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The Warsaw Voice » Business » March 12, 2008
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Exports in Record Territory
March 12, 2008 By Andrzej Ratajczyk   
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Polish companies exported a record of over 101 billion euros worth of goods and services last year as exports continue to be a key driver in the country's economic growth.

According to the Central Statistical Office (GUS), Poland's 2007 exports totaled zl.383.9 billion in current prices and imports reached zl.450.7 billion. This was a rise of 11.7 percent and 14.4 percent respectively on 2006. The trade deficit rose to zl.66.8 billion, up from zl.50.3 billion in 2006.

Calculated in euros, exports totaled 101.1 billion, a rise of 15 percent, and imports were 118.8 billion, an increase of 17.8 percent. The trade deficit stood at 17.7 billion euros, versus 12.9 billion euros in 2006.

In 2007, Poland recorded a deficit in trade with other Central and Eastern European countries and in trade with developing countries. But it recorded a surplus of zl.14.4 billion in trade with other European Union countries and a surplus of zl.3.2 billion in trade with developed countries in general. In trade with the EU, Poland's balance has been positive since the beginning of 2005. In 2007, developed countries had an 84-percent share in Polish exports and a 70.8-percent share in imports. The EU's share in Polish exports and imports was 78.7 percent and 63.9 percent respectively.

In Polish exports, the share of Germany, Poland's main trading partner, decreased by 1.4 percentage points from 2006 to 25.8 percent. In imports, Germany's share decreased by 0.1 points to 23.9 percent. The trade deficit was zl.8.5 billion (2.3 billion euros), up from zl.1.3 billion (300 million euros) in 2006.

Of Poland's main trading partners, the highest growth was noted in exports to Ukraine, Russia, Italy and Britain and in imports from China, Britain, the Netherlands, South Korea, Belgium and Italy.

Polish exports have tripled since 2000. This increase is impressive, especially considering that the zloty has strengthened considerably in recent months, thus reducing the profitability of exports.

Poland owes its continuing high rate of export growth to its businesses which have been able to exploit demand abroad, especially in the European Union. Exports have driven the Polish economy for several years now, and a strong zloty has not been a great problem because companies continue to restructure and cut costs.

Another reason why export growth has been so high is that foreign-owned companies account for a large percentage of Polish exporters. They import supplies from their subsidiaries and affiliates outside Poland and are largely immune to exchange rate fluctuations and an appreciating zloty. The share of foreign-owned companies in Poland's exports is steadily growing and has already exceeded 60 percent. Foreign-owned companies are usually less sensitive to temporary economic slowdowns and have greater funding opportunities and an ability to win new markets. These advantages help them achieve a much higher rate of growth in exports compared with Polish-owned companies.

A major contribution to the substantial reduction in Poland's trade deficit has come from automotive exports in recent years. This is due to a fast increase in the exports of cars, car parts and diesel engines. According to the Polish Automotive Chamber, in the first 11 months of 2007, Poland exported 14.7 billion euros worth of automotive products, over 1.8 billion euros more than in the same period of 2006.

An overwhelming 88.7 percent of Poland's automotive exports reach EU markets. Germany, with a 25.7-percent share in Poland's total automotive exports, is the key market for these products. It is followed by Italy, Spain, Britain and France. Passenger cars and delivery vans accounted for the biggest group of automotive products exported in the 11 months to November last year. These exports were worth a total 5.2 billion euros.

Parts and components were the second largest group of automotive products exported in this period. The total value of these exports exceeded 4.3 billion euros. Diesel engines made up the third largest group of automotive exports, worth over 2.9 billion euros.

In a negative trend in Poland's foreign trade, the value of energy materials imported to the country increased considerably. The deficit in this trade increased markedly as a result of surging prices of oil and natural gas.

So far neither the strong zloty nor problems experienced by other European economies have hampered Polish exports. This seems to indicate that negative economic trends in Europe do not have to spell trouble for Polish exporters. Just the reverse, at a time of a downswing, importers look for cheaper substitutes for products they bought previously, and Polish companies can grab this opportunity.

There is every indication that Poland's exports performance in 2008 will not be much worse than in 2007, experts say. According to the central bank's recent projections, the country's foreign trade may continue to grow fast. Exports are expected to increase by 9.5 percent in 2008 and 2009 and by 9.9 percent in 2010. Central bank experts say this fast growth should not be affected by either a strong zloty or slower economic growth in the euro-zone and the United States.

One of the reasons why Polish exports are on the rise is that Poland's economy is in good shape. In February, the central bank said that the country's economic growth would reach 5.1 percent this year, followed by 4.7 percent in 2009 and 5 percent in 2010.

The Polish economy is in a period of strong growth encompassing all of its main sectors, including services, industry and construction. According to preliminary GUS data, the country's 2007 GDP grew 6.5 percent in annual terms, its highest growth in 10 years. While investment and consumption have been the key drivers of growth recently, exports continue to play a major role.
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