloty loss on deals settled last year, it said in a regulatory statement after the close of trading yesterday.[...]



The Forex Lending Crunch Means Trouble Is Looming Large In Poland

2009-01-25T11:52:38.430+01:00

Poland now looks set to become the latest shoe to drop in the ongoing crisis which is steadily extending its reach from one country top another, right across the whole of Central and Eastern Europe - the latest and possibly the last in the sense that if Poland does role belly side up this will probably be the one which finally does turn the apple cart well and truly over.Italy's UniCredit, the biggest lender in emerging Europe, said on Wednesday there was a clear risk of the global credit crunch gripping the region and it was up to international banks to help to avert it. UniCredit board member Erich Hampel said in a presentation at the Euromoney conference in Vienna that the bank was committed to fund its subsidiaries in those countries and would continue to lend to consumers and companies. It called on other banks active in the region, the European Union, the International Monetary Fund, other institutions and the countries concerned to launch a joint plan to stem the threat that funds could stop flowing and choke economic growth. "The international financial crisis is questioning future developments and the risk of a credit crunch is clear," said Hampel, who steers most of UniCredit's emerging European units as head of its Bank Austria arm. "A number of interested parties are involved and the support to the region should come from all of them together," Hampel said. "Coordination is essential and a 'Plan for CEE' should be designed."Eastern Europe is - as Unicredit's Eric Hempel argues in the extended quote above - quite simply falling headlong into a very severe credit crunch, as funding for bank lending steadily dries up. And, unfortunately, as the evidence mounts that Poland is caught in the teeth of this crunch, its real economy falls deeper and deeper into the dreaded pit with each passing day. FT Alphaville's Izabella Kaminska has the forex loan story here (see also see here last Friday). Basically all I have to add are some charts (and some real economy analysis) to add a bit more weight to the point and illustrate more explicitly the speed with which things are now moving forward.How Important Are Forex Loans In Poland?Poland’s exposure as to foreign-currency lending has already been extensively documented and analysed on this blog, but just in case there is still anyone out there who holds defiantly onto the view that the extent of such lending in Poland is simply too small and too recent to have any sort of severe impact on the economy, let's take a look at the recent progress in such lending, at least as far as household behaviour goes. As can be seen in the first chart below, since the middle of 2007, the rate of growth in zloty loans has slumped steadily, while forex borrowing has gone up and up, until..... until last November, when the whole thing turned. It now pretty clear that something quite important happened to the Polish banking system back in October - as I attempted to analyse in this post which was written at the time.The extent of the transition can also be seen from the monthly chart for outstanding household loans, where again zloty loans can be seen to have have virtually stagnated, while forex ones went shooting up and up, till they seem to have hit a something akin to a "dead stop". Nor does the loan "revaluation" argument help us here, since during the period under consideration the zloty has been falling (see chart below) and hence the book value of the capital stock of forex loans should rise, not fall. (I mean, unfortunately, and from a large number of comments I have received on my blogs over the last 18 months, I have to say that this is the part of the story that many of those who have taken out unhedged forex loans in Eastern Europe simply do not "get", it isn't so much the payment stream you need to look at (influenced by the relative interest rates in the two cu[...]



