Polish 2012 GDP Slowed to 2% on Consumer Demand, ExportsDorota Bartyzel
Poland’s economy grew at the slowest pace in three years in 2012 as the euro-area slump damped consumer spending, increasing pressure on the central bank to keep cutting interest rates.
Gross domestic product advanced 2 percent from a year earlier, when it climbed 4.3 percent, the Central Statistical Office said in a preliminary report in Warsaw today. That matched the median estimate of 36 economists surveyed by Bloomberg. The annual pace was the slowest since 2009, when GDP rose 1.6 percent.
Consumer spending, responsible for 62 percent of GDP, is weakening as companies cut jobs and wages amid a recession in the 17-nation euro area, where the European Union’s largest eastern economy sells most of its exports. While the central bank has reduced rates by 75 basis points in the last three months, it’s signaled a possible pause in the easing even as its forecasts GDP slowing to 1.5 percent this year, the weakest since 2002.
Today’s data “masks a slump in domestic demand toward the end of last year that has seen household spending drop to its slowest rate since the early 1990s,” Neil Shearing, chief emerging-markets economist at Capital Economics Ltd. in London, said in an e-mailed note. “This strengthens the case for further policy easing.”
The zloty touched a four-year low against the euro last week after the central bank cut its benchmark to 4 percent on Jan. 9. The currency, which has weakened 2.7 percent since the start of 2013, traded at 4.2007 at 11:31 a.m. in Warsaw, little changed on the day.
Consumer spending increased 0.5 percent last year from 2.5 percent in 2011, the weakest since at least 2001, today’s report showed. In December, employment fell for a second month, industrial output had its biggest slump in more than three years and retail sales fell the most since 2005. The jobless rate rose to 13.4 percent, the highest in almost a year.
Exports increased 4.1 percent in the 11 months through November, compared with a 13.3 percent gain a year earlier. Exports to the euro area shrank to 52 percent of total foreign sales from 54.3 percent a year earlier.
Poland’s central should continue to lower borrowing costs and the zloty won’t weaken much as the economy picks up in the second half of 2013, Anna Zielinska-Glebocka, a member of the Monetary Policy Council, said in an interview today on TVN CNBC television. Fourth-quarter GDP growth slowed to between 0.5 percent and 0.6 percent, she said on TVN CNBC.
Fiat SpA, Italy’s biggest manufacturer, announced on Dec. 7 it will dismiss 1,500 Polish workers as Europe’s car market heads toward a 17-year low. Tauron SA, Poland’s second-biggest utility, said last week it will seek 3,180 jobs by 2015. TPSA, the largest telecommunications company in Poland, plans to cut 760 jobs, according to a Jan. 15 report on website Telepolis.pl.
The slowdown will be “worse” and last “a little longer” than in 2009, when Poland was the only economy in the EU to avoid a recession, MPC member Jerzy Hausner said Jan. 24.
Elsewhere today, India lowered interest rates for the first time since April and cut the amount of deposits lenders must set aside as reserves, easing policy to revive growth as inflation cools and the government curbs the budget deficit.
The Reserve Bank of India reduced the repurchase rate to 7.75 percent from 8 percent, as predicted by 30 of 35 analysts in a Bloomberg News survey. Governor Duvvuri Subbarao also cut the cash reserve ratio to 4 percent from 4.25 percent, effective Feb. 9, adding 180 billion rupees ($3.4 billion) into the banking system.
India becomes the first major Asian economy to ease borrowing costs in 2013, after inflation moderated to a three-year low and the government called for cheaper credit as it vows prudence in next month’s budget to damp price pressures. The central bank cut the inflation forecast to 6.8 percent and said there’s space, “albeit limited,” to support a faltering economy. It estimated a record current-gap will widen further.
Growth will be 5.5 percent in the year through March 2013, below an earlier estimate of 5.8 percent, the Reserve Bank said. That would be the slowest since 2002-2003.
In New Zealand, a government report showed the nation’s annual trade deficit unexpectedly narrowed in December. In Australia, a private report showed business confidence for December rebounded by the most since 2001.
A report in Spain showed a further decline in retail sales last month. In Germany, consumer confidence will climb in February due to a stable labor market and higher income expectations, market research company Gfk SE said.
In the U.S., private reports may show home prices in November posted their biggest year-on-year advance since 2006, while consumer confidence as measured by the New York-based Conference Board likely weakened in January for a third straight month, according to surveys.