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The Warsaw Voice » Business » November 29, 2012
Business & Economy
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2012:Economy Decelerating
November 29, 2012   
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The Polish economy has clearly slowed this year. But it is still one of the fastest growing in Europe.

In 2009, Poland was the only European Union country to avoid a recession. While it did not maintain its leading position in the following two years, it was still among the fastest-growing economies in the bloc. This year, Poland is expected to rank fifth, behind the Baltic states and Slovakia, in terms of GDP growth, according to forecasts by the European Commission. Poland’s economy is expected to grow 2.4 percent in 2012, a considerable slide from 2011 when 4.3 percent growth was recorded. This slide is chiefly due to the second half of the year, when a marked slowdown was recorded in public investment after the completion or discontinuation of infrastructure projects after the Euro 2012 soccer championships.

In the subsequent quarters of this year, Polish GDP growth gradually slowed due to a slower rise in household consumption and a continually high level of uncertainty about the general economic situation affecting the development decisions of companies including those related to investment. In the third quarter of this year, a deterioration was seen in many areas of economic activity. Economy Ministry studies show that sold industrial production was slightly lower than last year. Construction and assembly output also decreased. Retail sales increased only slightly. On the other hand, the rate at which sales grew in transport services remained at a high level, similar to that observed in the first half of the year.

The weakening of economic growth was accompanied by stagnation on the labor market. Average employment in the corporate sector in the first three quarters of this year was only slightly higher than a year earlier, and in the period between July and September this year it remained at last year’s level. Registered unemployment increased—the unemployment rate at the end of September stood at 12.4 percent and was 0.6 percentage points higher than a year earlier. The average gross monthly wage in the corporate sector grew more slowly than in the period from January to September last year, and the rate of growth weakened with each quarter. As a result, with inflation still running at a relatively high level, the purchasing power of wages was lower than in the first three quarters of last year.

Slowdown in industry and consumption
Economy Ministry data show that sold industrial production in the first three quarters of this year was 2.5 percent higher than a year earlier (after a 3.8 percent increase in the first half of the year, the third quarter saw a slight, 0.1 percent decrease). The increase occurred in all industries except mining and quarrying. Construction and assembly output in the first nine months of this year was 1.4 percent higher than last year, but it has been declining since June this year. Retail sales between January and September this year increased by 4.1 percent compared with the same period last year, and in the third quarter the rate of growth slowed to 1.9 percent in year-on-year terms.

The prices of consumer goods and services increased in year-on-year terms a little less than in the first three quarters of last year (4.0 percent vs. 4.2 percent), but still showed significant growth. In September this year, the rate of price growth (CPI inflation) in year-on-year terms was similar to that a month earlier, at 3.8 percent. High price increases continued for transport, food and non-alcoholic beverages and utilities. In the period between January and September this year, industry recorded a clear slowdown in price growth compared with the same period last year.

According to the Economy Ministry, in the period between January and August this year, foreign trade turnover increased in zloty terms, although its growth was slower than a year earlier. Exports grew faster than imports, resulting in an improvement in the overall negative trade balance. As in previous years, trade with other Central and Eastern European countries developed the fastest, which led to a greater role of this group of countries in the geographical structure of Poland’s foreign trade. On the other hand, the role of developed countries (including EU economies) decreased.

European Commission experts note in their autumn forecast that Poland’s GDP growth is now predominately driven by exports rather than domestic demand, which has weakened. Domestic demand has suffered because of worse labor market prospects, deteriorating consumer sentiment, and a decrease in public investment in connection with efforts to consolidate public finances. Public investment projects have also been affected by a natural petering out of EU structural funds at the end of the EU’s current budget perspective for 2007-2013.

WSE still IPO market leader
The worsening global economic situation has affected the Warsaw Stock Exchange. Although, in the third quarter of this year, Warsaw led the way in Europe in terms of the number of initial public offerings (IPOs) and ranked fourth in terms of the value of these offerings, a considerable decline was recorded in comparison with the previous year.

IPO Watch Europe, a quarterly survey by PricewaterhouseCoopers (PwC) that examines the number and value of IPOs on the largest European stock exchanges, reveals a further decline in activity on the European IPO market. In the third quarter of 2012, a total of 57 IPOs were recorded on European stock markets, down from 121 in the corresponding period of 2011. A decline was also noted in comparison with the second quarter of this year, when 81 IPOs were recorded. The total value of IPOs in Europe in the third quarter of 2012 totaled 4.4 billion euros, a decrease of 53 percent compared with the same period last year when IPOs with a total value of 9.4 billion euros were recorded.

The Warsaw Stock Exchange once again proved to be the most active European market in terms of the number of IPOs, ahead of the London Stock Exchange and Deutsche Börse. On the other hand, in terms of the value of IPOs, London took first place with 4.3 billion euros, ahead of the Luxembourg Stock Exchange (54 million euros), and Deutsche Börse (26 million euros). Warsaw was fourth with 14 million euros. In the third quarter of 2012, the WSE dominated in Europe in terms of the number of new listings (a total of 26 IPOs, including 24 on the NewConnect alternative market)—accounting for nearly half of all IPOs on European markets. However, compared with the same period last year (61 IPOs—seven on the main market and 54 on NewConnect), there was a significant decline in activity. The total value of offerings in the third quarter of 2012 on the Warsaw market was only 14 million euros, down from 1.46 billion euros in the third quarter of last year.
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