April indicators suggest economy on good track

Average wages in Poland's private sector grew by 10.2% to 3,144.41 PLN / month in the year to March, undershooting analysts' expectations by over one percentage point.

While this deceleration in the pace of wage growth is welcome (average wages grew by 12.8% in the year to February), salary pressure is still seen as the number one threat to Poland's economic well-being.

Responding to inflationary pressures surfacing across the entire Polish economy, the NBP's Monetary Policy Committee raised base rates by another 25 basis points at its end-March meeting.

The Monetary Policy Committee was responding to strong rises in inflation (4.1% in the year to March), production, consumption and average earnings.

Analysts expect that Poland's Q1 2008 GDP will remain above 6%. Sectors showing fastest growth include consumer electronics (40%), cement (28%), machinery (28%) and cars (26%).

Poland's trade grew dynamically in both directions in 2007. Exports grew by 15% to €101.1 billion, while imports grew by 17.7% to €118.8 billion. The trade deficit has grown to €17 billion from €14 billion.

Poland's economy grew by 6.4% in the third quarter of this year, towards the upper end of analysts' expectations, and matching the pace of the second quarter.

The claimant rate in March 2007 was 11.1%, down from 11.7% in January. The harmonised rate, based on numbers of economic active people (BAEL), show unemployment to be lower - below 9% - when the grey economy is taken into account. These figures are welcome proof that unemployment is rapidly ceasing to be the most serious problem facing the economy. It is now nearly half of what it was in February 2004, when it peaked at 20.4%. Since then, over a million Poles have gone to work abroad and 1.3 million new jobs have sprung up in the private sector. As of end-February, there are still 1,702,200 Poles registered as unemployed, 45% of them being inhabitants of villages. And while Warsaw, Poznan, Katowice, the Tri-City and Kraków all have registered unemployment at around 5% or less, there are still towns and regions where unemployment is still above 30% - Szydlowiecki district in Mazowsze, for example, has Poland's highest joblessness - 32.3%. By contrast, Warsaw, just 80 miles away, has unemployment of 2.9%.

In November 2008, the Central Statistical Office confirmed what many economists believed: that GDP was overstated for the first two quarters of 2007. Updated figures suggest that growth for the second quarter of 2007 was up 6.4% year on year (down from 6.7%), while in the first quarter growth was 7.2% rather than 7.4%.

Inflation rose to 4.1% in the year to March. Industrial output grew in the year to March by 0.9%. Completions of apartments and houses were up by 16.6% in 2007 compared to 2006.

Polish exports grew by 22.6% in 2006, while imports grew faster still, up 23.2% compared to 2005. The main component of the import growth, however, was capital goods, which bodes well for the future growth of Polish exports.

Economist Jan Winiecki said in 2001 that for structural reasons (hidden unemployment in public sector, skills missmatches, inflexible labour laws, high social security contributions), Poland's economy will not create new net jobs until growth is above 5%. With GDP growing above that magic figure (at an annualised rate) for six consecutive quarters, job creation is accelerating rapidly.

Consumer spending is growing strongly. Best performing sectors include household appliances and consumer electronics, new car sales have also rebounded after two years in the doldrums.

Fears that Poland's chaotic political scene is putting off foreign direct investment (FDI) are unfounded, according to the National Bank of Poland figures which show FDI strongly up on 2005. FDI for the whole of 2006 was $14.7 billion.

Despite perceived political instability, the zloty is likely to continue appreciating against the Euro and Sterling as productivity in tradeable goods and services continues to catch up with the Eurozone, although predictable bouts of political unpredictability will periodically weaken the zloty.

Polish export growth has surged ahead since EU Enlargement (growing by 26% in 2004 and a further 20% in 2005, 17% in 2006 and 15% in 2007), despite the fact that the zloty had appreciated by around 25% against the Euro since May 2004. This suggests that manufacturers have been using the strong zloty to invest in capital goods to improve productivity.

The largest age group is 25 year-olds (690,000 of them!); this is Poland's demographic high-water mark. Over the next 20 years, the number of school leavers will fall by an average of 17,000 a year - towards Poland's current demographic low-water mark - the 350,000 five year-olds.

Another issue is how long the zloty will remain competitive. While political turblence had stalled the zloty's climb during the Jarosław Kaczyński's term of office as premier, its long-term tendency is likely to be upward. In February 2004, one pound sterling cost 7.35 zlotys - by March 2008 it had fallen below 4.30 złotys - a rate last seen in mid-1995.

Inflation, GDP growth, unemployment, base rates, average salary and other key indicators, plus useful links for researchers.

Links:

GUS, the government's central statistical office, has a small section in English that offers some indicators.
Central Bank of Poland