Fitch upholds forecast of Poland's 2010 GDP growth forecast at 2.3%.

By bne IntelliNews July 14, 2010
Credit rating agency Fitch Ratings forecasts Poland's real GDP growth of 2.3% and 3.5% in 2010 and 2011, respectively. This compares with growth rates of 6%-7% experienced in 2007 and 2008, the agency has said in a communiqu. In February, it upgraded its 2010 forecast to 2.3% from 1.5%. The government puts the figures at and above 3.0% and 3.5%, respectively. "Moderate macroeconomic imbalances, a relatively small and robust banking system, deep domestic local currency financing markets and a credible monetary and exchange rate regime underpin Poland's resilience to shocks and support sovereign creditworthiness," director in Fitch's Emerging Europe Sovereign group David Heslam said, as quoted in the release. Still, the agency noted that the weaker economic environment was having a negative impact on Poland's budget performance and hence increased the government's borrowing requirement. The general government deficit (including pension reform costs) widened by 3.5pps to 7.1% of GDP in 2009. Fitch forecasts that the deficit will narrow to 6.5% in 2010, aided by a stronger economic growth backdrop, although recent floods could lead to a temporary widening of the deficit beyond that forecast this year unless compensated for by balancing measures. Fitch forecasts gross general government debt at 54.4% of GDP in 2011, almost 10pp above its 2007 level. Countering short-term strains, longer-term public debt sustainability is underpinned by Poland's reformed pension system, which leaves it resilient to the costs of an aging population, unlike many EU countries. The gross government borrowing requirement (deficit plus maturing debt) is forecast by Fitch at 15.5% of GDP in 2010, largely unchanged from last year (15.6%). The USD1.5bn issue completes the government's planned 2010 external issuance programme. Fitch also assigned Poland's 10-year USD1.5bn sovereign bond issue a rating of A- , which is in line with Poland's long-term foreign currency issuer default rating (IDR) of A- with a stable outlook. ISB, tom

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