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The Warsaw Voice » Business » September 28, 2012
Business & Economy
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Slowing Down
September 28, 2012   
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Poland has coped with the fallout of the global financial crisis in recent years much better than other countries in Europe. This year, Poland could also remain one of the fastest growing European economies. But it is clear that the country will not manage to maintain its previous pace of growth and that a significant economic slowdown should be expected.

Although the first signs of a slowdown could be noticed at the beginning of the year, it was not until the release of macroeconomic data for the second quarter that it became obvious that the Polish economy has indeed slowed down. The country’s GDP growth dropped from 3.5 percent in the first quarter to 2.4 percent in the second quarter. This substantial deceleration took most economists by surprise because in June Poland hosted the Euro 2012 soccer championships, an event that involved a lot of investment and increased private consumption.

It is not only the extent of the slowdown that is disquieting but also the structure of GDP growth. Private consumption in the first quarter contributed little to GDP growth—a trend similar to that seen during the first wave of the crisis in 2009. Inventory also fell, meaning that a sharp slowdown may indeed be in store. The only good news is that exports are still going strong, preventing an even sharper deceleration in GDP growth. However, this driver of growth may also peter out soon because Polish exporters are strongly affected by what happens in the eurozone, especially Germany, which is Poland’s main trade partner.

Two or three months ago, Polish and international financial institutions were still revising upward their growth projections for Poland. Following the release of the uninspiring GDP growth data for the second quarter, forecasters are now coming up with far more pessimistic scenarios. BRE Bank analysts project that Poland’s economic growth may slow to around 1 percent in the fourth quarter. They add that later the slowdown may be even sharper, with Polish GDP growth falling below 0 percent for one or two quarters.

The slowdown in GDP growth would be less worrying were it not for other unsettling trends. Research by the Euler Hermes company shows that the number of business bankruptcies since the beginning of the year is 23 percent higher than in the same period last year. The growing number of bankruptcies involves not only financial consequences, including payment backlogs and losses to suppliers, but also a sharp rise in the number of people losing jobs. The number of jobs lost as a result of business bankruptcies in July and August alone exceeds 10,000. And the situation on the labor market is unlikely to improve later in the year.
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