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The Warsaw Voice » Business » April 29, 2009
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Poland Shines Amid Global Crisis
April 29, 2009 By Andrzej Ratajczyk   
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International rating agencies, investment fund companies and banks are all praising the Polish economy, which is doing better than most other economies in the world.

Although the global financial crisis has left no country unaffected, some, like Poland, have suffered far less than others. Consequently, it comes as no surprise that a growing number of international financial institutions are looking at Poland with admiration, praising it for its relatively good macroeconomic indicators and playing down its shortcomings, such as bureaucracy, bad laws and corruption.

In its latest report on the Polish economy, the World Bank projects that the country’s 2009 GDP will grow 2 percent. According to Thomas Laursen, World Bank manager for Poland and the Baltic states, of all the new European Union member states, Poland’s fiscal and financial performance is the best—even though the international economic crisis has led to a drop in demand for Polish goods and services abroad and hurt foreign direct investment here.

Compared with other economies in the region, Poland shows more sustainable growth, Laursen said. This is largely because of private consumption, which is a key driver of economic growth in this country. According to the World Bank report, the Polish government’s determination to maintain budget discipline is an important anti-crisis measure.

In its report on emerging markets, the Standard & Poor’s rating agency said Poland is one of the countries that will suffer the least as a result of the crisis. The agency says that lending conditions in emerging economies have deteriorated considerably, but Poland—as well as China, Brazil, the Czech Republic and Slovakia—still enjoy stable credit ratings. They owe that to their governments’ efforts to maintain financial liquidity, improve economic competitiveness and keep inflation at a low level.

IMF safety net
Bank of America analysts note that the Polish government’s access to money from the International Monetary Fund (IMF) will make Poland one of the safest economies in the region. In mid-April, the finance ministry announced that the Polish government would ask the IMF for a flexible credit line of around $20 billion.

“It is very important that we are not dealing with any IMF assistance program,” Finance Minister Jacek Rostowski says. “Physically, the money will not be made available to the Polish government; it will only add to the international reserves of the National Bank of Poland. The facility will protect Poland from an uncontrolled depreciation of the zloty.”

The IMF’s flexible credit line facility is intended for countries whose economies are in good shape, but which may have temporary liquidity problems. Unlike with the IMF’s standard facilities, a country does not have to meet any additional conditions to gain access to a flexible credit line.

The zloty started to appreciate fast on news that Poland would apply for the facility, and especially after IMF Managing Director Dominique Strauss-Kahn promised that Poland’s application would be approved. Analysts said the zloty strengthened as investors’ confidence in the Polish currency and economy increased.

Investment fund companies are also praising Poland. According to Mark Mobius, managing director at Templeton Asset Management, Poland will probably be the only European country to record a positive growth rate in 2009. The Polish zloty has lost some ground and seems to be undervalued by around 10 percent at purchasing power parity, Mobius said, but this is bound to change in a trend that will benefit international investors holding Polish stocks.

Return of capital?
Charles Robertson, chief economist at ING for emerging markets, says Poland is one of the best markets in Eastern Europe. At a recent meeting with Polish economists, Robertson said that the Polish banking system is sound, and the country has no problems with debt repayment. When the situation in the world gets back to normal, Robertson said, whatever capital fled Poland in panic a few months ago will return here.

According to Robertson, the region as a whole is doing a relatively good job coping with the crisis, despite a sharp weakening of the German economy, a factor that has affected the economic performance of the entire region. In Germany, consumption remains at a high level in some segments; for instance, people are still buying new cars, it’s just that now, because of the crisis, they are choosing cheaper cars, such as Skodas manufactured in the Czech Republic or Dacias made in Romania, Robertson said. This trend benefits these countries’ economies and the whole of Eastern Europe, according to Robertson.

The least optimistic projection for Poland recently came from the IMF, which expects the Polish economy to contract by 0.7 percent this year. If the forecast proves correct Poland will slide into its first recession since 1991. In its report, the IMF predicts that global GDP will shrink by 1.3 percent this year, with the developed economies expected to contract by 3.8 percent. The U.S. economy is forecast to shrink by 2.8 percent, the euro-zone economy by 4.2 percent, and the German economy by 5.6 percent. Japan is expected to be hit the hardest, with a 6.2 percent GDP drop.

According to the IMF, Poland is and will still be better off than other economies in the region, although it will be hurt by the crisis. The IMF predicts that Central Europe’s GDP will shrink by 1.3 percent this year, with a 10.6-percent contraction in the Baltic states and a 3.7-percent fall in Emerging Europe, meaning Central and Eastern Europe plus Turkey. Next year the Polish economy is projected to grow by 1.3 percent.

Polish Economy: A Model for the US?
America’s The Washington Times has praised the Polish economy for its ability to withstand the global crisis. In an editorial published in late April, the daily applauded the neoliberal policy of the Polish government and advised President Barack Obama to follow the Polish example in his attempts to overcome the crisis in the U.S. economy. The Washington Times noted that Poland’s gross domestic product was expected to grow nearly 1 percent this year, which would be the best result in Europe. The paper wrote that Poland’s success story results from the country’s emphasis on a free market economy, which it contrasts with the Obama administration’s policy of increasing budgetary spending, modeled on President Franklin Delano Roosevelt’s New Deal policy.
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