Poland Business Forecast Q1 2007

Content

• Chapter 1: Political Outlook
  • Core Scenario
  • SWOT Analysis
  • BMI Political Risk Ratings
  • Domestic Political Outlook
  • A New Coalition, But Political Wrangling Ahead
  • Poland's governing party has staved off early elections by reviving the fractious three-party coalition that fell
  • apart in September We are concerned about the ability of the coalition to hold together and expect continued
  • political instability in the near future
  • Table: Poland Cabinet & Other Key Posts (As Of 10 November 2006)
  • Foreign Policy
  • Two Very Different Neighbours
  • German Chancellor Angela Merkel's reception of the Polish premier in Berlin on October 30 renewed
  • Polish-German relations, but showed that there was little common ground between the respective administrations
  • Although far from a disaster, the trip was a missed opportunity for the countries to work towards a resolution
  • of the current pan-European constitutional deadlock, as well as relations with the EU's eastern neighbours
• Chapter 2: Economic Outlook
  • BMI Core Scenario
  • SWOT Analysis
  • BMI Economic Risk Ratings
  • Introduction
  • A Market-Unfriendly Bunch
  • Poland's political situation is currently being buoyed by a raft of good economic news: today's unemployment
  • figures showed further falls to 152% in September, with a simultaneous release detailing retail sales growth
  • at 145% BMI is forecasting real GDP growth in excess of 5% for 2006, and the country boasts one of the
  • EU's lowest inflation rates, in addition to contained budget and current account deficits This healthy outlook,
  • however, belies Poland's ongoing rocky political road With a new coalition deal signed earlier this month,
  • BMI looks at the downside risks of a reconfigured government to economic and business prospects
  • going into 2007
  • Economic Activity
  • Investment Acceleration
  • The European Commission's bi-annual economic forecasting report, released in early November, concurs
  • largely with BMI's Polish growth projections for this year and next (52% and 46% respectively) As is the
  • case across much of Central Europe, a weak political situation, coupled with a more pronounced than anticipated
  • downturn in global and/or eurozone growth in 2007-2008, represent two of the greatest downside risks to our forecasts
  • Table: GDP, Output & Population
  • Fiscal Policy
  • Public Debt In The Spotlight
  • The growth of public debt in Poland could present a problem to the country's economic stability Constitutional
  • limits on the debt to GDP ratio provide some security, but tax increases or backtracking on reforms seem in the
  • present climate more likely to materialise as a counterbalance than cuts to social spending
  • Table: Government Finances (PLNbn)
  • Exchange Rate Policy
  • PLN - Going Nowhere Fast?
  • The Polish zloty looks set to remain one of the less exciting of the CEE currencies into the medium-term
  • While we foresee considerable gains for units such as the Czech and Slovak korunas, the Serbian dinar and
  • even the Romanian leu, the Polish zloty may well have posted its most significant gains already That is not
  • to say, however, that the unit does not have the potential to make some moderate gains over the forecast period
  • Monetary Policy
  • Rates Heading Up, But Debate Over How Fast
  • With inflation ticking up, the central bank will come under increasing pressure to initiate a tightening cycle,
  • in line with banks across Central Europe We believe 50 basis points (bps) of hikes are on the cards for 2007
  • Regional Outlook
  • One In, One Out: First Wave Turning Shy On The Euroclub
  • Bloated fiscal deficits and rising inflation pressures are derailing many of the EU-10 countries' eurozone
  • bids, with several, including Hungary, abandoning an official target altogether this year While a loss
  • of commitment to eventual euro adoption will sit badly with investors, the delay in joining the currency
  • union should not threaten stability in itself, provided convergence with the eurozone continues Indeed,
  • several states are now considering the merits of allowing more time for real economic convergence
  • before handing over control of monetary policy to the European Central Bank (ECB)
• Chapter 3: Special Report
  • BMI Sovereign Risk Ratings
  • What And Where Are The Risks?
  • Table: BMI Sovereign RIsk Ratings
  • Emerging Europe
  • Diverging Ratings Trends
  • Table: Emerging Europe Sovereign Ratings - Evolution of Ability to Pay
  • Table: Emerging Europe Sovereign Ratings - Evolution of Willingness to Pay
  • BMI Sovereign Ratings Index Methodology
• Chapter 4: Business Environment
  • Core Scenario
  • SWOT Analysis
  • BMI Business Environment Risk Ratings
  • Legal Issues
  • Legal Framework
  • Labour Force
  • Size
  • Table: Demographic Indicators (2005)
  • Table: Employment Indicators
  • Foreign Investment Policy
  • Overview
  • Table: Emerging Europe, Annual FDI Inflows
  • Table: Poland, Annual FDI Inflows
  • Foreign Trade Regime
  • Overview
  • Table: Top Export Destinations, US$mn
  • Tax Regime
  • Overview
• Chapter 5: Key Sectors
  • Automotives
  • Industry Forecast Scenario
  • Table: Poland Autos Sector - Historical Data & Forecasts (CBUs unless otherwise stated)
  • Pharmaceuticals
  • Market Summary