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Poland Won’t Join Currency War Amid Slowdown, Cichon Says

March 18 (Bloomberg) -- Poland won’t seek a weaker currency to boost growth as the economy is set to benefit from the government’s investment program and easier access to credit, Deputy Finance Minister Janusz Cichon said.

The zloty is “quite stable” and its current exchange rate is “favorable” for the competitiveness of Polish exporters, he said in a March 14 interview. The currency has weakened almost 1.7 percent against the euro this year, less than the Czech koruna and Hungarian forint.

The three eastern European countries are seeking ways to spur expansion after the recession in the euro area, their main trading partner, curbed demand for exports. The room to stimulate growth through government spending is limited as they all pledged to narrow their budget deficits to 3 percent of economic output, in line with European Union requirements.

“Poland doesn’t want to get into currency wars,” Cichon, a lawmaker from the ruling Civic Platform who joined the ministry in January, said at his Warsaw office. “Every attempt to intervene or manipulate the exchange rate runs the risk of creating volatility.”

The zloty weakened 0.3 percent to 4.1577 per euro as of 12:22 p.m. in Warsaw, the third-steepest decline among more than 20 emerging-market currencies tracked by Bloomberg.

Toughest Time

The $515 billion economy is now enduring its toughest period since emerging from the financial crisis as rising unemployment hurts consumer spending and the impact fades from a construction boom before co-hosting last year’s European soccer championship. The EU predicts growth will slow to 1.2 percent, the worst in 12 years. That contrasts with the government’s 2013 budget assumption of 2.2 percent growth.

“We can say that our growth forecast is very, very optimistic,” Cichon said. “We cannot yet say, though, that it’s unrealistic.”

Brazilian Finance Minister Guido Mantega used the term currency wars in 2010 to criticize industrialized nations for policies that weakened their exchange rates. The topic returned to the agenda this month as the yen and pound slid on the prospect central banks will intensify stimulus.

Czech policy makers are debating koruna sales as they failed to spur the recovery even after cutting interest rates to near zero. Polish and Hungarian monetary authorities also slashed their borrowing costs to record lows this year.

Depreciation Benefit

Poland benefited from a weaker currency in the aftermath of the 2008 global financial crisis. It was the only EU economy to avoid recession as the zloty’s 35 percent depreciation in the seven months through February 2009 helped overseas sales.

The authorities also stepped into the market to prop up the currency. The state-owned Bank Gospodarstwa Krajowego and the central bank sold euros in 2011 to prevent the value of the country’s foreign debt from breaching the levels that trigger mandatory spending cuts.

To get the economy going this time around, the government has set up Polskie Inwestycje Rozwojowe, which will act as a private equity fund to provide capital for its investment projects. It will boost its capital through sales of shares in state-controlled companies.

Meanwhile, Bank Gospodarstwa Krajowego this month agreed with five local lenders to provide as much as 30 billion zloty ($9.4 billion) in loan guarantees for small-and medium-sized companies. The financial-market regulator will relax debt-to-income limits for consumers seeking credit and simplify lending procedures, according to its Feb. 26 statement.

Private Investments

“The setting up of the Polish investment program will be a major contributor to boost expansion in the second half,” Cichon said. “We expect recovery in private investments.”

The government also expects the European Commission will allow Poland to exit the so-called excessive-deficit procedure “in late June or early July” as it narrows the budget deficit, he said. The country risks losing access to EU funds if it fails to narrow the gap and stays in the procedure.

Poland’s deficit probably fell to 3.5 percent last year from 5 percent in 2011, according to the comission’s Feb. 22 forecast.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at

To contact the editor responsible for this story: Balazs Penz at

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