Country Report Poland January 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 1.5% in 2009. The economy is forecast to recover in 2010, with growth quickening to 2.4%.
• 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 5.6% of GDP in 2008 to 4.3% of GDP in 2009 and 3.6% of GDP in 2010.
• If the international financial crisis deepens further, 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 government overturned the president's veto of its pension reform after the Democratic Left Alliance (SLD) voted to support the government.
• The central bank's monetary policy council (MPC) cut official interest rates by a larger than expected 75 basis points in December.
• The government has rejected a referendum on entry to the euro zone, and looks to be planning to take the zloty into the EU's exchange-rate mechanism (ERM2) before changing the constitution to allow adoption of the euro.
• Industrial output fell sharply in November, signalling that the economic downturn is likely to be deeper than previously expected.
• Consumer price inflation fell back to 3.7% year on year in November, just above the MPC's 1.5-3.5% target range.
• The growth of foreign debt slowed sharply (in euro terms) in the third quarter of 2008. With the current-account deficit continuing to widen, foreign reserves fell sharply between June and December 2008.

This report covers the following industry codes:
SIC Code: 65;60
NAICS Code: 53;52

This report covers the following industry codes:
SIC Code: 65;60
NAICS Code: 53;52