Fed Tapering Shows Power of Tusk’s First Surplus: Poland Credit

Poland will probably record its first quarterly current-account surplus next month, a lure for investors as the European Union’s biggest eastern member shifts its economy to focus on exports.

The current account, the broadest measure of payments balance in an economy, registered a surplus of 574 million euros ($762 million) in May after April’s record 714 million-euro figure, the first back-to-back positive outcome since the central bank started publishing the data in 2000. That helped lower the extra yield on nation’s dollar bonds to 129 basis points over Treasuries, the least in two months, JPMorgan Chase & Co. indexes showed yesterday.

Prime Minister Donald Tusk’s government is relying less on consumers to drive the economy amid the worst slump in more than a decade. While domestic demand will probably recover as the outlook brightens, some parts of the improvement in the current account may be sustained, central bank Marek Belka told lawmakers July 24. The finances supported the zloty’s 2.1 percent gain against the euro in July, the biggest advance among 24 emerging-market currencies tracked by Bloomberg.

“I read it as quite positive” because “the current account gap was one of the key weaknesses of the country,” Viktor Szabo, who helps oversee more than $10 billion in emerging-market debt at Aberdeen Asset Management Plc in London, said by e-mail yesterday. “In the tapering world it’s all about external financing, or the lack of it.”

Quarterly Surplus

The amount of surplus in April and May should ensure the balance of payments will be positive in the second quarter of the year, Grzegorz Ogonek, an economist at ING Groep NV’s Polish unit, said in a phone interview yesterday. Polish exports rose

8.2 percent from a year earlier in June to 12.9 billion euros, according to an e-mailed estimate today from the state-owned Export Credit Insurance Corporation.

This should help narrow the annual current account deficit to 2.55 percent of economic output this year, the least since 2005, from 3.3 percent in 2012, according to the median forecast in a Bloomberg survey of 32 economists. Poland’s central bank will release current account data for June on Aug. 12.

Pick Countries

The narrowing in the gap comes as Federal Reserve Chairman Ben S. Bernanke said June 19 the U.S. central bank may reduce its monthly purchases of $85 billion of assets this year and phase them out by the middle of 2014. The near-zero borrowing costs have driven investors to look for higher-yielding bonds in emerging-markets, including Poland.

As the monetary stimulus may soon be withdrawn “investors start to differentiate” and they’re picking countries that “have less financing needs, meaning a current account surplus,” Peter Schottmueller, who helps manage the equivalent of $17 billion in emerging-market and international debt at Deka Investment GmbH in Frankfurt, said by e-mail yesterday.

Turkey, which recorded a current-account deficit of 6 percent of economic output last year, has taken steps in recent weeks to support the lira to stem foreign-investment outflows.

Poland’s domestic market of 38 million consumers has helped prop up economic growth in past years, making the country less dependent on exports compared with its regional peers Hungary and the Czech Republic. Yet with its economy in the deepest slowdown in more than a decade, Poles cut back on spending, leaving sales abroad to support expansion.


Poland has “a lot of small and medium-sized companies which shy away from exports because it involves extra cost and risk,” Andrzej Bratkowski, a member of the central bank’s Monetary Policy Council, told reporters in Warsaw yesterday. “The improvement could be sustained because once companies make an effort to reach new markets, they tend to stay.”

Exporters cut their dependence on the euro area to 51.9 percent last year from 54.1 percent in 2011 as Poland’s main trading partner plunged into recession, according to data from Warsaw-based statistics office released on July 29. Their sales to Russia grew to 5.3 percent from 4.5 percent.

“The surplus results in part from the cyclical nature of the Polish economy,” Radoslaw Bodys, chief economist at PKO Bank Polski SA, said in an interview in Warsaw yesterday. “When the recovery comes, the deficit will deepen again.”

The zloty weakened 0.3 percent to 4.2410 against the euro at 10:07 a.m. in Warsaw, dropping for the second day. Polish domestic bonds returned 4.1 percent in euros this month, the best performance after Greece, among 26 global markets tracked by indexes compiled by European Federation of Financial Analysts Societies and Bloomberg.

The additional yield on Poland’s 10-year zloty bonds over German bunds rose three basis points to 239. Credit-default swaps, contracts insuring the nation’s debt against non-payment, rose one basis point to 89, data compiled by Bloomberg show.

“We could continue to see the surplus on the current account for several months to come,” ING’s Ogonek said. “With the recovery in the euro area, the demand will continue to come from abroad while the domestic consumption lags.”

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