Transcript Poland - Chiwa Media

Poland
Business and economic outlook
Quarterly update – July 2015
by Dr Daniel Thorniley
Contents
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Executive summary
CEE and Poland looking good in the world
Regional long-term GDP outlook
CEE overview
Why has CEE improved in the last two years?
Why does the Polish economy perform better than its peers?
The good news and some worries
Business issues
Business outlook
Economic outlook
What about the Swiss franc?
Inflation outlook
Currency outlook and interest rates
Statistical table
Executive summary (1)
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Core Central Europe will grow this year 6-8 times faster than Latin America!
Poland is a big part of this story and is one of the best performing “emerging markets”
in the world reporting the best figures in 6 years
In fact Poland is the star of the European growth performance
Poland combines the growth of an emerging market with the volume of a developed
one
The consensus for 2015 GDP growth is one of the best in Europe at 3.6%
The Polish GDP growth story also looks sustainable
The economic rally has lasted almost two years now after starting in about spring 2013
The Ukraine crisis and Russian recession have only taken about 0.15% off CEE growth
The Eurozone is also recovering and will grow by 1.5% this year: lower oil prices, a
weaker Euro and the introduction of QE will spur the CEE region
When the Eurozone grows an extra 1%, then the CEE region adds an extra 1.3%
Poland is a tight, competitive market but it remains one of the key-3 markets in the CEE
region with Russia and Turkey
It is also very much a single-digit sales growth market, definitely mature
Executive summary (2)
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But one should not get too over-excited, Poland/CEE markets have all the usual and intrinsic
business challenges including a challenging regulatory environment
Regional CEE mangers are facing more demands from global headquarters to ratchet up
sales and especially profits to compensate for the weaker big markets
EU funds help: CEE markets are able this year to spend the EU structural funds from the last
period up to 2013 and also start to allocate funds from the current period of 2014-2020;
In mid-2014 Poland was allocated 77bn Euros of funds under the European Structural and
Investment Fund programme which includes 50bn Euros for under-developed regions.
Poland was allotted the largest amount in the CEE region given its economic size and
population
The core CEE cluster of Hungary, Poland, Czech, Slovakia and Romania now represents a
solid business cluster to compensate in part for the slowdown in Russia, Ukraine and Turkey
The timing of this core CEE rally could hardly have been better for regional CEE/Ceemea
managers as Russia, Ukraine slumped
The Big-3 markets of the CEE region were and to a large extent still are: Russia, Turkey,
Poland. Currently Poland looks the most resilient and sustainable of these
Within the greater CEE region, Poland has usually accounted for 22-26% of regional
business when Russia accounted for 35-45%
Executive summary (3)
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Polish GDP results and trends look like the strongest they have been in decades; the
economy is in a sweet spot and the rally is broad-based in manufacturing, industry,
investment, trade, consumption and government consumption….. Not bad!
Noticeably Poland looks like out-performing Russia for the short and even medium-term
The sudden surge in the value of the Swiss franc will cause some bank and consumption
problems in 2015 but we do not yet think these are insurmountable
GDP growth averaged 3.4% in 2014 and will reach 3.6% this year and then trend close to
this number for 3-4 more years performing better than all CEE markets and perhaps only
matched by Romania which has more room for convergence and catch-up
Fixed investment and industrial output this year will range about 5-6% and in 2015-19
Household spending stabilises this year at around 3.3% and just over 3% in next 3-4 years
Consumer confidence has improved steadily and persistently over recent years and is now
in June 2015 at -12 close to a 6-year best level
Prices remain deflationary at -0.4% this year and creep up to just below +2% in 2016-19
Solid growth is not bringing higher prices, so interest rates will not rise: we were therefore
not surprised when the Monetary Policy Council cut rates in March by 0.5% to 1.5% as
deflation went deeper
Executive summary (4)
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Low inflation means very high real wages at 3.5% to 4.5% which are some of the best in
Europe and the world this year and next
Future growth comes from consumer spending, investment (EU funds) and less from
exports
Trade (especially exports) has survived well in recent years at an average 5-7% and
while we see some softening this year, a Eurozone mini-rally may suck in more Polish
products
Bank credits are driving the economy with a high average increase of 4-6%
The budget deficit turned positive in 2014 thanks purely to the transfer of private
pension funds to the state coffers. This will return to normal next year and the “real”
budget deficit will hover below the EU threshold of -3% in 2015-16
Our latest Survey, Poland now ranks second after Russia as priority market in the CEE
region for the next 3-5 years with 44% of respondents ranking it thus
Still, western sales in Poland are very much single digit but this is a large volume market
Poland is the same as other CEE markets….except it’s different!
