GDP in Poland is set to rise by 2.2% this calendar year after a 1.1% increase last year, according ...
GDP in Poland is set to rise by 2.2% this calendar year after a 1.1% increase last year, according to Istvan Racz, director at Credit Suisse First Boston.
Strength in demand should continue to increase through the year because real wages have risen as inflation has fallen. The economy is also set to benefit from increasing export growth due to a pick-up in demand from Western European economies, he says.
Others are less bullish on the economy, however. Pawel Szymanski, head of Polish equity research at SchroderSalomon SmithBarney, predicts growth of just 0.9% in 2002.
He says this less positive stance is based on a perception that the global economic recovery will start in the second half of this year rather than it having started back in the fourth quarter of 2001, as others maintain.
Interest rates at 6.5%, currency appreciation and limited external demand pick-up all mean that growth will be limited this year, he maintains.
In a weak market in February, the WIG 20 index dropped by 5.4%. Szymanski points to textiles, media and construction materials as being strong performers, with growth figures of 5.7%, 1.9% and 1.4% respectively. All other sectors saw a drop in value, with insurance the worst, falling by 21.6%, he says.
Looking forward, Szymanski sees telecoms as a rather poor prospect for the year ahead.
He says: 'A combination of inconsistent regulations and a relatively high level of capex does not favour them, in comparison with their regional peers.'
He is similarly negative on media and IT services. He argues that because a pick-up in the economy is not expected before the fourth quarter, demand is unlikely to increase or results improve much this year.
However, poor results to be reported for the year have largely been priced in and, as demand picks up in the second half of the year, Racz expects a significant rerating of the sector.
He points to a weak industrial sector in 2001 as having a negative impact on the whole economy.
Racz says output was down 1% year-on year-in the fourth quarter, leaving it flat for the year as a whole.
The position of gross investment, a drop of 13.8% in 2001, contrasted with strong retail sales from the second quarter onwards, he adds. This was largely brought about because inflation fell faster than expected generating a rise in real average wages.
The weakness of the economy has had some positive consequences, according to Racz. As inflation remains low there is room for loosening of monetary policy, he says. Szymanski points to an improvement in the current account as a result of weakness in domestic demand.
However, the financing of the current account will continue to prove difficult this year.
Racz says foreign direct investment almost fully covered the $10bn current account in 2000 while it was only at $6.5bn in 2001 and it is not expected to improve much this year.
GDP growth expected for the year.
Consumer demand remains strong.
Room for loosening monetary policy
Delayed global recovery may hit economy.
Weak industrial sector has hit economy.
Telecoms weak because of regulation
£300bn of liabilities
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