Jan. 19 (Bloomberg) -- Polish industrial output probably fell for a third consecutive month in December as a recession in the European Union, which buys almost 80 percent of Polish exports, curbed demand.

Output dropped by an annual 1.8 percent, compared with an 8.9 percent decline in November, according to the median estimate of 11 economists surveyed by Bloomberg. They predict a 1 percent monthly drop. The data will be reported by the Warsaw-based statistics office tomorrow at 2 p.m.

“Shrinking manufacturing orders mostly hurt the sectors oriented towards exports, and they are likely to continue suffering from the economic slowdown in Poland’s main trading partners, particularly in Germany, which buys about a quarter of Polish exports,” Maciej Reluga, chief economist at Bank Zachodni WBK in Warsaw, wrote in a note to clients.

Polish economic growth is forecast by the central bank to slow to 2.8 percent this year from an estimated 5 percent in 2008. The Narodowy Bank Polski lowered interest rates by 1 percentage point last year and policy makers say further reductions are needed to help spur investments and demand.

“The Polish economy has been severely affected by falling foreign demand amid recessions in the U.S. and the euro zone,” Adam Antoniak, senior economist at Bank BPH in Warsaw, said by phone. “The worsening situation is likely to hurt non-export sectors as well, as it’s an interconnected ecosystem.”

Wages

Average corporate wage growth in December may have slowed for a fourth month to an annual 7.2 percent, according to the median estimate of 11 economists surveyed by Bloomberg, as pressure for pay increases wanes amid rising unemployment. The statistics office will report December wages and employment today at 2 p.m.

The December unemployment rate will grow for a second consecutive month, to 9.4 percent, according to eight economists in a Bloomberg survey. Annual retail sales growth probably accelerated in December due to the holiday shopping season, with the median estimate of 11 economists predicting a 5.5 percent advance. Both figures will be published on Jan. 23.

Falling consumer demand is likely to push the net core inflation rate, which measures consumer prices excluding food and fuels, to its first annual drop since July 2007. According to seven economists surveyed by Bloomberg, the rate fell in December to 2.8 percent from 2.9 percent a month earlier. The National Bank of Poland will publish the figure on Jan. 21.

The Finance Ministry will report the 2008 budget deficit early next week.

Markets Last Week

The Polish zloty lost 5.6 percent in the week, falling to 4.2254 against the euro, almost a four-year low, on speculation the central bank will cut interest rates.

The yield on the two-year zero-coupon government bond due in July 2011 dropped 22 basis points to 4.85 percent.

The benchmark WIG20 Index dropped 6.2 percent to 1,705.23 this week. BRE Bank SA tumbled 16 percent this week to 170.7 on a report that the Polish unit of Commerzbank AG may create provisions for currency option deals and after Moody’s Investors Service lowered its rating outlook for the bank. ING Bank Slaski SA slid 15 percent to 360 zloty, the lowest level in more than two months, after the unit of ING Groep NV reported an unexpected fourth-quarter loss.

The following is a list of important events in Poland this week:

T-bill auction                                    1/19
December average corporate wages, employment      1/19
December producer prices, industrial output       1/19
Exchange offer auction                            1/21
TVN on new Web service                            1/21
Agora on new Internet service                     1/21
December core inflation                           1/21
Exchange offer auction                            1/22
January business sentiment                        1/22
December retail sales                             1/23
December unemployment rate                        1/23

-- With reporting by Ewa Krukowska and Pawel Kozlowski in Warsaw. Editors:

To contact the reporter on this story: Monika Rozlal in Warsaw at mrozlal@bloomberg.net

Last Updated: January 18, 2009 18:00 EST