The Polish market is bigger and more complex with more opportunities and challenges
And it has been less of a roller-coaster one than other CEE markets over the last 5-7
years
CEE and Poland looking good in the world
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CEE and other regions comparative GDP growth
Core CEE region
South East Europe
West Europe (including UK)
USA
Latin America
Asia pacific
2014
3.0
1.6
1.3
2.2
1.2
4.6
2015
2016
3.4
2,2
1.7
2.6
0.4
4.7
3.3
2,6
1.8
2,7
1.9
4.9
Sources: Consensus Economics, Ceemea Business Group, IMF
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The comparative numbers speak for themselves with the core CEE region growing faster
than any region in the world with the exception of Asia pacific.
Regional long-term GDP outlook
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And for how long will the good times continue?
The consensus for solid growth for the CEE markets is actually quite strong and
sustained over the next 5-7 years
Average annual GDP growth by period
Hungary
Poland
Czech Republic
Slovakia
Romania
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2010-2013
0.4
3.4
1.1
2.5
0.9
2014-2018
2.6
3.5
2.6
2.9
3.0
2019-2023
2.2
3.0
2.3
2.7
3.0
Source: Ceemea Business Group
Given likely low growth in the Eurozone of 1.8% average over the next 7 years and with
Russia's GDP medium-term outlook at about 2.7 to 3.0%, these numbers are solid. Once
again, when taken as a cluster, they do look a bit like a growth engine
The CEE outlook (1)
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Core CEE is growing at 8 times faster than the GDP of Latin America!
Poland is one of the best performing transitional markets in the world
Consumer confidence in Hungary and Czech Republic over the last 20 months have seen
some of the best improvements in the world and in Europe
When the Eurozone grows an extra 1%, then the CEE region grows an extra 1.3%
Core CEE went through a very tough 5 year period from 2009 to May 2013
Business executives were certainly disappointed and despondent with the region
Hungary and Czech Republic were slumped in recession or sub-par growth just 2-3 years
ago
More companies are putting more focus on core CEE region.
But talking with regional managers, Russia, Turkey and Poland remain the Big-3. The
pick-up in core CE will not compensate entirely for the slowdown in the Big-3
South-east Europe is still under-performing with recovery likely only in 2016-17
We have taken Romania “out of the Balkans”! based on solid trends
The CEE outlook (2)
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Unfortunately we cannot say this for SEE markets and Slovenia and Croatia and the
smaller ones are still struggling; they’re about 10-18 months behind core CEE
The key point to make is that the economic numbers are improving but this does not
automatically mean that business results are therefore booming immediately
These core CEE markets are mature, transitioned markets (although they do retain
regions which are still emerging)
The core CEE region will remain a more mature single digit sales market for most firms
and we see this trend in 2015 and this is the outlook for the coming years
But we can confirm that more companies than ever report a mild/steady uptake
One US major conglomerate reports organic top-line sales growing at 8-10% and as the
regional managing director notes: “for such markets, this is very sizeable and helps
buttress other slower markets in the EMEA region”.
Why has core CEE improved in the last 2 years?
1. Improvement in Eurozone just noted: low oil price helps disposable consumer spending
on non-energy items , low inflation helps real wages, weak Euro helps exports and
quantitative easing will help stock markets and property sectors
2. Bank credits are flowing a better even f for a while in 2009-10 the banking sector did
look like a weak link but the worst was soon over and new credit emission is rising 2-4%
which is quite decent and in Poland such new credits are rising at 4-6%, close to record
levels.
3. Several CEE governments are imposing softer austerity programs on their economies
4. Inflation (or deflation)n is extremely low in all the CEE markets
5. This allows the central banks in the region to keep interest rates at record low levels
which in turn kicks back and stimulates the investment and production outlook.
6. But low inflation (or deflation) is very important in stimulating real wages (i.e. salary
after inflation): some nominal wages are rising ell given the demand for labour as
economies expand. But even in economies where nominal wages are for example just
+1%, then if inflation is negative at say -1%, then real wages are positive by 2%. The
combination of some increase in nominal ages across a back-drop of very low inflation
is boosting consumer confidence and household spending
Why has core CEE improved in the last 2 years?
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There are several key reasons for the turnaround:
As we noted above, one axiom is that when the Eurozone grows by an extra 1%, then
the CEE region grows by an extra 1.3%
And in 2014 the Eurozone added an extra 1.5% and this year may well add another 0.7%
growth to the 2014 figure
The rally in the Eurozone is the key driver for CEE exports, investment and industrial
output
But from mid-2014 we also started to see a positive contamination from exports and
investment into consumer spending which has usually been the weak link in these
markets
Unfortunately unemployment was slower to recuperate but even these stubbornly
negative figures have started to improve across the region from late 2014 (in Hungary,
thanks to government programs unemployment tumbled more quickly and earlier)
Why does the Polish market perform
better than its peers?
