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The Warsaw Voice » Business » August 13, 2008
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Still Resilient
August 13, 2008 By Andrzej Ratajczyk   
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The Polish economy has remained unaffected by the latest global economic slowdown and continues to grow rapidly, experts say.

According to Katarzyna Zajdel-Kurowska, the deputy finance minister, there is no risk that Poland's GDP growth rate could fall below 5.5 percent in the second half of the year.

"There is a higher risk for next year, but this is an external risk, " Zajdel-Kurowska said. "We will be closely watching foreign demand and global developments."

The finance ministry recently put the country's second-quarter growth at anywhere between 5.5 and 5.9 percent, down from 6.1 percent in the first quarter. The ministry's projection for the whole year is 5.5 percent. At the same time, the ministry has warned that the risk of a slowdown in the longer term is growing. Under the targets for the 2009 budget, the GDP growth rate next year is projected at 5 percent.

The latest economic slowdown around the world will have an adverse impact on the 13 nations using the single European currency, experts say. "In Poland, however, economic growth will not weaken as much as in the euro-zone, thanks to the continued modernization of the economy here, coupled with foreign and domestic investment, which contributes to increased productivity," said Andrzej Sławiński, a member of Poland's Monetary Policy Council. "To a large extent, we are helped by the fact that the Polish economy is being constantly modernized. The inflow of foreign direct investment and investments by domestic companies mean that productivity is on the rise and will continue to outpace productivity growth rates in highly developed economies."

Analysts at international institutions, including Euler Hermes, a global leader in credit insurance, agree that the Polish economy has good prospects for further growth. Euler Hermes ACI, based in the United States, recently published a global risk report for the first half of this year. The report predicts a drop in the global GDP growth rate and a decline in global trade in the second half of the year.

The unprecedented raw material price hikes and the implications of the U.S. credit crunch have contributed to a global economic slowdown, causing widespread problems with inflation and lower demand on many markets. Another important factor that has made it more difficult for the world to come out of the crisis is a slowdown in global trade and, consequently, problems with asset allocation to the advantage of both developed and developing countries.

It is widely believed that Poland will not suffer much as a result of the U.S. credit crunch and that the greatest headache for Polish businesses is a strong zloty, which makes exports less competitive. But Tomasz Starus of Euler Hermes Polska says that exporters' problems should not be attributed exclusively to the appreciating zloty. "Economic conditions on foreign markets are also important," he says. "It is true that the United States is not a major economic partner for Poland; the country's ties with other European economies are crucial. The crisis on the Spanish and Italian markets, and stagnation in France and Britain have had an adverse impact on demand for Polish products."

Euler Hermes analysts say Polish companies are now largely dependent on exports because in many sectors the domestic market is too small to ensure expansion and a secure future. Of course, exporters may try to sell more products at home, but this leads to tougher competition and reduces profitability for producers.

The Polish economy is growing much faster than most other European countries, as shown by a list of the world's fastest growing economies ranked by the Globalization Institute. Poland is ranked 29th among 50 countries. The institute's experts took into account indicators such as GDP growth, per-capita GDP, unemployment, inflation, government debt, foreign trade, and foreign direct investment. There are three Asian nations among the top five countries on the list. Hong Kong tops the league table, followed by China, the Netherlands, the United States, and Singapore. Of the new EU member states, only the Czech Republic is ahead of Poland, in 24th place. Emerging powerhouses such as India and Brazil as well as many Central and Eastern European countries, including Slovakia, Ukraine and Hungary, rank behind Poland.

According to the Globalization Institute, Poland is witnessing rapid economic growth, decreasing unemployment, and a steady rise in foreign trade and foreign direct investment. Importantly, although the Polish economy is growing much faster than Western European economies, it has not suffered from overheating, unlike Hungary some time ago and the Baltic states today.

Poland ranks even higher in terms of investment attractiveness. Cushman & Wakefield, a real estate services company, has ranked Poland in fifth place among the most attractive investment locations in Europe, after Belgium, which tops the list, the Netherlands and Hungary. The Czech Republic ranks fourth, being the third most attractive location in Central and Eastern Europe among the top five. Cushman & Wakefield's European Distribution Report 2008 looks at 25 countries in terms of their attractiveness as a location for industrial and logistics operations.

According to Ferdinand Hlobil of Cushman & Wakefield Eastern Europe, the fact that Central and Eastern European nations have moved up the league table is not surprising because these countries continue to develop and offer opportunities to investors to reduce their operating costs.

Economic growth will not weaken as much as in the euro-zone, thanks to the continued modernization of the economy here, coupled with foreign and domestic investment, which contributes to increased productivity
Andrzej Sławiński, member of Poland's Monetary Policy Council
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