Poland To Consider Interbank Guarantees As The Forex Lending Crisis Deepens

2008-10-27T20:02:41.750+01:00

Well, it's been a few weeks now since I posted on this blog, but I have a feeling that this situation may now be about to change. Pressure on Poland's economy is mounting as the clutches of the global credit crunch start to make their grasp and reach felt.Stocks In DeclineCentral European stocks declined for a fourth consecutive fourth day today, with indexes in Vienna and Budapest heading for record monthly drops, on mounting concern that the global financial crisis is going to have a severe impact on economic growth in the region and that the IMF sponsored rescue packages in Hungary and Ukraine won't avoid the worst of the damage. Concern is also mounting that the problem will affect the whole region, and hence the mounting pressure on Poland's rather stronger economy. If Poland falls, god help the rest of them.Erste Group Bank AG slid to the lowest level in more than five years while Raiffeisen International Bank Holding AG, which operates in Russia and the Ukraine, plunged after mounting financial chaos forced Ukraine to seek help from the IMF.Poland's WIG20 Index added 2.2 percent today following a 5.9% fall on Friday. The MSCI Barra Core Index (which is a measure of comparative equity values) is down 48% so far this month, and 61.24% over the last three months.The Polish government has also announced today that Poland is considering guaranteeing interbank transactions, according to Deputy Prime Minister Waldemar Pawlak speaking on Polish public radio this (Monday) morning. Pawlak said that the government is examining the possibility of taking bank shares as collateral for the guarantees. Foreign investors in Polish banks have applied policies that are too strict in Poland, though credit problems have not affected Polish banks, Pawlak said . According to the draft of a new law which is set to go before cabinet tomorrow (Tuesday) Poland's government will be empowered to guarantee commercial banks loans from the central bank and other lenders on the interbank markets. The government will also be able to lend cash and state securities to banks.Poland's central bank injected 9.3 billion zlotys ($3.42 billion) of liquidity into the banking sector last week, in the form of 14-day repos. The decision was taken in order to try to ease strains on the Polish money market. The bank said it had accepted all bids worth 9.267 billion zlotys, at an average rate of 6.16 percent, 16 basis points above the main policy rate, with state bonds used as collateral. The minimum rate at which the central bank lent money to banks was 6.15 percent, while the maximum at 6.25 percent.Poland's deputy prime minister also warned that local bank capital was at risk of capital being transferred to their financially-strapped foreign owners and urged the country's watchdog to stay vigilant."There is a risk that the capital will be transferred from Polish institutions to their parents," Waldemar Pawlak, who is also the economy minister and heads the governing coalition's junior party, was quoted as saying by PAP newswire.The Financial Oversight Commission (KNF) has asked banks domiciled in Poland to report all transactions with their foreign owners daily. In a newspaper interview last week, the head of the KNF, Stanislaw Kluza, said the risk of capital transfers was very low, however, because Polish banks, with $284 billion in total assets, were too small to rescue large players in Europe and the United States. This is evidently true, but some of these bank are now under great pressure to avoid additional exposure in the east, and movement of funds can equally correspond to this strategy.Foreign financial groups, among them Italy's UniCredit, the Dutch ING Groep, and KBC Group NV, Belgium's biggest bank and insurer by market value (all of whom are struggling with major problems at the present time), control two[...]



Poland's Central Bank Leaves Rate Unchanged

2008-08-31T22:00:40.103+02:00

Poland's central bank left its benchmark interest rate unchanged for a second month as it assesses whether eight increases in the past 16 months have been enough to keep inflation within the limits it requires. The Narodowy Bank Polski kept its seven-day reference rate unchanged at 6 percent this week, although it did stress that further monetary tightening may be needed to bring inflation down to the target.

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Slowing industrial output and retail sales indicate economic growth is itself slowing, and the bank takes the view that this, and the recent decline in global oil prices should reduce pressure on inflation after consumer prices rose at a rate of 4.8 percent in July, the highest level in eight years.

The bank said today that recent data showed the economy was gradually slowing while wage growth still remained strong. The central bank expect the inflation rate to stay above their 1.5-3.5 percent target range in the coming months, and indeed they have now been struggling for some 10 months get the rate down to their 2.5 percent target midpoint.



Polish Wages Continue To Rise Strongly In July

2008-08-18T16:45:11.692+02:00

Polish average corporate wages rose more than 10 percent for a seventh consecutive month in July, suggesting that interest rates will be raised in the future. Wages rose an annual 11.6 percent to 3,229 zloty ($1,425), compared with a 12 percent rate in June, according to the Central Statistical Office today. Wage growth has been the main gauge of inflationary pressure by the Narodowy Bank Polski, which has so sar boosted its benchmark rate eight times since April last year, to the current rate of 6 percent.


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Employment was up 4.7 percent from a year in July, and rose 0.2 percent on the month. Unemployment is thought to have fallen to 9.4% in July, down from June's 9.6%. Poland's inflation rate rose in July close to a seven-year high as accelerating wage growth spurred consumer demand. The annual rate rose for a third consecutive month to 4.8 percent from 4.6 percent in June.


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The inflation rate may rise in August to as high as 5.1 percent, according to the central bank forecast.



Where Now for CEE and Baltic Currencies?

