Poland Business Forecast Report Q3 2008

Publication Date	June 2008
Publisher	Business Monitor
Product Type	Report
Pages	61
ISBN Number	1745-0667
Product Code	BMI01212

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Summary

Economy To Cool In 2008 Though Q108 GDP data are yet to be released, tentative indications still point towards a positive first quarter. On the domestic front, consumers have had good reason to be upbeat, with favourable labour market dynamics continuing to drive wages higher. Domestic lending conditions have also remained relatively supportive of domestic demand. The stock of loans to households grew by 4.5% during January-March, slightly below the 5.0% growth achieved over the same period in 2006. In the latest edition of the Senior Loan Officer Opinion Survey compiled by the national Bank of Poland (NBP), the conditions on consumer and housing loans were said to be broadly unchanged during Q108 despite the tightening of global liquidity. Poland's burgeoning economy appears to have (partially) shielded the consumer from the turmoil on global financial markets.

That said, there are tentative signs that consumers are starting to develop the jitters. eurostat's Economic Sentiment Indicator for Poland fell 1.4 points in April, though was less severe than the 3.8 point loss for the EU as a whole. In addition, the consumer confidence indicator compiled by Ipsos-demoskop fell by 0.16 points in February, following a more substantial 3.79 point contraction in January. Thus, while confidence has been shaken somewhat, we have yet to see an outright downswing in consumer sentiment.

Since securing victory at the October 2007 general election, support for the ruling Civic Platform (PO) party continues to swell. Support for the government has been buoyed by a number of factors. First, the coalition took over at the height of the economic boom (with 2007 recording a 10-year high rate of expansion), with business and consumer sentiment still high. Indeed, rising household wealth and improving employment opportunities have renewed optimism, with the proreform agenda of the PO party striking a powerful chord with young Polish voters. In addition, the widespread criticism of the previous Kaczynski-led government and frustration at the lack of more substantial reform has leant the PO party a new legion of supporters.

Despite widening by a substantial 1.1 percentage points (pp) of GDP in 2007, we believe that the current account deficit still has further to widen in 2008. Indeed, the picture will get worse before it gets better. The indirect effect of a US recession and the direct effect of a eurozone slowdown (with growth forecast to sink to 1.6% in 2008), will prove particularly damaging for Polish exporters.

In addition, the continued unwinding of the global credit crunch, a cooling post-boom economy and deteriorating consumer confidence will reduce the appetite for imported consumables. However, we believe that there will be a lagged response from importers as developments in the external environment take longer to filter through to consumer expectations than for exporters who are at the sharp end of eurozone growth dynamics.

Poland's Infrastructure Minister Cezary Grabarczyk has announced that the country plans to spend US$55bn on new roads in preparation for the Euro 2012 Football Championships. Many of the hard-surfaced roads are in poor condition due to maintenance cutbacks and even though Poland is the largest Eastern European country in the EU, with a land area of 31.3mn hectares, only 3% of Polish roads meet EU standards.

