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The Warsaw Voice » Business » February 25, 2011
From the Business Editor
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Mixed Messages
February 25, 2011   
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It is hard to form a clear opinion on the condition of the Polish economy on the basis of recently published data. Poland still has a high rate of growth and production and exports are on the rise, but disquieting signals about the deteriorating condition of Polish businesses, mounting public debt and inflation have started to emerge.

Among the most optimistic economic news in recent weeks was Polish exports data for 2010 released by the National Bank of Poland. The central bank announced that Polish exports rose last year 19.5 percent to a record 117.4 billion euros. Polish exporters noted particularly strong results in trade with developed countries. European Union countries are Poland’s main trade partner, with almost 80 percent of Polish exports destined for EU markets. This means that Polish firms compete successfully on these markets not only on price, but also on quality and innovation.

However, the news about Polish producers’ success on foreign markets stands in contradiction to the recently published findings of research into the condition of Polish businesses. Of the almost 270,000 businesses analyzed by the D&B Poland economic intelligence firm, 54 percent are in a bad or very bad financial condition. And expectations for coming months are not optimistic. Businesses fear that the increase in the VAT rate from 22 percent to 23 percent this year will have an adverse impact on them. Many shopping chains have decided not to pass the VAT increase over to consumers so as not to discourage them and have kept prices unchanged. But this is likely to have a negative influence on their financial condition.

The January inflation figure published by the Central Statistical Office (GUS) was not optimistic either—it was much higher than most analysts had expected. In the first month of 2011, prices of consumer goods and services were 3.8 percent up year on year. This was the sharpest increase since April 2009. In comparison, in December 2010 CPI inflation was 3.1 percent. Contrary to the government’s promises, the increase in VAT pushed inflation sharply up. Households will be hit the hardest because, experts say, food prices may go up by 5-6 percent this year. To make things worse, inflation is expected to grow further in coming years. The situation on global markets, where prices of raw materials are on the rise, is certainly not conducive to the stabilization of prices in Poland.
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