January 30, 2014
Analysts expect the Polish economy to clearly accelerate and grow almost 3 percent this year, twice as fast as in 2013.
When drafting this year’s budget, the Finance Ministry assumed that Poland’s 2014 GDP would grow 2.5 percent. However, last year the ministry’s projections proved to be wide of the mark, forcing the government to revise the budget. This year, the ministry’s targets may also prove to be incorrect—though this time GDP growth may turn out to be better than forecast.
For several months, most international organizations, financial institutions and economists have been revising upward their forecasts for Poland. At the end of last year, the European Commission revised upward its forecast for Poland’s 2014 economic growth from 2.2 percent to 2.5 percent, and the World Bank upgraded its projection from 2 percent to 2.8 percent. In turn, the International Monetary Fund revised upward its forecast from 2.2 percent to 2.4 percent in October and then followed up with another revision in November to 2.7 percent.
The OECD predicts that Poland’s GDP will grow from 1.4 percent in 2013 to 2.7 percent in 2014 and 3.3 percent in 2015. In the next two years “GDP growth is projected to gain momentum with both exports and domestic demand strengthening over the projection period. Yet slack will hold inflation pressures down for some time before price increases rise to above 2 percent in 2015,” OECD analysts wrote in a recent report.
Some bank analysts have revised their forecasts in a similar manner. The most optimistic is HSBC bank, which expects Poland’s GDP growth to pick up to 3 percent, from 1.4 percent in 2013. In 2015, the Polish economy will grow even faster, at 3.3 percent, according to the bank. HSBC said it decided to upgrade the forecast for 2014 to 3.0 percent after Poland recorded higher-than-expected growth in the second half of 2013. The economic rebound will not be much stronger in 2015 due to poor prospects for the euro zone, HSBC economist Agata Urbańska-Giner wrote in a report.
Meanwhile, Witold Orłowski, chief economist for audit firm PwC in Poland, predicted GDP growth in 2014 will be “quite solid.”
He said, “This will not yet be the rate from before the crisis [because] most forecasts suggest economic growth will be below 3 percent. However, I do not exclude a more positive scenario.”
Stanisław Gomułka, chief economist at the Business Centre Club, a major business association in Poland, and former deputy finance minister, is also optimistic. “At a time of economic recovery econometric models usually produce forecasts that are slightly too pessimistic and are consequently revised upward with time,” Gomułka said. “Taking this factor into account and considering the still considerable amount of uncertainty, my forecast for Poland’s economic growth would be in the 2.5-3.5 percent range for 2014 and the 3-4 percent range for 2015.” Gomułka added that there is a fair amount of good news in store for 2014 including “the still very low inflation and the more or less unchanged, low interest rates.” Also important for businesses is the expected stability of the two key price determinants: wages and the exchange rate of the zloty against the euro and probably also against the dollar, Gomułka said.
The Polish economy is visibly gaining momentum. Unemployment is falling, while production is rising. Exports have an increasingly better outlook and companies have adapted to the crisis, winning new markets after a slowdown across the European Union, and all the indications are that this trend will continue. Moreover, Poland’s traditional markets in Europe, especially Germany, are steadily reviving after the crisis, which offers a chance to step up sales of Polish goods abroad.
Private consumption is growing, contributing to economic growth. Investment is also likely to improve, though in this case a repeat of the boom recorded when Poland was preparing to host the Euro 2012 soccer championships cannot be expected. It’s mostly private companies that are beginning to spend money they accumulated at a time of uncertainty.
GDP growth in both Poland and across the European Union will translate into higher production, and consequently into the maintenance and creation of new jobs.
The Polish zloty will also benefit from faster GDP growth. Economists expect the Polish currency to strengthen steadily.