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The Warsaw Voice » Business » June 29, 2012
Business & Economy
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Pole Position
June 29, 2012   
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Despite turmoil abroad and stumbling blocks at home, Poland remains one of the fastest growing economies in the European Union.

Poland’s gross domestic product grew a healthy 3.5 percent in the first quarter in year-on-year terms—a result many countries could only dream of—testifying to the country’s resilience amid growing problems in the eurozone.

“The Q1 GDP growth figure may be lower than the 4.3 percent recorded in the final quarter of 2011, but it is still the fourth best result in the European Union,” said businessman Andrzej Krzemiński, chairman of the board at Europejski Fundusz Leasingowy (EFL SA).

“Considering that some EU countries are in recession or stagnation, the 3.5 percent is a pretty strong reading,” added Krzemiński, who is also a member of the board at Leaseurope and chairman of the Executive Committee of the Polish Leasing Association.

Data from the government’s Central Statistical Office (GUS) indicates that private consumption is still the main driver of growth. It is responsible for two-thirds of Poland’s GDP growth. In the first quarter of the year, private consumption increased by 2.1 percent, a figure similar to the final quarter of last year. Another driving force behind the economy, as in the previous four quarters, is investment, which rose 6.7 percent year-on-year. Investment was boosted by projects carried out for the Euro 2012 soccer tournament in Poland.

Foreign trade is also helping the Polish economy as Poland’s main trade partners, especially Germany, are doing relatively well. At the same time, amid ongoing problems in a swathe of EU countries, Polish firms have managed to take advantage of positive developments in Russia and Ukraine.

Seeing the strong performance of the Polish economy, some financial institutions have revised upward their growth projections for Poland for this year. Among those who have done so recently are foreign banks such as BNP Paribas, JP Morgan, and Goldman Sachs. BNP Paribas analysts predict that the Polish economy will grow by 2.4 percent this year and 2.7 percent next year; previously they projected 1.6 percent and 2.4 percent respectively. The upward revision comes on the heels of an upgrade of Germany’s growth forecast from 0.4 percent to 1.1 percent. The bank also has revised its projections for four other countries in Central Europe, Bulgaria, the Czech Republic, Hungary and Romania. The average growth rate for the region is now projected at 1.4 percent this year and 2.6 percent in 2013, versus the previous projections of 0.6 percent and 2.2 percent respectively.

JP Morgan has revised upward its 2012 GDP growth projection for Poland to 3.0 percent from 2.7 percent. Goldman Sachs also expects that the Polish economy will improve. The bank has revised upward its growth projection to 2.5 percent from 2.0 percent.

FDI on the rise
Growing foreign investment is another positive signal for the Polish economy. Preliminary statistics by Poland’s central bank (NBP), put the value of new foreign direct investment (FDI) in Poland in 2011 at 9.9 billion euros, up 47.4 percent on 2010. This data will likely undergo some minor revisions in the coming months, but it clearly shows that investment has revived significantly. This year FDI will probably reach a similar level, barring unforeseen developments.

Foreign companies are attracted to Poland by its relatively fast economic expansion. Another important factor is that it is increasingly seen as an investor-friendly country. Sławomir Majman, head of the Polish Information and Foreign Investment Agency (PAIiIZ), says Poland has a stable and predictable economy, which has made it an attractive country for investors. “Paradoxically, the global crisis has contributed to improving the country’s image in the eyes of investors. Poland has become trendy and sexy,” Majman says.

A survey by the Polish-German Chamber of Industry and Trade shows that foreign investors give high ratings to Poland. Ninety-five percent say they would choose Poland again as an investment destination. This view is voiced not only by investors from neighboring Germany, which is Poland’s main economic partner, but also by British, Irish, Canadian, Portuguese, Scandinavian and Swiss executives.

The investors surveyed ranked Poland ahead of other Central and Eastern European countries with which it competes for foreign investment. Poland’s biggest regional rivals in this area are the Czech Republic and Slovakia, followed by Estonia and Slovenia. Among the factors determining its investment appeal, Poland scored the largest number of points for being a member of the European Union and for the qualifications, motivation and productivity of its labor force.

Poland’s investment attractiveness is reflected by its high position in the European Cities Monitor, a league table of top business locations ranked by commercial real estate services firm Cushman & Wakefield. The table was compiled on the basis of surveys carried out among senior executives responsible for expansion at Europe’s 501 largest companies.

Warsaw was ranked in 21st place in the general league table, ahead of Vienna and Prague. In the survey, Cushman & Wakefield evaluated 36 cities in 12 categories, including quality of life, access to markets, availability of qualified workers, quality of telecommunications services, and the transport system.

Warsaw moved up the list in eight categories. It was ranked first in terms of office space lease expenses relative to office standards. The climate created for business by the Polish government was also ranked high—in fifth place.

“For many years we have been focusing on the development of Warsaw as a business-friendly metropolis,” said Warsaw mayor Hanna Gronkiewicz-Waltz, commenting on the survey findings. “We are investing in public transport, road building and ICT infrastructure. We are streamlining the work of the public administration to make it more friendly to investors. I am happy that international firms and institutions appreciate our efforts.”


WSE going from strength to strength
An expanding capital market further testifies to the resilience of the Polish economy. Despite turbulence on global financial markets, the Warsaw Stock Exchange (WSE) is going from strength to strength. It is already the largest trading floor in Central and Eastern Europe and a regional financial hub. Last year, the WSE topped the list worldwide in terms of growth in the number of listed companies and was ranked seventh in terms of growth calculated according to the value of equities traded. The number of issuers increased by 33 percent to 777, proving that the WSE is creating attractive conditions for both domestic and foreign companies seeking funds for expansion. The value of equities sold at trading sessions last year rose 25 percent in dollar terms, despite a drop in the combined value of equities traded on global stock exchanges. The rise shows that the WSE has considerable potential for further growth. In early June, there were 435 domestic and foreign companies listed on the WSE’s main market, with a total capitalization of nearly zl.650 billion.

According to IPO Watch Europe, a survey that tracks the volume and value of initial public offerings (IPO) on European stock exchanges, the WSE leads the way in Europe in terms of the number of IPOs. In the first quarter of this year, 25 new companies were listed on the WSE, four on the main market and 21 on the NewConnect alternative market. In terms of the value of IPOs, the WSE, with zl.14 million, ranked fourth in Europe after NYSE Euronext with 975 million euros, the Swiss Exchange with 681 million euros, and the London Stock Exchange with 621 million euros, but ahead of the Madrid, Oslo and Vienna bourses.

The WSE has become a major capital market in Europe and an attractive market for both domestic and foreign issuers. “Poland’s ambition is to maintain its position as leader in Central and Eastern Europe,” Treasury Minister Mikołaj Budzanowski said at the recent CEE IPO Summit conference in Warsaw. “The presence of global capital, global investors and global issuers in Warsaw are the three main pillars of Poland’s position on the capital market. The most important thing is confidence. Thanks to its stable economy, Poland is a magnet for foreign capital from markets ranging from Asia to the United States.”
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