Poland’s government shrugs off talk of slowdown, points to rapidly rising investment as growth driver

Poland’s government shrugs off talk of slowdown, points to rapidly rising investment as growth driver
Poland’s government shrugs off talk slow downtalk, investment rising
By bne IntelliNews August 25, 2018

Poland’s government has shrugged off talk of a slowdown and pointed to rising investment that will continue to drive the country’s robust growth, despite the structural limitations.

Polish Prime Minister Mateusz Morawiecki said that the Polish economy was doing “increasingly well,” and that, “importantly and it was growing “in a sustainable manner,” in an interview with the PAP news agency, thenews.pl reports. Polish GDP is based on three pillars: investment, exports and consumption, the prime minister added.

Poland has turned in a raft of strong results in the last few weeks. Retail sales in Poland continue to surge, putting in another month of strong growth, rising 9.3% in July compared with the same month last year, the country’s Central Statistical Office (GUS) said.

Poland’s industrial production also expanded by 10.3% in July y/y. Analysts were also surprised by the low pressure on prices, despite the acute labour shortage the country is facing. Polish core inflation remains stuck at 0.6% y/y in July. And Poland expects its budget deficit to fall to PLN28.5bn (€6.6bn) next year from the PLN41.5bn planned for this year.

“The budget assumes full-year GDP growth of 3.8% and a government budget deficit at 1.8% of GDP. In our opinion, these figures are realistic as our own forecasts are 3.9% real economic growth and 1.9% for the general government deficit,” Pavel Radwanski of Raiffeisen Bank (RZB) said in a note.

Poland’s unemployment rate was 5.9% in July, unchanged from June – the lowest level in 28 years, according to Labour Minister Elżbieta Rafalska. There were 961,800 people registered as jobless in employment offices nationwide in July, down from 967,900 in June, according to GUS. 

The Polish government pleased analysts with the budget draft bill for 2019 on August 21, who said is based on “realistic assumptions.” GUS said in a flash estimate last week that economic growth will accelerate to the 5.1% in the second quarter of this year.

But maybe the most encouraging result was the pick-up in investment. GUS reported that capital expenditure by Polish companies in the first half of the year was PLN54.4bn (€12.7bn) — 10.3% higher than in the same period last year. More investment is needed if Poland is to push past the constraints on further growth. Companies invested more in buildings, machinery, equipment and means of transportation than they did last year, according to GUS.

The year-on-year rise in business investment was the highest since Poland's ruling conservative Law and Justice (PiS) party swept to power in late 2015, Morawiecki said in the interview, reports thenews.pl.

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