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The Warsaw Voice » Business » September 29, 2014
Business & Economy
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Fallout from Ukraine Crisis
September 29, 2014   
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Poland’s exports to Russia totaled $4.8 billion in the first half of this year, about 6.7 percent less than in the same period last year, according to the Polish Economy Ministry. Exports to Ukraine fell by a whopping 23.1 percent. This is due to not only the Russian-Ukrainian conflict, but also a deterioration in the Russian and Ukrainian economies. One of the factors negatively affecting Polish exports is a weakening of the Russian ruble and the Ukrainian hryvnia since the beginning of the year.

The fall in shipments to Russia may be even more visible in the second half of the year as a result of reduced agri-food exports to that country. Last year, Polish exports to Russia increased by 19 percent. This year it is difficult to expect that last year’s level of exports will be maintained, let alone increase. The situation is especially unsettling as farm produce and agri-food products have for years been producing a positive balance of trade for Poland. Some consolation comes from the fact that the downward trend stabilized after July, even though a Russian embargo on fruit and vegetable exports to that country was already in force. This may mean that the biggest shock in trade is already behind us. Another piece of good news is that some of the products not sold in Eastern Europe have been redirected elsewhere, especially to emerging markets.

Meanwhile, the government expects Poland’s economic growth to decelerate, as can be seen in the draft budget for 2015 adopted in September. The macroeconomic forecasts contained in the draft budget are much less optimistic than those offered in June. At the time, when setting preliminary budget targets, the government assumed that GDP growth next year would be 3.8 percent. But the severity of the conflict in Ukraine and the Russian embargo—introduced in retaliation for EU sanctions and affecting Polish exports to Russia—forced the government to revise downward its 2015 GDP growth forecast to 3.4 percent. And some experts say this new projection is still too optimistic. But everything depends how the situation in Ukraine develops. If this conflict exacerbates, it could cause serious problems for all European economies.
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