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Economic Overview
Despite inflationary and wage pressures, the macroeconomic fundamentals for Poland remain strong. Domestic demand and investment outlays were the key drivers of the economic growth in the first half of 2008. Relatively healthy investors demand, combined with high production output, stable consumption growth and the improving situation in the labour market contributed to the overall solid performance.
Since Q1 2007, economic growth in Poland has slowed but has still remained well above the EU average. In Q2 2008, GDP growth reached 5.6% compared with 6.6% as at the end of 2007. According to the forecasts, GDP growth is expected to reach 4.85% and 4.68% in 2009 and 2010 respectively.
Inflation has been rising since the end of 2006. According to the Central Statistical Office (GUS), in the first half of 2008, inflation stood at 4.2%. The upturn of inflationary pressure was driven mainly by increases in the prices of energy, food and services. According to the National Bank of Poland (NBP), average annual inflation in 2008 and 2009 will be 1.7 p.p. higher than in 2007, and will reach around 4.3%, whereas in 2010 it will decrease to 3.1%.
The unemployment rate dropped to 9.6% at the end of June 2008, decreasing from 11.4% in December 2007. The unemployment rate is forecast to decline to 8.12 % by the end of 2009. In major agglomerations such as Warsaw, Kraków, Poznań, Wrocław, Gdańsk and Katowice, the unemployment rates ranged between 1.8% and 4% as at June 2008.
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There was still a negative balance of foreign trade in H1 2008. According to GUS data, the volume of exports was 16.6% higher than last year, whereas the volume of imports was 18.6% higher. Consequently, the negative trade balance stood at 10.9 billion euro. The growing deficit resulted from the significant increase in the trade deficit with other Central and Eastern countries and developing countries. Additionally, there was a decrease in the surplus in foreign trade with developed countries as a result of the strengthening of the Polish złoty.
Retail sales in Poland have been steadily increasing in recent years, encouraged by wage growth and the stable labour market. Sales increased by 10.4% in 2007 and totaled PLN517.4 billion, according to GUS. In the next couple of months, retail consumption is likely to be constrained by limited wage growth, which will coincide with increasing inflation.
According to economists, a slowdown in economic growth is forecast. While domestic demand and investment will remain the driving forces of the economy, the negative foreign-trade balance, the slowing of wage growth, and the depreciation of their real value due to rising inflation may result in Polish economic performance not matching the levels recorded over the last few quarters. Negative trends shall remain under control and Poland is not likely to enter recession period as a result of solid fundamentals still in place.
Commercial Property Markets Overview.pdf
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