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The Warsaw Voice » Business » July 29, 2011
From the Business Editor
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Stormy Summer
July 29, 2011   
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Early summer was a time of turbulent weather in Poland, with periods of near-tropical heat followed by sudden drops in temperature and heavy rainfall. Some regions had to cope with extreme weather, tornadoes and hailstorms. But it was not only the weather that was changeable. The financial markets were just as turbulent.

Uncertainty over the mounting crisis in the public finances of Greece, Spain, Portugal and Italy resulted in a sharp depreciation of the currencies of emerging economies. Despite its relatively robust economy, Poland is still treated by global investors as an emerging market. Consequently, the zloty weakened significantly, especially against the Swiss franc, which is in great demand in uncertain times. After the psychological barrier of zl.3.50 per franc was breached, many analysts expected that the Swiss currency would strengthen further and that the exchange rate would reach zl.4 to the franc. Luckily, this trend was reversed and the zloty started to gradually recoup its losses. But the anxiety is still there. The more so as the Polish zloty—alongside the Hungarian forint, South African rand and Brazilian real—is regarded as one of the currencies most exposed to the financial crisis in the European Union, according to Citigroup analysts.

Instability on the currency market is not good news for the Polish economy, firms and households. Businesses consider the volatility of the zloty as their greatest risk. Homeowners who have mortgages denominated in the Swiss franc have to pay increasingly high installments, which curbs consumption. In turn, a lower pace of growth in consumption hits business revenues and profits.

Data on Poland’s industrial output in June is not optimistic either. According to the Central Statistical Office (GUS), output increased 2 percent compared with a year earlier. The result disappointed analysts, who had expected a rise of at least 5 percent. Whether this was just a temporary blip or a sign of economic slowdown will become clear after the next release of macroeconomic data by GUS.
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