Zloty Is Still Too Strong Even After Central Bank Intervened, Kotecki Says

The zloty remains “too strong” even after the central bank intervened to help stall the currency’s appreciation, Deputy Finance Minister Ludwik Kotecki said.

“At this stage of the recovery, the zloty is probably too strong and for sure further appreciation of the zloty should be avoided,” Kotecki said in an April 17 interview in Madrid. “The recovery is not well grounded and risks still exist. Too strong a zloty would be negative.” He declined to speculate on what the optimal exchange rate would be for Poland’s economy.

The central bank last week carried out its first intervention in 12 years as the currency’s gains hurt exporters in the biggest of the EU’s eastern members by making Polish goods more expensive abroad and cutting the value of their sales in local currency.

“We support the central bank in this activity,” Kotecki said. “We cross our fingers for successful interventions.”

The zloty fell 0.4 percent against the euro at 8:47 a.m. in Warsaw, trading at 3.8932 and extending declines from April 16, when it lost 0.6.

The economy has improved enough to lift revenue from value- added tax, which should lead to a narrower deficit this year than envisaged in the budget, Kotecki said. Based on “better- than-expected” March revenue, “the possibility is increasing,” he said.

‘Positive’

“The deficit this year should be lower by some 15 billion zloty ($5.2 billion) mainly because of revenue,” Kotecki said. The government originally planned for a 50 billion-zloty shortfall.

The budget balance will also be better as the economy is growing at about a 3 percent annual rate and inflation will be above 2 percent this year. The government’s assumptions when drafting the budget were for 1.2 percent growth and 1 percent inflation.

“We are very positive looking into the future because macroeconomic activity is improving and now we see taxes are improving,” Kotecki said.

To contact the reporters responsible for this story: Agnes Lovasz in Madrid at alovasz@bloomberg.net; Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net.

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