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Poland Country Risk Report Q2 2016

  • February 2016
  • -
  • Business Monitor International
  • -
  • 39 pages

Core Views

Poland’s robust real GDP growth will continue throughout 2016,driven mainly by household consumption, but also by governmentspending too.The sharp drop in oil prices has led to a positive adjustment in Poland’sexternal accounts, although growing domestic demand willlead the current account deficit to widen in 2016.The new Law and Justice government will result in a slight wideningin the fiscal deficit and looser monetary policy.Major Forecast ChangesAs a result of downward adjustments to our Brent crude forecast for2016, we have lowered our forecast for Poland’s current accountdeficit to 1.0% of GDP, from 1.5% previously. Declining oil pricesmay have an automatic stabilising effect, by increasing householddisposable income and consequently consumer imports, but we donot expect this effect to be material in 2016.

Table Of Contents

Poland Country Risk Report Q2 2016
Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
PiS Policies To Boost Short-Term Growth8
We maintain our above consensus real GDP growth forecast for 2016 Although the new government is a negative outcome for
investors, the impact on growth over the short term may actually be mildly positive as various stimulatory policies are enacted
Nonetheless, new levies on the banking sector will lead to tighter credit conditions and the government's investor-hostile stance is likely
to weaken foreign investment
TABLE: GDP BY EXPENDITURE8
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS10
TABLE: PRIVATE CONSUMPTION FORECASTS10
External Trade And Investment Outlook 11
Further Benefits From Low Oil Prices In 2016 11
Low oil prices are leading to a structural improvement in Poland's current account balance However, accelerating domestic demand will
increase import growth across 2016 and beyond, while the new government's investor-hostile policies may lead to a reduction in foreign
direct investment inflows
TABLE: GOVERNMENT CONSUMPTION FORECASTS11
TABLE: FIXED INVESTMENT FORECASTS11
TABLE: NET EXPORTS FORECASTS11
TABLE: CURRENT ACCOUNT12
Outlook On External Position 13
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE13
Monetary Policy 14
Probability Of Rate Cuts In 2016 Falling 14
In line with our core view, local rate markets are beginning to price out the possibility of further rate cuts in Poland The ECB's less
dovish than expected extension of its quantitative easing (QE) programme has removed a potential catalyst for further rate cuts, while
upside risks from demand-pull inflationary pressure will grow in 2016
TABLE: TOP 5 GOODS EXPORTS (2014)14
TABLE: TOP 5 GOODS IMPORTS14
Monetary Policy Framework 15
TABLE: MONETARY POLICY15
Fiscal Policy And Public Debt Outlook 16
Sovereign Fundamentals Remain Strong16
Although Poland's new government will run a slightly larger fiscal deficit, government debt dynamics remain in reasonably good shape
The main risk at this juncture is revenue undershoot, as identified revenue sources are optimistic in our opinion
TABLE: FISCAL POLICY16
Structural Fiscal Position 17
TABLE: MAIN EXPENDITURE and REVENUE CATEGORIES18
Chapter 2: 10-Year Forecast 19
The Polish Economy To 2025 19
Long-Term Future Looks Bright19
We forecast Polish real GDP growth to average 35% between 2016 and 2025, down slightly from 40% between 2001 and 2011
Poland is well placed to avoid the pitfalls of the middle income trap and continue benefiting from large catch-up growth with the rich EU
economies
TABLE: LONG-TERM MACROECONOMIC FORECASTS 19
Chapter 3: Political Outlook 23
SWOT Analysis 23
BMI Political Risk Index 23
Domestic Politics 24
Constitutional Framework At Risk24
We downgraded Poland's Long-Term Political Risk score due to the governing Law and Justice's party's weakening of the country's
constitutional framework and highlight that without a sharp change in course, a sustained deterioration in Poland's relations with the EU
lies ahead
TABLE: POLITICAL OVERVIEW 24
Long-Term Political Outlook 25
A Maturing Regional Power25
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 4: Operational Risk 29
SWOT Analysis 29
Operational Risk Index 29
Operational Risk 30
TABLE: OPERATIONAL RISK30
Trade Procedures And Governance 31
TABLE: EMERGING EUROPE - TRADE PROCEDURES AND GOVERNANCE RISK 31
TABLE: IMPORT AND EXPORT DOCUMENTS32
TABLE: TRADE PROCEDURES BREAKDOWN32
Vulnerability To Crime 32
Chapter 5: BMI Global Macro Outlook 35
Global Macro Outlook 35
Downside Risks Gather Momentum35
TABLE: GLOBAL ASSUMPTIONS35
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %36
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 36
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %37
TABLE: MACROECONOMIC DATA and FORECASTS39

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