2008-08-06T15:15:43.531+02:00

By Claus Vistesen: CopenhagenEver since the illusive credit turmoil began sentiment in the market place has been fickle and essentially, like the assets of which it consists, volatile. We started off with an adamant focus on downside risks to growth which then turned into a focus and fear of inflation. Now, as the cyclical data has turned for the worse in Europe and many places in Asia the focus seems to be reverting to growth. Now, I won't go into the whole decoupling v recoupling discussion at this point since I think that this dichotomy is a false one. It never was about de-coupling à la traditionelle but moreso about two interrelated points. The first would be the extent to which the world already has decoupled from the US in the sense that a key group of emerging economies are now set to ascend in economic prowess. The second would be the extent to which the de-coupling thesis always built on a fallacy. The main point would be that the main fault line of slowdown was observed across economies with external deficits; something which, I am sure most will agree, is sure to impact surplus economies too. Now, that does not completely let the ECB off the hook since by maintaining a focus on inflation it also assumed the role, if only temporary, of the new anchor in a re-wamped version of Bretton Woods II as the Euro ascended to new highs. This bet on global re-balancing was always going to end in tears and in this light the Eurozone could not decouple from the US; that much, I think, is true.The key issue here however, as I have argued time and time again is represented in two crucial interlocked questions which together form a key structural trend in the global economy. One is what happens when the surplus economies slow down and there is not sufficient demand to pull the economy back up? Demographics and a high median age are key variables to watch in this regard. The second question is the extent to which hitherto deficit nations can turn the boat around and increase savings (i.e. rely more on exports) and what it will mean for global capital flows when they begin this process?In the context of the CEE economies the themes above are also present. In a recent note I detailed the change in sentiment from growth to inflation and what it might mean for Eastern Europe's economies and their respective currencies. The key situation as I sketched it was one of a dilemma.On the one hand, the rampant inflation levels suggest that the exchange rate be loosened to allow appreciation and thus pour water on the roaring inflation bonfire. On the other hand however the Baltics, as well as many other CEE countries, are saddled with extensive external deficits financed by consumer and business credit denominated in Euros. It is not difficult to see that this represents a regular vice from which it will be very difficult to escape since as long as the peg remains deflation seems the only painful alternative as a mean of correcting.(...)Another point which is specifically tied to Eastern Europe is that if domestic nominal interest rate increase to keep up with inflation rates it will have a strong substitution effects towards Euro denominated loans. This can become a dangerous cocktail should the tide turn against the currencies. Now that the focus seems to be changing back again it appears to be a good time to revisit the situationWithin this global nexus of what exactly to do with inflation relative to growth, many Eastern European economies has so far opted to go for inflation by raising interest rates. At an initial glance this seems quite reasonable and in many ways the CEE central banks merely latched on to market sentiment and expectations that many emerging economies would seek to use nominal appreciation as[...]



Polands Central Bank Holds Interest Rate Steady In July

2008-07-30T19:46:01.501+02:00

Poland's central bank kept its benchmark interest rate unchanged today as the economy slows and it anticipates inflation falling back. The Narodowy Bank Polski left the seven-day reference rate unchanged at 6 percent, after previously raising it four times this year.


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The Monetary Policy Council has been struggling for nine months to bring down the inflation rate, at a four-year high of 4.6 percent in June, to its 2.5 percent target. Slower-than expected employment growth, retail sales and industrial output in June indicate the economy is losing steam and the central bank said this may damp inflation. Annual wage growth in Poland's corporate sector accelerated to 12.0% in June, above forecasts and up from a 10.5% rise in May. On the month,average wages were up 4.8%, following a 2.2% monthly decline in May. Total employment at firms with more than nine employees was running at 5.39 million in June, up 4.8% on the year. That annual rise was below the February peak of 5.9%, and suggests job creation in Poland is now starting to slow.


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The economy expanded an annual 6.1 percent in the first quarter, down from 7.3 percent at the beginning of last year and 6.4 percent in the fourth quarter.

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The 10.8 percent rise of the zloty against the euro, which has converted the zloty into the world's second-best performing emerging market currency this year, has also helped keep inflation in check. The June inflation rate of 4.6 percent was driven mainly by a 3.3 percent monthly gain and an annual 7.5 percent advance in fuel prices, which policy makers cannot control.

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Momentum In Polish Retail Sales Slightly Weaker In June

2008-07-25T13:11:38.350+02:00

Polish retail sales rose at their slowest rate this year in June, suggesting that the increase in consumer demand may now be slowing enough to allow monetary policy makers to pause before raising rates again. Retail sales rose at an annual 14.2 percent rate, compared with 14.9 percent in May. The monthly increase was 2.4 percent, after a 1.9 percent decline in May, the Warsaw-based Central Statistical Office reported today. The pace of retail sales growth has now halved since February in real terms.