Content

Executive Summary
- Economy to Cool in 2008
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Surviving The Slowdown Key to Coalition Support
- The Popularity of Poland's Civic Platform-LED Government Continues to Flourish, with Its Pro-Reform Mantra
- Auguring Well with Many Young and Previously Disaffected Voters
List of Tables
- Table: Polish Political Overview
- Foreign Policy
- Time Running out for Polish and US Defence Negotiators
- The Latest Set Back in Negotiations between Poland and The US over The Latter's Proposed Construction of A
- Missile Base Suggests That Time May Be Running out to Get A Deal Approved
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Growth Dynamics to Remain Favourable
- Having Posted A Substantial 6.6% Rate of Growth in 2007, We Expect The Polish Economy to Cool over The Course
- of 2008-2010 as IT Rides out The Post-Boom Wave
List of Tables
- Table: Economic Activity
- Balance of Payments
- External Demand to Weigh on Current Account
- Though We Project The Polish Current Account Continuing to Post Deficits over Our Five-Year Forecast Period, We
- Maintain That The Shortfall Will Be Both Modest and Manageable, Remaining within A 3-4% Band during 2008-2012
List of Tables
- Table: Balance of Payments
- External Debt
- External Debt to Expand, but Not A Cause for Concern
- Though We Forecast Poland's Gross External Debt Pile to Continue Growing over The Medium Term, We Do Not as Yet
- See Any Real Cause for Concern
List of Tables
- Table: Foreign Debt
- Exchange Rate Policy
- Zloty to Strengthen Further over Long Term
- The Continued Firming of The Polish Zloty Is Reflective of Poland's Strong Macroeconomic Fundamentals and
- Opportunities for Investors to Exploit The Carry Trade
- Labour Market
- The End of Large-Scale Polish Migration to The UK?
- We Believe That amid The Continued Strength of The Polish Zloty against Sterling, Combined with Increasingly
- Favourable Employment Opportunities in Poland, The Trend for Net Polish Migration to The UK Will Reverse over
- The Medium Term
Chapter 3: Special Report
- Business Outlook for Global Frontier Markets
- Growing Fast on The New Frontier
- The 41 States That Bmi Examines in A New Report on Our Online Service May Make up Only A Small Slice of The World
- Economy, but They Possess Characteristics That Will See Them Gain Importance in The Eyes of Investors and Global
- Businesses over The Coming Years
List of Tables
- Table: Frontier Markets - Key Data and Projections for Top 10 Countries
- Frontier Investment
- Potential and Pitfalls
- The Spectacular Macroeconomic Performance of Frontier Markets in Recent Years Has Been Matched by Mildly
- Successful Efforts to Deepen Capital Markets
List of Tables
- Table: Gdp per Capita, US$ (in Order of % Increase)
- Table: Diversity through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market Indices
- Regional Overview
- Laos
- Neighbouring Economies The Key to Growth
- Laos's Gdp Growth Has Been Boosted in Recent Years as Neighbours China, Thailand and Vietnam Compete for Its
- Natural Resources. Gdp Expansion in 2007 Has Been Estimated at 7.6% and We See Annual Growth Remaining
- above 7% for Our Five-Year Forecast Period
- Yemen
- Huge Potential, but Don't Bank on Gcc Membership
- Markets Do Not Come Much More Frontier than Yemen, and, as Would Be Expected, There Is Huge Potential for
- Development, with The Prospect of Eventual Gcc Membership Likely to Act A Key Investment Pull
List of Tables
- Table: Yemen Economic Activity
- Democratic Republic of The Congo
- Mining Industry to Drive Growth
- The Democratic Republic of The Congo's Mining Industry Will Be A Key Driver of Growth and Is Likely to Attract
- Significant Levels of Fdi, with Our Real Gdp Forecasts Standing at 8.3% and 7.9% in 2008 and 2009, Respectively
List of Tables
- Table: Democratic Republic of The Congo - Economic Activity
- Cuba
- Investment Prospects after Fidel
- The Accession of A New Leadership Structure in Cuba Has Sparked Excitement That The 45-Year-Old Trade Embargo
- with The US May Be Lifted and Cuba May Move toward Market Liberalisation
List of Tables
- Table: Cuba Macroeconomic Data and Forecasts
- Mongolia
- Minerals to Drive Economic Boom
- Mongolia Is in The Midst of A Massive Resource-LED Economic Boom That Should Lift Gdp Growth into The Double
- Digits and Underpin Robust Increases in Exports and Inflows of Foreign Investment Capital over The Long Term
List of Tables
- Table: Mongolia - Economic Activity
Chapter 4: Business Environment
- SWOT Analysis
- Bmi Business Environment Risk Ratings
- Business Environment
List of Tables
- Table: Bmi Business & Operational Risk Ratings
- Table: Bmi Legal Framework Ratings
- Institutions
- Infrastructure
- Market Orientation
List of Tables
- Table: Emerging Europe Fdi49
- Table: Poland Fdi
- Table: Bmi Trade Ratings
- Table: Top Export Destinations
- Operational Risk
Chapter 5: Key Sectors
- Freight Transport
List of Tables
- Table: Poland Autos Sector - Historical Data and Forecasts (Cbus Unless Otherwise Stated)54
- Power
List of Tables
- Table: Poland Power - Historic Data & Forecasts