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Poland’s Economy Grows Faster Than Forecast on Investment

Poland’s economy grew faster in the second quarter than economists estimated as investment growth outweighed slowing consumer demand.

Gross domestic product grew 4.3 percent from a year earlier, compared with 4.4 percent in the previous three months, the Central Statistics Office in Warsaw said today in a statement. The median estimate of 30 economists surveyed by Bloomberg was 4.2 percent.

Poland’s economy grew at the fifth-fastest pace in the European Union after being the only member of the 27-nation bloc to avoid recession two years ago. Investments helped maintain momentum in the second quarter, when peaking inflation bit into consumer demand.

“Consumption is pretty weak, and that’s a concern,” said Maja Goettig, chief economist at Bank BPH SA in Warsaw. “But investment is on track to pick up the slack to a great extent -- that’s a very good sign.”

The zloty rose to 4.1530 per euro as of 4:15 p.m. in Warsaw. The yield on the five-year bond was at 5.060 percent, and the WIG20 was up 0.4 percent from yesterday at 2361.35.


“I’m bragging about today’s figure because it’s really something to brag about in today’s Europe,” Prime Minister Donald Tusk, who is bidding for a second term in October, told journalists today in Brussels. The solution to the economic crisis is to “spend EU funding sparingly, wisely, rationally but also courageously, in particular those funds that encourage direct investment.”

Poland was the biggest net recipient of EU funding in the 2007-2013 budget, getting 67 billion euros ($97 billion) in aid to iron out differences between richer and poorer states. EU governments will this year start debating the bloc’s next multiyear budget, with some net payers signaling they want to curb funding.

Growth in the euro area, which buys 55 percent of Polish exports, slowed to 0.2 percent from the previous quarter in the April-June period, the worst performance since the region’s 2009 recession. Export-led growth in Hungary, Romania and the Czech Republic has decelerated as Europe’s debt crisis and a weaker U.S. economy put the brakes on global expansion.

Investment Accelerates

Capital expenditures and inventory building accounted for more than half of second-quarter growth, while the contribution of consumption shrank to 1.9 percentage points from 2.9 percentage points in the first three months, according to estimates by the statistics office.

Fixed investment in Poland, which is co-hosting the 2012 European football championships with neighboring Ukraine, grew 7.8 percent from a year earlier in the second quarter, accelerating from 6 percent in the previous three months.

Lubelski Wegiel Bogdanka SA, the only Polish coal producer in the benchmark WIG20 blue-chip index, and Kompania Weglowa SA, Europe’s largest miner, plan to boost investment this year as higher demand from domestic industrial customers requires capacity to be expanded.

Private-consumption growth slowed to 3.5 percent from 3.9 percent. Inflation and a higher-than-expected jobless rate may have prompted consumers to delay planned purchases, according to BPH’s Goettig.

“The situation on the labor market is not as good as expected, with unemployment falling at a slower pace than we thought and only a moderate increase in employment,” she said.

Rates on Hold

Today’s growth figure will support the central bank’s “wait-and-see” stance, Raffaella Tenconi, an economist at Bank of America Merrill Lynch in London, said by e-mail.

The central bank has raised its benchmark interest rate by a total of 1 percentage point this year to 4.5 percent as inflation remained above its target. As the euro area’s sovereign-debt crisis worsened, monetary policy makers suggested they would keep rates on hold or even begin cutting them.

“The risk is biased toward easing if the eurozone situation were to deteriorate further as the rosy message of the GDP release is at odds with the monthly releases, most of which have been pointing to a more pronounced slowdown,” Tenconi said.

Industrial-output growth slowed for a second month in July to 1.8 percent from a year earlier, below a 3.4 percent median estimate of 20 economists. Employment rose an annual 3.3 percent that month, the slowest this year, as companies delayed hiring.

Economic conditions “don’t suggest the need for interest-rate cuts,” Anna Zielinska-Glebocka of the Monetary Policy Council said in an interview on TVN CNBC after the GDP release, adding she’s “very pleased” with investment growth.

The Narodowy Bank Polski lowered its 2012 GDP projection last month to 3.2 percent from 3.6 percent.

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