Country Report Poland October 2009

Outlook for 2010-11

• The coalition government of the centre-right Civic Platform (PO) and the agrarian Polish Peasants' Party (PSL) is likely to remain stable, at least in the short term.
• However, the PSL's demands for special treatment for its supporters are 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 growth is forecast to pick up to 1.9% in 2010 and 2.6% in 2011 from an estimated 1% in 2009.
• Contained wage growth and gradually tighter monetary policy will allow annual average inflation to fall in 2010-11 from an estimated 3.4% in 2009.
• We estimate that the current-account and trade deficits narrowed sharply in 2009. The current-account deficit is forecast to expand as a share of GDP in 2010-11 as imports rise faster than exports and income debits increase.

Monthly review

• In September the US president, Barack Obama, announced the abandonment of the previous US administration's plan to deploy a battery of anti-ballistic missiles in Poland.
• This called into the question the future relationship between the US and Poland, hitherto one of the US's most loyal NATO allies in Europe.
• In early October several government officials resigned in the wake of an alleged scandal involving lobbyists from the gaming industry.
• At the end of September the government passed the final version of the 2010 budget, which projects a Zl? 52bn (US$16.8bn) deficit. Concerns have increased regarding the projected increase of public debt in the coming years.
• Available economic and survey data for the third quarter of 2009 suggest that year-on-year GDP growth picked up in July-September from 1.1% in the second quarter.
• Prospects for domestic demand in the following quarters may have worsened, as labour market indicators continue to deteriorate.
• Data from the National Bank of Poland (NBP, the central bank) showed a current-account deficit of US$2.1bn in January-July, compared with a deficit of US$15.9bn in the year-earlier period.

Source: Country Report