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Polish Economy Grows at Quickest in 2 Years on Loan Costs

May 30 (Bloomberg) -- Poland’s economy grew at the fastest pace in two years in the first quarter as record-low borrowing costs stoked consumer spending and corporate investments.

Gross domestic product surged 3.4 percent from a year earlier last quarter, compared with 2.7 percent in the previous three months, according to a preliminary estimate published today by the Central Statistical Office in Warsaw. That exceeded the 3.3 percent preliminary estimate published May 14. GDP rose 1.1 percent from the previous quarter.

Borrowing costs, kept at a record low since July, will be maintained unchanged at least until the end of the third quarter, helping the European Union’s largest eastern economy gather pace, according to the central bank’s economic outlook. It predicts full-year growth of 3.6 percent, more than double last year’s rate.

“The year got off to a very good start and that bodes well for the next few quarters,” Adam Antoniak, an economist at Bank Pekao, said in an e-mailed research note. “The whole structure of growth is positive news, especially the impressive boost in investments.”

The zloty traded at 4.1429 per euro at 1 p.m., down 0.1 percent from yesterday’s three-month high. The yield on the government’s two-year bond rose three basis points to 2.73 percent.

Fixed investments jumped 10.7 percent, led by an 8 percent gain in construction, which grew for the first quarter since the start of 2012 because of mild winter weather.

Fiat Investment

Fiat SpA plans to invest 2.36 billion zloty ($775 million) in Poland to start production of a new model at plants in Tychy and Bierun, the government in Warsaw said on May 20. The company will add 420 jobs to its current 3,000 workforce.

Falling unemployment coupled with increased wages and low inflation pushed consumer confidence to a two-year high. Individual consumption accelerated for a fourth quarter, gaining 2.6 percent. Exports rose 7.6 percent as the euro region recovers from recession, showing no sign of fallout from the conflict in neighboring Ukraine.

“The impact of the Ukraine crisis is still unknown and we expect it will actually be noticeable mostly in the second quarter,” Pawel Radwanski, an economist at BGZ bank in Warsaw, said today by phone.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Andrew Langley, David McQuaid

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