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Policy makers at the Polish central bank have lifted borrowing costs by 2 percentage points since April 2007 as wage growth and higher consumption have kept the inflation rate above the central bank's target of 2.5 percent for the last nine months.



Poland's June Industrial Output Rebound and Tame Producer Prices Lower Rate Rise Prospects

2008-07-21T15:29:21.298+02:00

Expectations the Polish central bank would increase rates in the coming months eased back slightly this week following better than expected producer price numbers, and a rebound in industrial output which was lower than analyst expectations. And this despite the fact that consumer price inflation continues stuck significantly above the banks target.According to data released by the Polish statistical office Poland's industrial output rose 7.2 percent year-on-year in June (see chart above), while the rate of increase in producer prices held constant at 2.7 percent year-on-year (see chart below).Folllowing publication of the data Monetary Policy Council member Andrzej Slawinski is quoted as saying that the level of interest rates would now largely depend on the zloty."What is going to happen with the interest rate level will largely depend on the changes in the zloty exchange rate," Slawinski, seen as a moderate on the 10-member MPC, speaking to TVN CNBC.The zloty - which was little changed after the data - has gained almost 4 percent against the euro in July alone and is up more than 10 percent since the start of the year.Poland's Monetary Policy Council has raised rates eight times since April 2007, bringing the key rate to the current 6.0 percent in response to the booming economy, growing inflation and a tight labour market.June consumer inflation stood at 4.6 percent year-on-year, above the central bank's 2.5 target.However, not everyone is convinced about the inflation outlook, and Halina Wasilewska-Trenkner, a hawk on the 10-strong policy panel, told daily Rzeczpospolita during last week that although the zloty was probably too strong it was difficult to determine the level of excess, and hence the bank should continue to tighten monetary policy."Maybe growth is not as dynamic as last year but it is still robust growth," she said.... "I think that in the second quarter it could have been at about 5 percent but there is still a chance that the result for the whole year will be slightly higher. I believe that we should tighten monetary policy more,"Also monetary policy maker Dariusz Filar argued on Friday that the Polish central bank should immediately raise its main interest rate by at least a quarter of a percentage point to cap inflation. The new core inflation rate, introduced three months ago, and which strips out food and fuel prices (thus giving a better reading on the state of domestic demand) - was probably a "bit too high'' in June (at 2.2 percent) and thus Narodowy Bank Polska's 6 percent seven-day reference rate was not enough to adequately cap price growth. ``That's why an immediate reaction is needed,'' Filar said in an interview on Friday in Warsaw. ``Waiting too long with a change of interest rates may cost us in the future in the form of a higher inflation rate.'' Central bank policy maker Halina Wasilewska-Trenker has also added her voice to the debate. Wasilewska-Trenker stated in an interview with a Polish news agency this weekend that Poland's 6 percent interest rate should be raised as slower-than-expected industrial output data last month provided no proof of an economic slowdown. ``Eonomic growth is still robust,'' ....Poland is ``far from a rapid slowdown,'' she added.Monetary Policy Council member Marian Noga also feels the Polish central bank should raise interest rates even as economic growth slows because accelerating inflation is only going to prompt demands for higher wages. Noga alos expects freeing energy prices as of next year will drive up inflation to almost 5 percent in January before slowing to below 3.5 percent in the middle of 2010. ``The faster-than-expected economic slowdo[...]



Polish Inflation Ticks Up In June 2008

2008-07-16T09:55:16.380+02:00

Poland's inflation rate accelerated in June and reached a four-year high as fuel, alcohol and tobacco prices all surged. In my opinion the chances the central bank will lift interest rates again sooner rather than later has just risen. Poland's annual inflation rate rose to 4.6 percent from 4.4 percent in May according to the latest data from the Warsaw-based statistics office.

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Poland's Monetary Policy Council have raised borrowing costs eight times in the past 14 months as accelerating wages and falling unemployemnt have fuelled consumption and kept inflation above their 2.5-percent target since last October.

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Polish Central Bank Raises Interest Rates (June)

2008-06-26T11:11:33.615+02:00

Poland's central bank raised its benchmark interest rate by a quarter of a percentage point yesterday. The rate now stands at 6 percent, the highest in three years, as record oil prices and rising consumer demand threaten to push up inflation. Polish policy makers have increased borrowing costs eight times since April last year while the inflation rate almost doubled.

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The May inflation rate rose to 4.4 percent, the highest since December 2004, and has exceeded the central bank's 2.5 percent target for eight months. Annual consumer price growth may be as much as 4.7 percent in December, according to an updated central bank forecast.



