Belka Says Polish Rebound ‘Probably’ Underway; Sales Up

Poland’s rebound has “probably already” begun, central bank Governor Marek Belka said today as retail sales grew at the fastest pace in four months.

“Probably already now we are in a phase of a gradual, I stress gradual, rebound,” Belka said in an interview today while attending a seminar in New Delhi, India. “I think the worst is over.”

Retail sales rose 3.1 percent in January from a year earlier, led by spending on cars, pharmaceuticals and at supermarkets, according to the statistics office. The increase beat the most optimistic forecast in a Bloomberg survey of 26 economists and follows the steepest drop in sales since 2005 in December.

Poland’s central bank has lowered its benchmark rate by 1 percentage point since November with the economic expansion slowing to its weakest pace in three years as recession in the euro area and rising unemployment sapped demand. Investors are wagering on one more 25 basis-point cut in borrowing costs in the next three months, according to forward-rate agreements compiled by Bloomberg.

Following the retail report, the zloty gained 0.3 percent to 4.1476 per euro at 2:24 p.m. in Warsaw, the steepest rise among more than 20 emerging-market currencies tracked by Bloomberg. The yield on 10-year notes rose 4 basis points to 4.05 percent.

Improved Signals

Signs the slowdown is approaching its trough are mounting. Belka said this month that the monetary-easing cycle in nearing a pause. Industrial production unexpectedly rose 0.3 percent in January after decreasing 10.6 percent in December, the lowest since 2007, amid improving business confidence in Germany, Poland’s biggest export market.

Belka said his “personal projection” for growth this year “is about 2 percent, but I might be pleasantly surprised.” This contrasts with the European Commission’s Feb. 22 forecast that gross domestic product will expand by 1.2 percent to match the weakest pace since 2001.

“We can already expect a first quarter that’s better than the fourth quarter,” Jaroslaw Janecki, chief economist at Societe Generale SA in Warsaw, said by phone today. “Data show the economy is rebounding, but it’s too early to change our full-year estimates.”

The statistics office will say that fourth-quarter economic output grew 1 percent from a year earlier, the weakest since 2009, when it reports the data on March 1, according to the median estimate in a Bloomberg poll of 26 economists.

‘Low Growth’

While recent surveys point to a “certain improvement in consumer and business sentiment,” the European Union’s largest eastern economy won’t get out of the slowdown “immediately,” Halina Dmochowska, deputy head of the statistics office, said at a news conference in Warsaw today.

“We’ll have to deal with relatively low growth dynamics for some time,” she said.

Separately today, the statistics office said the jobless rate jumped to 14.2 percent in January from 13.4 percent in December as companies from Telekomunikacja Polska SA, Poland’s biggest phone company, to PZU SA, the largest insurer, announced layoffs in recent months. The unemployment rate is the highest since March 2007.

Belka, who declined to comment on whether there will be more interest-rate cuts, said Poland’s inflation rate should average “something like 1.5 percent” this year. “We are not concerned about inflation at all,” he said, adding that “our concern is obviously slow growth.”

The nation’s debt-rating outlook was raised to positive from stable last week by Fitch Ratings, which cited a narrowing budget deficit and stabilizing public debt. Belka said he hoped other rating companies would follow Fitch in improving Poland’s credit assessment. Fitch rates Poland at A-, the fourth-lowest investment level.

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