Country Report Poland December 2008

Outlook for 2009-10

• The coalition government of the centre-right Civic Platform (PO) and the agrarian Polish Peasants' Party (PSL) offers good prospects for political stability, at least in the short term.
• The PSL's demands for special treatment for its supporters are nevertheless likely to increase over time. As a result, the coalition may not survive a full parliamentary term, leaving the PO to govern as a minority administration.
• The government will adopt a more liberal approach to economic policy than its predecessor, but opposition from the president and the PO's hopes of winning the presidential election in 2010 make radical changes unlikely.
• Year-on-year GDP growth is forecast to slow sharply from an estimated 5% in 2008 to 2.4% in 2009. The economy is forecast to recover in 2010, with growth quickening to 3.5%.
• Slower economic growth and an easing in labour market conditions will allow inflation to fall back from an estimated 4.3% in 2008 to 3.3% in 2009 and 2.2% in 2010.
• The sharp slowdown in domestic demand will cause the current-account deficit to narrow from an estimated 5.4% of GDP in 2008 to 5% of GDP in 2009 and 3.5% of GDP in 2010.
• If the current international financial crisis continues, access to foreign borrowing will become more difficult, and this could force an even sharper adjustment on the economy, leading to even slower growth in 2009-10.

Monthly review

• The president appears to be backing away from an earlier threat to veto the government's plans to restrict eligibility to the current system of generous early retirement benefits.
• The government has prepared a package of measures to counter the effects of the global economic crisis. The main measures are higher state guarantees for bank lending and faster use of EU structural funds.
• The government has maintained its plans to bring down the budget deficit in 2009, despite cutting the expected rate of economic growth.
• The monetary policy council (MPC) of the National Bank of Poland (NBP, the central bank) cut the key official interest rate from 6% to 5.75% in November.
• Real GDP growth in the third quarter was 4.8% year on year. However, growth in spending on fixed investment slowed sharply, and monthly indicators suggest economic growth slowed further in October and November.
• The current-account deficit continued to widen in the third quarter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52