Poland Retail Sales May 2008

2008-07-16T09:55:53.291+02:00

Polish retail sales rose more than many observers expected in May, adding to speculation that central bank policy makers will increase interest rates tomorrow as domestic demand continues to fuel inflation. Retail sales rose an annual 14.9 percent, compared with 17.6 percent in April, according to data from the Warsaw-based Central Statistical Office earlier today.Demand for consumer goods, in part a by product of record high employment and the fastest wage growth in eight years, has been driving inflation in Poland, boosting the impact of the surge in oil and food prices. Inflation has remained above the central bank's target of 2.5 percent for eight months. Poland's annual inflationrate rose to 4.4 percent in May, up from 4 percent in April. Consumer prices rose a monthly 0.8 percent, compared with a gain of 0.4 percent a month earlier. Wages in Poland's corporate sector rose 12.6% on the year in April, above forecasts and up from 10.2% in March, according to data released Monday by the Central Statistical Office. On the month, April average wages fell 0.2%, following March's 3.7% monthly rise. The figures are preliminary and cover Polish companies with more than nine employees. Total employment at firms with more than nine employees amounted to 5.39 million in April, up 5.6% on the year. Poland's jobless rate declined to the lowest rate in almost a decade in April, falling for a third consecutive month as robust economic growth boosted hiring. Unemployment declined to 10.5 percent from 11.1 percent in March, according to the methodology used by the Central Statistical Office. About 1.61 million Poles were registered as unemployed at the end of April, the office said. Using the EU harmonised methodology there were 1.313 million Poles unemployed in March (the latest month for which we have such data) and the seasonally adjusted unemployment rate was 7.7%.Construction output was up by 22.8% in April.Most observes feel that the central bank Monetary Policy Council will lift the benchmark seven-day reference rate by a quarter of a percentage point to 6 percent tomorrow. Policy makers have lifted the rate to 5.75 percent in seven increases since April last year, when the rate was at the record low of 4 percent. The Polish central bank rejected a bid to raise the benchmark interest rate a quarter of a percentage point last month since policy makers said they wanted to see the bank's inflation projection which is due this month, according to the minutes of the rate-setting meeting. ``Most members of the Council decided that the full assessment of the risk of persisting inflation'' will be ``possible after the release of the central bank's June inflation projection,'' the bank said in minutes from the May 27-28 meeting. ``This argument justified, in their opinion, leaving interest rates changed.'' However there is one possible snag with the interest rate rising scenario. The question is, what impact will such a move have on the appetite among Poles to contract debt in euros rather than in zloty. There is a considerable market for non-zloty loans in Poland, although it is not at this point as extensive as the demand for forex loans in places like Hungary, the Baltics or Croatia, and the appetite for such loans this does not seem to have grown disproportionately vis a vis zloty loans (both have been growing very fast) in recent years.And there has long been a healthy demand for non zloty mortgage finance.But interestingly, if we come to look at the comparative year on year changes between the two possibilities in terms of mortgage finance, wha[...]



Poland Inflation May 2008

2008-06-14T16:53:12.246+02:00

Poland's inflation rate rose in May to the highest since the end of 2004, increasing the possibility that the central bank will raise interest rates again as early as this month. The annual rate rose to 4.4 percent from 4 percent in April. Consumer prices rose a monthly 0.8 percent, compared with a gain of 0.4 percent a month earlier.

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Poland's inflation rate has now been higher than the central bank's target for six consecutive months, a situation which has lead to seven increases in the key interest rate since April last year. The zloty rose to 3.3865 against the euro after the report before closing lower at 3.3900 in Warsaw. The prospect of rising interest rates is obviously liable to lead to zloty strengthening.



Polish Monetary Policy - A Hypothesis

2008-06-07T21:21:12.676+02:00

Poland's Monetary Policy Council left interest rates unchanged in May for a second consecutive month as it awaits more data on inflation and economic growth before making any further increases. Rate setters kept the seven-day reference rate at 5.75percent at their meeting this morning.

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The central bank has raised rates seven times in the past year to curb inflation as rising salaries and record-high employment spur consumer demand.

The question is, what impact will this have on the appetite among Poles to contract debt in euros rather than zloty. There is a considerable market for non-zloty loans in Poland, although this does not seem to have grown disproportionately vis a vis zloty loans (both have been growing very fast) in recent years.

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More specifically there has long been a healthy demand for non zloty mortgage finance.


