Polish First-Quarter GDP Growth Probably Slowed on Crisis

Poland’s economic growth was probably the slowest in two years in the first quarter as Europe’s sovereign-debt crisis damped demand for exports.

Gross domestic product expanded 3.5 percent from a year earlier, the lowest rate since the first three months of 2010, after rising 4.4 percent in the fourth quarter, according to the median estimate of 33 economists surveyed by Bloomberg.

The European Union’s largest eastern nation, the only member of the 27-nation bloc to avoid a recession in 2009, will grow 2.7 percent this year, the EU’s quickest pace, the European Commission forecast May 11. 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.

“Very good retail-sales data for the first months of this year justify quite optimistic expectations about consumption, while investments have slowed in comparison with the previous quarter,” Marcin Mrowiec, chief economist at Bank Pekao SA in Warsaw, said in a note. “Exports, similarly to the second half of 2011, had a positive impact on economic growth, though the scale of that influence was lower than in the last quarter of the previous year.”

Deficit Targets

The government’s scope for stimulating the economy is limited as Prime Minister Donald Tusk seeks to cut the budget deficit to 2.9 percent of GDP this year from 5.1 percent in 2011. Additional infrastructure spending also declined with the completion of sports facilities and road and railway upgrades for the European soccer championships kicking off in Poland and Ukraine next month.

The zloty declined 0.8 percent to 4.3955 yesterday against the euro. After falling 12.2 percent against the euro in the second half of 2011, the currency gained about 7 percent in the first three months of this year.

Data in April showed the Polish economy is losing momentum. Retail sales expanded 5.5 percent, the slowest annual pace since July 2010. Industrial-output growth rose 2.9 percent, less than half the level from a year ago, while employment and wages grew at the slowest rate in almost two years. The government forecasts GDP will rise 2.5 percent this year from 4.3 percent last year.

Euro-Area Slump

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.

Poland’s “household-savings ratios have fallen very sharply, suggesting that spending has been sustained by a rundown in savings,” Neil Shearing, an emerging-markets economist at Capital Economics Ltd. in London, said by phone yesterday. While Shearing estimated GDP to increase 4.3 percent in the first quarter, “I wouldn’t be surprised that we’d see a weaker number,” he said.

Polish inflation unexpectedly gained pace in April to 4 percent, remaining above the central bank’s 2.5 percent target for the 19th consecutive month. Core inflation, which excludes volatile food and energy prices, accelerated on higher clothing and housing costs, supporting arguments for more interest-rate increases even as the economy slows.

The Narodowy Bank Polski raised its main rate by a quarter-point to 4.75 percent on May 9, its first increase since last June and the first such move in the EU this year. Governor Marek Belka said after the decision that the economy had avoided a “significant” slowdown with inflation staying “stubbornly high.” The bank didn’t rule out further tightening.

-- Editors: Jeffrey Donovan, Alan Crosby

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