Author: Udayan Gupta

PROBLEM NEIGHBORS

Now, problems in the rest of Europe are affecting Poland. “Growth in Poland will slow in the last months of the year due to a decline in exports, as demand in the eurozone slows,” the European Commission noted in a statement, adding that Poland’s economy is also being hit by the Russian embargo on food imports from the EU. Germany’s weakening economy, which accounts for 25% of Polish exports, has slowed Poland’s exports of industrial goods. And Polish food growers, who in 2013 sold over $1 billion worth of fresh produce to Russia, including 700,000 tons of apples, have been forced to sell their stock at deep discounts or stockpile, when possible.

The Commission has cut its prediction for Poland’s economic growth in 2014 from the 3.2% it forecast in May to 3%. But that still is far ahead of its 1.3% projection of overall EU GDP growth—and just 0.8% in the eurozone.

STRONG LOCAL MARKETS

Nonetheless, domestic demand remains strong. A recent survey of loan officers by the country’s central bank, Narodowy Bank Polski, found that there was little evidence of major changes in demand for loans or in lending policies. Compared with the previous edition of the survey, there was a lower percentage of the banks that identified factors favoring the easing of lending policy toward enterprises. In particular, responding banks did not change the terms on corporate loans significantly.

Banks, however, intensified monitoring and limited credit extension to certain sectors—notably, to enterprises engaged in exports to Russia and Ukraine, enterprises that were overreliant on raw materials imported from these countries and enterprises with a substantial share of sales to those in the coal-mining industry, where a number of companies are financially distressed.

In spite of the problems that domestic coal mining faces, the Polish energy sector has just been handed a lifeline. The European Bank for Reconstruction & Development in November approved a program to help Poland switch from a reliance on carbon-intensive fuels to a more diverse, clean and sustainable energy mix. Poland estimates that it needs €10 billion ($13.3 billion) in renewable energy investments to double its renewable energy capacity to 11 gigawatts by 2030 and achieve domestic and EU targets.

The EBRD says it will support Poland’s electricity distribution network operators in building both the physical and operational capacity to connect new, renewable energy generators. That task will mean financing 500 megawatts of renewable energy capacity by 2018 and result in significant savings in carbon dioxide emissions.

Growth will continue, says Rusiecki of Enterprise Investors, which has always focused on a long-term development and investment strategy for Poland. “I believe the prospects are good if there is at least minimal political stability in Europe and Poland. I think there is hope for a more innovative generation of entrepreneurs and managers to take the economy to the next level, but they need another 10 years of stability.” n

GFmag.com Data Summary: Poland

Central Bank: National Bank of Poland

International Reserves                  

$ 112.5 billion

Gross Domestic Product (GDP)

$517.7 billion

Real GDP Growth

2011

4.5%

2012

2%

2013

1.6%

GDP Per Capita—Current Prices

$13,435.26

GDP—Composition By Sector*  

agriculture:

4%

industry:

33.3%

services:

62.7%

Inflation

2011

4.3%

2012

3.7%

2013

0.9%

Public Debt (general government
gross debt as a % of GDP)

2011

56.2%

2012

55.6%

2013

57.1%

Government Bond Ratings

(foreign currency)

Standard & Poor’s

A-/Stable/A-2

Moody’s

A2

Moody’s Outlook

STA

FDI Inflows

2011

$20,616 million

2012

$6,059 million

2013

$6,038 million

* Estimates                                                                       
Source: GFMag.com Country Economic Reports, IMF

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