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The Warsaw Voice » Business » April 25, 2013
Business & Economy
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Consumers More Pessimistic
April 25, 2013   
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Despite Poland’s relatively resilient economy, Poles feel as financially insecure as the Spanish, Italians, the Portuguese and Greeks, the latest research conducted by the Genworth insurance company shows.

The Genworth Index, an annual survey conducted since 2008 by researchers from the Personal Finance Research Center at Britain’s Bristol University, compares the views of 13,000 households in 20 countries, including Poland, concerning their present and future financial security. The findings this year show a surprising level of pessimism among Polish households, with the lowest index score achieved by Poland in five years.

Poland long managed to evade the crisis besetting other countries in Europe thanks to a high level of exports, the inflow of European Union funds and high consumer spending. But in 2012 consumer sentiment significantly deteriorated, as reflected in the responses given by Polish households in the survey. Anticipating rising prices, a slow increase in real wages and an increased risk of unemployment, Poles reacted by gradually reducing consumption and postponing bigger purchases. Economists point out that consumer anxiety contributes to the weakening of the economy and acts like a self-fulfilling prophecy, with an adverse effect on the residential market and the retail sector.

The Genworth Index is a financial mirror of society and a barometer of how households are coping financially, said Dimitris Kioukis, managing director at Genworth Financial in Poland.

The index is composed of two separate, but linked, financial vulnerability characteristics—the current problems of households resulting from excessive debt, and expectations regarding their financial situation in the future, Kioukis added. The second component means that the index can be treated as an indicator signaling how consumers may behave in the future, he said.

Excessive debt contributes not only to fears about households’ ability to repay unsecured loans and mortgages. It also affects the ability of households to make their basic payments on a regular basis, for example utility bills, taxes and rent. A financially vulnerable household is one that is unable to meet one or more of these financial obligations from their current income and does not have its own savings or access to a loan to meet its obligations, according to the researchers.

By and large, Poles already have financial problems or are expecting their financial situation to worsen or at best remain unchanged, according to the Genworth Index survey. Only 1 percent of households are satisfied with their financial situation and think that it will improve. Only 7 percent of Polish households, irrespective of whether the present situation is good or bad, are optimistic and expect their financial situation to improve. Moreover, these attitudes reflect a trend seen over several years towards increased financial vulnerability among Poles. This is visible in the steadily decreasing number of financially secure households, down from 5 percent in 2008 to 1 percent last year, and a growing number of financially vulnerable households, up from 27 percent in 2008 to 45 percent in 2012.

The shrinking number of households that, despite experiencing financial difficulties, are expecting their financial security to improve—down from 17 percent in 2008 to 6 percent in 2012—does not bode well for the future. These households are becoming part of the financially vulnerable population. The fourth group of consumers, who do not have financial difficulties but are convinced that their situation will deteriorate or at best remain unchanged, has remained at around 50 percent.

Asked about the future, Polish consumers are growing increasingly pessimistic. Since 2008, the number of those who believe that their financial situation will improve in the next 12 months has fallen from 22 percent to 7 percent. In turn, the number of households that do not see a chance for improvement has risen from 78 percent to 93 percent.

In assessing their future financial situation, Poles point to three key factors, with living expenses regarded as the most important, according to the survey.

A total of 53 percent of those polled believed that living expenses would have a decisive impact on their household budget in the next 12 months.

Interestingly, job security and wages were less important in households’ assessment of their future financial situation—these factors were indicated by 34 percent and 39 percent respectively of those surveyed. This shows that Poles fear that they may lose their jobs, but are even more worried that prices and living expenses will grow in 2013.
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