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Poland Business Forecast Report Q2 2014

  • February 2014
  • -
  • Business Monitor International
  • -
  • 45 pages

Core Views

The export-driven recovery we have anticipated in Poland is now in motion, and we are now turning increasingly positive towards the country’s domestic demand outlook. We expect a robust recovery in domestic demand could arrive as early as Q114, as low inflation, solid wage growth and an improving labour market bolster household
purchasing power. Poland’s external position remains relatively strong and we estimate the current account deficit arrived at just 1.6% of GDP in 2013. However, a large stock of foreign-owned government paper and ongoing private sector deleveraging represent the two major risks to our sanguine outlook.
We continue to expect the Civic Platform (PO)-led government to serve out its term. The government won a recent parliamentary vote of confidence, suggesting its parliamentary majority is safe for the time being. We also believe that the opposition will struggle to broaden its appeal despite the rising government unpopularity, limiting its ability to challenge the ruling coalition.

Major Forecast Changes

Due to weaker than expected demand in H113, we have revised our current account deficit estimate, to 1.6% of GDP in 2013, from 2.0% previously. However, as cyclical rather than structural drivers are behind the smaller deficit, we expect it to widen in 2014 as economic activity accelerates.
In light of accelerating economic activity, we now expect the central bank to hike rates in 2014 by 50 basis points, most likely in the last quarter of the year.

Key Risks To Outlook

Although not our core scenario, we highlight the risk of Greece leaving the euro, potentially leading to a disorderly breakup of the whole common currency bloc. This would likely push Poland into recession.

Table Of Contents

Poland Business Forecast Report Q2 2014
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Ratings 7
Domestic Politics 8
All Eyes On European Elections 8
Despite Law and Justice (PiS) riding above Civic Platform (PO) in recent opinion polls, we think that PO has a good chance of holding
onto power after the 2015 parliamentary election as the economic outlook improves. We caution against extrapolating European
Parliament election results into a domestic parliamentary majority, as there tends to be a stronger trend for the electorate to use the vote
as a protest against the incumbent party.
Long-Term Political Outlook 9
A Maturing Regional Power 9
We consider Poland's long-term political risk profile to be on an upward trajectory, reflecting the country's maturing political institutions
and greater confidence in the conduct of external affairs. Solid macroeconomic fundamentals underpin our expectation for improvement
over the long run. Nevertheless, Poland still faces significant challenges to political stability in its external relations and at home.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Ratings 13
Economic Activity 14
Recovery Still In The Sweet Spot 14
We have upgraded our forecasts for Polish real GDP growth to 2.8% and 3.1% in 2014 and 2015, from 2.6% and 2.8% previously.
There are now clear signs that stronger external demand is driving improvements in the labour market, and interest rate and inflation
dynamics will remain supportive of domestic demand in 2014.
Fiscal Policy 16
Pension Reform Provides Fiscal Flexibility 16
Recent pension system reform has reduced Poland's headline public debt levels and created more room for fiscal manoeuvring. Over
the short term, this has improved the fiscal outlook, and we expect the country will exit the Excessive Deficit Procedure on schedule in
2015, although over the long term, the contingent liabilities remain in place.
Exchange Rate Forecast 16
PLN: Outlook Resilient, But Limited Gains Ahead 16
TABLE: BMI Poland Currency Forecasts 17
Monetary Policy 18
FX Rout Bolsters Case For Q4 Tightening 18
The Polish zloty has not avoided the recent deterioration in global sentiment towards emerging market assets, with the unit losing 1.8
%against the euro since Jan 20. However, we do not anticipate a protracted selloff in the currency.
Chapter 3: 10-Year Forecast 21
The Polish Economy To 2023 21
Long-Term Future Looks Bright 21
We forecast Polish real GDP growth to average 3.4% between 2016 and 2023, down slightly from 4.0% between 2001 and 2011.
Poland is well placed to avoid the pitfalls of the middle income trap and continue benefitting from large catch-up growth with the rich EU
TABLE: Long-Term Macroeconomic Forecasts 21
Chapter 4: Business Environment 25
SWOT Analysis 25
BMI Business Environment Risk Ratings 25
Business Environment Outlook 26
Institutions 26
Infrastructure 28
Market Orientation 31
TABLE: Top Export Destinations 31
Operational Risk 32
Chapter 5: Key Sectors 33
Auto 33
TABLE: Auto Sales, 2010-2017 33
TABLE: Auto Production, 2010-2017 34
TABLE: Auto Trade, 2010-2017 34
Food and Drink 35
TABLE: Food Consumption Indicators - Historical Data and Forecasts , 2010-2017 36
TABLE: Alcoholic Drinks Value /Volume Sales - Historical Data and Forecasts , 2010-2017 39
Other Key Sectors 41
TABLE: Oil and Gas Sector Key Indicators 41
TABLE: Pharma Sector Key Indicators 41
TABLE: Infrastructure Sector Key Indicators 41
TABLE: Poland Telecoms Sector Key Indicators 42
TABLE: Defence and Security Sector Key Indicators 42
TABLE: Freight Key Indicators 42
Chapter 6: BMI Global Assumptions 43
Global Outlook 43
Fairly Benign Prognosis... With Risks 43
Table: Global Assumptions 43
Table : Developed States , Real GDP Growt H, % 44
Table : Emerging Markets , Real GDP Growth , % 45

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