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Investments slowing down
Teresa Czerwinska
Poland's economy sped along in Q2 at the promised 5.1% annual growth rate, but with the ever-lagging investment growth slowing to a 4.5% annual rate and fading as a driver after several quarters of constant recovery from the 2016 investment recession.
"The 4.5% growth rate is a surprisingly weak result, showing that wherever we don't have an impact from the approaching elections or large firms, investments are weak," ING Bank Slaski chief economist Rafal Benecki told PAP.
Partial data on local government spending and investment spending by firms with over 50 employees had lent a tone of optimism to the preliminary Q2 GDP growth read, out mid-August. Minister of Investments and Development Jerzy Kwiecinski dared public musings about double digit investment growth rates Q2 through year-end.
"It's a huge disappointment," BZ WBK economist Piotr Bielski said of the ultimate read. "Perhaps large firms and local governments are investing, but there is huge stagnation elsewhere."
Poland's stats office spoke up the impact of accounting issues in military spending, where accounting shifts from cash outlays to delivery, the director of the national accounts office at stats office GUS, Maria Jeznach said.
The investment slowdown left consumption as the still very dominant source of Polish economic growth. That consumption story remains familiar: employment and wages have grown unabated and Poland has extended forms of social spending.
But those labor market conditions may be salt in the eye of investment growth, analysts said. "Growing labor costs and costs related to new investments to some extent hamper investments," Societe Generale's chief economist in Warsaw Jaroslaw Janecki told PAP.
Poland additionally benefitted from a recovery in economic growth in western Europe in Q2, with export growth recovery from a Q1 dip to account for 0.5 pps of the headline economic growth figure.
The 5.1% annual growth, first announced in a flash estimate mid-August, had cheered. The figure was within a notch of the growth rate set in Q1 and well ahead of the range of estimates that might have been ventured only several months prior. A weak reading for added value in construction had only hinted that the investment recovery had something of a soft underbelly.
The economic slowdown adds weight to assumptions that Poland has now passed the peak in its economic cycle, a view which has already been expressed publicly by policymakers, most notably Finance Minister Teresa Czerwinska.