Poland Business Forecast Report Q1 2009

Poland And The Credit Crunch: Not Immune

The Polish economy will face a number of tough challenges heading into 2009 as the eurozone embarks on its economic downtrend, risk aversion towards domestic financial assets remains elevated and external credit lines diminish. While we continue to hold that Polish macroeconomic fundamentals will help the country to deflect the worst of the credit crunch, we caution that it is not immune. As a result of widespread deleveraging across emerging Europe, combined with the distinct lack of capital to fund investment and consumption, combined with the natural unwinding of domestic demand conditions, we have revised down our real GDP growth forecasts for 2009 and 2010. The resurgence in growth momentum will depend much on the economic recovery of the eurozone, which we expect to materialise in 2010, though caution that it may take until 2011 to transpire should credit markets take longer to thaw.

Despite the apparent eagerness with which Polish Prime Minister Donald Tusk is pursuing Poland's euro adoption, we believe that the deadlines set forth in the government's euro roadmap will unlikely be met. Indeed, having announced on September 10 that Poland will be taking added measures to adopt the euro, an ambitious eurozone accession date of 2011 (with official euro adoption planned for January 1, 2012) has been set. However, we believe that this accession target is a little too optimistic, with BMI pencilling in an adoption date of 2013.

Though growth in Poland's stockpile of gross external debt came in at 49.8% yearonyear (yoy) during Q208 (having expanded by 50.6% during the first quarter), we hold to our view that the rate of accumulation will start to slow significantly during H109. While we previously expected the nominal debt pile to continue swelling as a result of the increasingly leveraged position of the private sector, we now believe that given the severity of the eurozone slowdown and likelihood of a substantial impairment of external credit lines, the foreign debt burden will contract somewhat over the course of 20092010. Indeed, as refinancing facilities start to diminish and shortterm loans (as well as a proportion of longterm liabilities falling due) are harder to roll over, debtors will be increasingly forced to pay off their liabilities.

Vodafone has announced that it has decided to further increase its stake in Polkomtel, a leading telecoms operator in Poland, by 4.8% for a total cash consideration of EUR176mn plus accrued interest at closing. The additional stake acquired from TeleDenmark Communications (TDC) would take Vodafone's stake in Polkomtel from 19.6% to 24.4%. The purchase of the additional stake will enhance Vodafone's exposure to the attractive mobile market of Poland. BMI anticipates that there will be 43.75mn mobile subscribers in 2008, with the total rising 7.7% by 2012 to 47.1mn. Over this period, penetration will rise from 115% to 124.3%.

• Executive Summary
• Poland And The Credit Crunch: Not Immune
• Chapter 1: Political Outlook
  • Swot Analysis
  • Bmi Political Risk Ratings
  • Domestic Politics
  • Euro Adoption Unlikely Before 2013
  • Though Prime Minister Donald Tusk Is Increasingly Pushing For Eurozone Entry In 2011, We Believe That This
  • Accession Date Will Prove Too Optimistic
• List Of Tables
  • Table: Polish Political Overview
  • Chapter 2: Economic Outlook
    • Swot Analysis
    • Bmi Economic Risk Ratings
    • Economic Activity
    • Domestic Demand To Suffer From Tighter Liquidity
    • Despite Remaining Fairly Upbeat On The Polish Economy, Which We Believe Is Relatively Better Positioned In The
    • Emerging Europe Region, We Caution That Growth Is Set To Slow Considerably
    • Table: Economic Activity
    • Monetary Policy
    • Inflationary Cycle Finally Losing Momentum
    • We Believe That The Moderation Of Polish Headline Inflation In September, Largely On The Back Of The Ongoing
    • Correction In Global Soft Commodity And Energy Prices, Provides A Tentative Sign That The Inflationary Cycle Is
    • About To Embark On Its Downtrend
• List Of Tables
  • Table: Monetary Policy
  • Balance Of Payments
  • Current Account To Remain Under Pressure In 2009
  • As A Result Of Polands Deteriorating External Position, Compounded By The Eurozone Slowdown As Well As Tight
  • Global Credit Conditions, We Have Revised Our Current Account Forecasts Through To 2013
• List Of Tables
  • Table: Balance Of Payments (Euro)
  • Eurozone Recovery To Offer Some Respite
  • Financial Account Provides Cause For Concern
  • External Debt
  • External Debt Pile To Contract During 20092010
  • Though Previously Projecting A Continued Expansion Of Polands Nominal Debt Pile, We Now Believe That The
  • Severity Of The Eurozone Slowdown And Tightening In Global Liquidity Will Likely See The Debt Load Lessen Over The
  • Course Of 20092010
• List Of Tables
  • Table: Foreign Debt
  • Regional Outlook
  • Demand Destruction Key For Negative Outlook
  • A Significant Demand Slowdown In Both The Us And Eurozone In 2009 Will Dramatically Impact The Economies Of
  • Central And Eastern Europe
• List Of Tables
  • Table: Europe Equity Indices, Selected Figures
  • Chapter 3: 10 Year Forecast
    • The Poland Economy To 2018
    • Favourable Growth Dynamics To Remain Through To 2018
    • We Believe The Polish Economy Will Continue To Expand At A Healthy Clip Over Our 10Year Forecast Period, With
    • Average Annual Real Growth Of 4.2%. This Will Allow For Significant Real Convergence Gains To Be Realised
• List Of Tables
  • Table: Poland LongTerm Macroeconomic Forecasts
  • Chapter 4: Special Report
    • Why The Us Can Remain World Superpower
    • Wealth Is Shifting East
    • The Uss Current Financial Woes Will Not Necessarily Undermine Its Position As A Global Superpower
• List Of Tables
  • Table: Geopolitical Power Index
  • Chapter 5: Business Environment
    • Swot Analysis
    • Bmi Business Environment Risk Ratings
    • Business Environment Outlook
    • Institutions
• List Of Tables
  • Table: Bmi Business And Operational Risk Ratings
  • Infrastructure
• List Of Tables
  • Table: Bmi Legal Framework Ratings
  • Table: Labour Force Quality
  • Table: Europe, Fdi Annual Inflows
  • Table: Bmi Trade Ratings
  • Market Orientation
• List Of Tables
  • Table: Top Export Destinations
  • Operational Risk
  • Chapter 6: Key Sectors
    • Food & Drink
• List Of Tables
  • Table: Mass Grocery Retail Sales By Format (Us$Bn)
  • Pharmaceuticals
• List Of Tables
  • Table: Polands Generics Market Indicators
  • Chapter 7: Bmi Global Assumptions
    • Global
• List Of Tables
  • Table: Global Assumptions
  • United States
  • Eurozone
  • Japan
  • China
  • Commodities