Country Report Poland February 2009

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 real GDP growth is forecast to slow sharply, from an estimated 4.8% in 2008 to 0.7% in 2009. The economy is forecast to recover in 2010, with growth quickening to 2.2%.
• Slower economic growth and an easing in labour market conditions will allow inflation to fall back from an estimated 4.2% in 2008 to 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 5.7% of GDP in 2008 to 4.9% of GDP in 2009 and 4.2% of GDP in 2010.
• If the international financial crisis deepens further, access to foreign borrowing will become more difficult, and this could force a sharper adjustment on the economy, leading to even slower growth in 2009-10.

Monthly review

• The main development on the political scene during the past month was the resignation of the justice minister, Zbigniew Cwiakalski.
• The prime minister, Donald Tusk, appears to have ruled out a referendum in 2009 on the introduction of the euro in Poland.
• Dire economic data for December 2008-January 2009 forced the government to downgrade the macroeconomic assumptions on which it based its EU convergence programme update and its budget draft for 2009.
• In late January the National Bank of Poland (NBP, the central bank) cut its policy rates by 75 basis points, to 4.25%, following a similar move in December.
• According to preliminary data from the Central Statistical Office (GUS), GDP grew by 4.8% in 2008, implying a sharp slowdown in the fourth quarter.
• The latest forward-looking indicators reinforce concerns that the downturn already evident in the fourth quarter of 2008 is set to become deeper in the short term.

Source: Country Report

This report covers the following industry codes:
SIC Code: 53;59;22;48;47
NAICS Code: 44;313;517;48