Poland’s economic growth slowed in the first quarter as euro-region turmoil hurt exports and fixed investments, weakening the case for central bank rate increases.
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 growth slowed to 6.7 from a year earlier in the first quarter, down from 9.7 percent in the fourth quarter, as sports facilities and road upgrades are completed for European soccer championships kicking off in Poland and Ukraine next month.
“Given the worsening situation in Europe, the psychological effects of the latest phase of the crisis and the fading effects of UEFA-related infrastructure investments, we do look for weaker performance in the coming quarters,” said Gabor Ambrus, an economist at 4CAST Ltd. in London, wrote in an e-mail after the data release. The data are “neutral” for Poland’s central bank and “shall not support further monetary tightening,” he said.
The zloty strengthened after the data to 4.3868 per euro at 11:26 a.m. in Warsaw, up 0.2 percent on the day. 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 3 basis points to 5.453 percent.
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 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.
Polish exports grew 4.8 percent from year earlier in the first quarter, down from 7.8 percent in the previous quarter, the statistics office said. Growth in industrial output, as measured by its contribution to GDP, dropped to 3.4 percent in the first quarter, from 6.6 percent in the previous quarter.
“What’s striking is that industrial growth was the weakest since the third quarter of 2009,” Wojciech Matysiak, an economist at Bank Pekao SA in Warsaw, wrote in an e-mailed research note today. “Manufacturing is particularly sensitive to changes in the business climate and therefore a good leading indicator for the rest of the economy.”
Economic growth will keep slowing to about 3 percent in the second and third quarters and total 3.1 percent for 2012, Pekao’s Matysiak said. That compares with 3 percent median forecast in a Bloomberg survey of 36 economists.