Country Report Poland May 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. The coalition may therefore not survive a full term, possibly 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.
• Real GDP is forecast to contract in 2009, after growing by 4.9% in 2008. The economy is forecast to post modest growth in 2010.
• Slower economic growth and an easing in labour market conditions will allow inflation to fall from 4.2% in 2008 to 2.5% in 2009 and 2% in 2010.
• The sharp slowdown in domestic demand is expected to cause the current-account deficit to narrow slightly in 2009-10 from 2008.
• 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.

Monthly review

• During the past month, the political scene was dominated increasingly by party campaigning and manoeuvrings in the run-up to the forthcoming European Parliament election, which will be held in Poland on June 7th.
• In mid-April Poland became the second country, after Mexico, to seek a flexible credit line (FCL) from the IMF, which introduced this scheme in late March specifically for countries with sound policy fundamentals.
• In the first three months of 2009 the state budget deficit reached 58% of the annual plan. EU-harmonised public deficit and debt figures for 2008 were larger than expected.
• The aggregate capital ratio of the banking sector fell to 10.8% of risk-weighted assets at the end of 2008, from 12.1% at end-2007 and 13.2% at end-2006.
• In the first quarter of 2009 industrial output excluding construction fell by nearly 11% year on year.
• The balance of economic and survey indicators appears to suggest that GDP registered year-on-year growth of around 0.5-1% in the first quarter of the year.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;47;70;15;37;53;49;2834;80;48;10;65
NAICS Code: 52;48;72;23;336;44;22;3254;62;517;212;53