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The Warsaw Voice » Business » December 1, 2014
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Guarded Optimism
December 1, 2014   
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All things considered, 2014 has proved to be a reasonably good year for the Polish economy. According to most forecasts, in 2014 Poland’s GDP will grow around 3 percent, almost twice as much as in 2013, and the country will chalk up one of the best results in the European Union.

In its autumn forecast, the European Commission predicts that growth this year will be less than impressive in the EU as a whole, though higher than in countries using the euro. It is expected that real GDP growth for the full year will be 1.3 percent in the EU and 0.8 percent in the eurozone. In 2015, this is expected to accelerate to 1.5 percent and 1.1 percent respectively. In 2016, the EU economy is expected to expand 2.0 percent and eurozone growth is expected to reach 1.7 percent.

Economic recovery in the European Union seems to be weak in comparison with the situation in other developed countries, and also in light of historical examples of economies returning to a growth path after a crisis. According to European Commission experts, the level of trust is lower than in the spring, reflecting growing geopolitical risks and a weaker outlook for the global economy. Despite favorable financial conditions, the European Commission expects economic recovery to be slow next year. This is due to the slow rate at which the fallout of the crisis, such as continually high unemployment, a high debt level and low levels of production capacity utilization, are being overcome.

Worryingly, these forecasts may change for the worse in the near future—due to geopolitical tensions and the uncertainty on financial markets. Mark Mobius, chairman of Templeton Emerging Markets Group, says the biggest cause for concern for investors in Eastern Europe is that the conflict between Ukraine and Russia could be exacerbated. Sanctions imposed first by the United States and the European Union and then by Russia could affect the entire region. The considerable dependence of Eastern Europe on Russian gas is a factor that needs to be taken into account. Any disruptions in the supply of Russian gas could have serious consequences for regional economies.

As with most Central European countries, exports to Germany have a big impact on Poland. Therefore a lot will depend on the state of the German economy. It is also difficult to predict the effect of the conflict between Russia and Ukraine on the Polish economy. It is estimated that Moscow’s ban on imports of food products to Russia will lead to a 0.2 percent drop in Polish GDP growth. The good news is that Poland can expect a significant increase in spending on infrastructure in 2015 and 2016 when new EU funds come online. Thus, despite temporary uncertainty, the long-term outlook for Poland and for the region remains optimistic on the whole.

Andrzej Ratajczyk
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