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But interestingly, if we come to look at the comparative year on year changes between the two possibilities in terms of mortgage finance, what we will see is that while the zloty loans were gaining ground while monetary policy in Poland was relatively loose, since the National Bank of Poland started tightening in a serious way last autumn, the situation has inverted, and the year on year rate of increase in forex loans has been accelerating, while the rate of increase in zloty mortgage lending has been slowing. If the Polish central bank needs to continue to tighten and the ECB (despite Trichet's most recent sabre rattling) starts to loosen, then it will be interesting to follow the comparative path here, since it gives a pretty good birds eye view of the effectiveness of single country monetary policy (or its limits) in the present globalised world.

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Poland GDP Q1 2008

2008-05-30T22:38:46.756+02:00

Polish gross domestic product grew an annual 6.1 percent, compared with a revised 6.4percent in the previous three months, the Central Statistical Office in Warsaw said today. This rapid first-quarter growth may persuade policy makers to increase borrowing costs as a 10 percent gain in wages and record- high employment boost demand and inflation.

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Domestic demand grew 6.3 percent, while consumer demand increased 5.6 percent. Investment rose 15.7 percent, construction gained 16.7 percent and production grew 6.9 percent, the statistics office said.

The Polish economy is expected to grow by "around 6 percent" in the current three-month period as domestic demand remains robust, Deputy Finance Minister Katarzyna Zajdel-Kurowska said.


The zloty strengthened to 3.3732 per euro as of 12:49 p.m. in Warsaw from 3.3790 yesterday. The yield on the benchmark five-year bond rose 2.9 basis points to 6.438 percent.



Polish Central Bank Leaves Interest Rates Unchanged in May

2008-05-28T15:01:17.986+02:00

Poland's Monetary Policy Council left interest rates unchanged in May for a second consecutive month as it awaits more data on inflation and economic growth before making any further increases. Rate setters kept the seven-day reference rate at 5.75percent at their meeting this morning.The central bank has raised rates seven times in the past year to curb inflation as rising salaries and record-high employment spur consumer demand. Poland's inflation rate unexpectedly fell back in April, a factor which has also evidently influenced today's decision. The rate slipped to 4 percent from 4.1 percent in March. Consumer prices gained 0.4 percent in the month. Unemployment has been falling steadily, and using the EU harmonised methodology there were 1.313 million Poles unemployed in March (the latest month for which we have such data) and the seasonally adjusted unemployment rate was 7.7%.Polish retail sales continued to grow at a healthy clip in April, if rather more slowly than in March, a factor which may well have influenced the central bank policy decision. Retail sales rose 17.6 percent from a year earlier and 2.9 percent from March.On the other hand Polish industrial output growth accelerated in April, although this whole situation is clouded somewhat by the timing of easter this year, and the fact that April thus had more working days than March. Production rose an annual 14.9 percent, compared from 1 percent in March. Month on month, production was up 4 percent over March.The zloty has gained 5.6 percent against the euro and 12.7 percent vis a vis the dollar this year, driven by strong economic growth, the prospect of euro adoption and rising yield differentials as the central bank has steadily raised rates. The Polish government now forecasts that growth will slow to 5.5 percent this year from the decade-high 6.5 percent in 2007. Central bankers are concerned that slowing growth won't prevent higher wages and employment from speeding up inflation. Average corporate wages rose an annual 12.6 percent in April, while employment increased 5.6 percent from a year ago. It remains to be seen whether the current policy rate will be sufficient to continue to hold back inflation given the vigour of the current expansion and the steadily dwindling pool of appropriately trained and educated workers.[...]



Poland Retail Sales April 2008

2008-05-28T14:01:59.499+02:00

Polish retail sales grew more slowly than expected in April, a factor which may well influence the central bank policy decision later this morning. Retail sales rose 17.6 percent from a year earlier and 2.9 percent from March, the Warsaw-based Central Statistical Office said today.

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Unemployment Poland April 2008

2008-05-28T14:35:29.458+02:00

Poland's jobless rate declined to the lowest rate in almost a decade in April, falling for a third consecutive month as robust economic growth boosted hiring. Unemployment declined to 10.5 percent from 11.1 percent in March, according to the methodology used by the Central Statistical Office. About 1.61 million Poles were registered as unemployed at the end of April, the office said.

Using the EU harmonised methodology there were 1.313 million Poles unemployed in March (the latest month for which we have such data) and the seasonally adjusted unemployment rate was 7.7%.

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