Polish Economic Growth Probably Accelerated on Export Demand

Nov. 30 (Bloomberg) -- Polish economic growth may have gathered speed in the third quarter, driven by exports, as the only European Union member to avoid a recession since the credit crisis began benefited from a recovery in neighboring Germany. Gross domestic product probably rose an annual 1.5 percent after growing 1.1 percent in the previous period, the median estimate of 18 economists in a Bloomberg survey showed. The statistics office will release the data at 10 a.m. in Warsaw. “The main driving power of economic growth was exports, thanks to recovering demand abroad, especially at Poland’s main trading partners,” said Jaroslaw Janecki, chief economist at Societe Generale in Warsaw. Poland’s relatively large domestic economy, stimulated by cuts in personal taxes and record-low interest rates, helped the biggest eastern EU member avoid recession as investment was stifled by the drying up of credit. A recovery in export markets, where Germany is the biggest buyer of Polish industrial goods, in the third quarter offset a downturn in consumer demand triggered by rising unemployment and slowing wage growth. The economy of Germany, which receives a quarter of Polish exports, grew 0.7 percent in the third quarter. An index of Polish manufacturing rose to 48.8 in October, the highest since May 2008, as new orders gained for the first time in 17 months. While exports fell by 21.6 percent in the first nine months, the current account deficit narrowed in the third quarter due to a slower pace of decline in exports. Inventories Grupa Kety SA, Poland’s biggest aluminum maker that sells 35 percent of output abroad, raised third-quarter profit by more than half from the previous three months as revenue rose by a fifth. That prompted the company to upgrade its 2009 profit forecast by 10 percent. The central bank cited lower inventories as a key contributor to revived demand in its latest quarterly report on the economy, based on a survey of 892 companies. The number of enterprises signaling a drop in excessive inventories fell by 2.8 percentage points to 17.3 percent, while the group of companies reporting too-low inventories compared with their needs rose by 1.3 percentage point to 5.4 percent. Still, “replenishing of inventories is likely to boost imports and curb the positive contribution of net exports to GDP,” said Michal Karewicz, an economist at Citibank Handlowy in Warsaw. ‘Seasonal Effect’ Growth was also helped by consumer spending as a weak zloty encouraged Poles to spend summer at home. Retail sales rose in July and August at the fastest annual pace this year, though economists said the boost may not last. The zloty weakened by a fifth against the euro in the third quarter from a year earlier, among the 10 worst performers of 26 emerging market currencies tracked by Bloomberg. “This was only a seasonal effect,” said Adam Antoniak, an economist at Bank BPH in Warsaw. “The outlook for individual consumption is gloomy, given rising unemployment, shrinking disposable income, the waning effect of personal tax cuts and lower pension increases planned for next year.” The jobless rate rose in October to a six-month high of 11.1 percent and may approach 12 percent by the end of this year and exceed 13 percent in 2010. Companies, which squeezed investments as credit got tighter, are scaling down pay rises, with average corporate wage growth slowing in October to 2 percent. “Domestic demand is going to remain weak in coming months, while consumption and investments will continue to fall,” said Michal Dybula, chief economist at BNP Paribas in Warsaw. Investments probably fell 4 percent in the third quarter, and individual consumption rose 2 percent, according to the median estimate of seven economists, polled by Bloomberg.