Polish Economic Growth Slowed as Euro Turmoil Hurts Exports

Poland’s economic growth slowed in the first quarter as exports weakened amid euro-region turmoil that reduced demand for exports.

Gross domestic product expanded 3.5 percent from a year earlier, compared with a revised 4.3 percent increase in the previous three months, the Warsaw-based Central Statistics Office said today. The figure matched the median estimate of 33 economists in a Bloomberg survey. Output grew a seasonally adjusted 0.8 percent from the previous quarter.

The European Union’s largest eastern economy, the only member of the 27-nation bloc to avoid a recession in 2009, is expected to grow 2.7 percent this year, the EU’s quickest pace, the European Commission said on May 11. Fixed investment increased 6.7 from a year earlier in the fourth quarter, while exports grew 4.8 percent and contributed 0.7 percentage point to GDP growth, the statistical office said.

“With the most important GDP categories almost unchanged, the reason for the slowdown lies mainly in net exports which is likely to add only a bit to GDP growth,” Ernest Pytlarczyk, chief economist at BRE Bank in Warsaw, said in a note before today’s data were published. The economy will grow 2.8 percent this year, he said.

The zloty strengthened after the data to 4.3863 per euro at 10:17 a.m. in Warsaw. It has weakened 4.8 percent in May, the second-biggest decline among European currencies after the Russian ruble, data compiled by Bloomberg show. The average yield on the government’s 10-year Treasury bond fell 2 basis points to 5.464 percent.

Euro Risks

With euro-area nations such as Spain and Italy slipping into a recession after enacting austerity measures to fight the debt crisis, Europe’s economy will fail to grow this year with risks “tilted to the downside,” the Brussels-based commission said on May 11. Unemployment at a 15-year high in the 17-nation currency region will probably continue to depress demand for Polish exports.

While Poland has relied on its 38 million consumers and EU- aided infrastructure spending to keep growing, the country is being hurt by the slump in the euro region, which buys 55 percent of its exports. Euro-region GDP will drop 0.3 percent this year before expanding 1 percent in 2013, according to the commission’s forecasts.

To contact the reporters on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net Aaron Eglitis in Riga at aeglitis@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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