Poland has outperformed the other core CEE market (even in the 2013 downturn) for
several reasons:
1. Poland has a large domestic economy
2. It is less dependent on external trade with the proportion of GDP emanating from trade
at only 33% in Poland compared with 72% in Slovakia, 70% in Hungary and 60% in the
Czech Republic. When global and Eurozone trade has slumped, being less dependent on
trade had been a big positive for Poland
3. The government has been much less obsessed with austerity measures than other CEE
markets
4. The banking sector and loan profile is stronger and the Central Bank has been
reasonably aggressive in cutting interest rates to support GDP growth. The authorities
are also eliminating certain restrictions on consumer lending
5. Remittances from abroad have been very strong although they have slowed
6. Polish companies are sitting on cash and are relatively profitable
7. Inflation has fallen sharply in recent quarters
8. The Central Bank is ready to intervene to protect the zloty at around 4.30
The good news and some worries (1)
In the following table we compare some selected indicators at the start of 2013 (January)
with numbers for 2014 and then February/March 2015 and May June 2015 (the numbers
are year-on-year i.e. comparing the month(s) in 2014 with the same month/period in 2013
etc). Percentage change unless stated otherwise:
Jan 2013
Retail sales
Consumer confidence
Business confidence
Industrial output
PMI
Inflation
Unemployment
*See notes following
0
-3
-12
-10
48
2
13
May/June
2014
3.8
-17
6.9
4.4
50.8
0.2
12.5
Nov/Dec
2014
-0.2
-12
-2.5
0.3
53
-1
11.7
Feb/Mar
2015
-1.3
-16
6.3
4.9
54
-1.6
11.7
May/June
2015
+1.8
-12
6.1
2.8
54
-0.8
10.4
The good news and some worries (2)
Notes to the table
• First of all, there is a lot of good news and most indicators remain at good/solid levels
• We would probably expect retail sales to be doing better than they are: this year they
have fluctuated widely and averaged a mere 0.6% growth but were up +1.8% in May
• Given such strong real wages, falling unemployment and better consumer confidence,
we only presume that they will rally through the year to average at least 2-3%
• Consumer confidence at -12 is at a 6-year record level
• Business confidence is also close to a 5-year high level at 6.1 in June
• But industrial production is a bit more volatile ranging from +8.8% in March to “just”
+2.8% but it is averaging 5% growth through the first 5 months of 2015
• As exports flow to the Eurozone, we think there is upside in the second half of the year
• Additionally the PMI has stayed very strong at 54 in June 2015 and has been at this high
average level through all of 2014-15 after a bad slump for most of 2011-13 when the
figure was weak and below a level of 50
• After averaging 13-14% for the last 5 years, unemployment is finally coming down and
is close to a recent record low level of 10.4% in June
Business issues (1)
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The business outlook is for a competitive, single-digit growth market in 2014-2016
Business has fared reasonably well in Poland in recent years compared with other CEE and
European markets but we underline again the competitive nature of the market
Poland is the same as other CEE markets…but different
It is a bigger market than the other CEE ones and therefore has more geographic scope and
options for affordable innovation, different marketing and sales strategies: does the Warsaw
business strategy work in south-eastern Poland, do you want to try to get to “rural
consumers”, does Poland meet one price approach, how complex is customer segmentation
in Poland, how does this all affect route to market or do you use one “standardised Warsaw
model” for the whole country? Lots of issues which do differentiate the Polish market.
As expected, Poland ranks average to low for companies planning to make cuts in sales and
marketing spending (just 7%) which is even lower than the figure 6 months ago
The number of companies planning to reduce headcount has also decreased over the last 6
months from 16% in December to 10% in June 2015. Conversely a large 20% do plan to
increase their staff numbers (the second best total in the region behind Russia) so there is
some churn going on and different trends across sectors
These features suggest that while the Polish market is stabilising, it is doing so at good levels
and companies need to structure their operation accordingly
Business issues (2)
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As might be expected, Poland ranks very mid-table when it comes to changing route to
market as this feature is already so mature for most: but 17% of companies do plan changes
and these are probably firms which plan to extend and expand their operations with more of
their own distribution or amending existing relations with suppliers, always with an eye to
something expansionary or innovative
Only 2% of firms report problems with receivables in Poland which places it at the very
bottom (good) end of the table. Cash management techniques are mature and the supply
chain is buoyant and well-financed
But downtrading is a constant feature of business: much of his has already happened and
Poland ranks mid-table in the CEE region in June 2015, with 27% of companies reporting
downtrading with this more prevalent among consumer goods firms and food/beverages
The reason that this number is not worse is that the market has already gone a long way in
downtrading and price wars. As one regional FMCG director states: “Polish retail is brutal,
tougher than Germany and that says a lot!”
Price wars, margin pressures and downtrading to cheaper brands will continue, although
sales are likely to steadily improve in 2015
Business outlook (1)
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Poland used to rank in 2-3 position in the total CEE region in terms of rate of sales’
growth invariably behind the more “converging” markets of Russia and Turkey
But with Russia trending downwards for the next 12 months or more, companies will
divert more attention to other key markets such as Turkey and to some extent Poland
Other markets are “catching up” and now Poland ranks only No 12 out of 23 markets
But this is a change in relativities and does not reflect a major downturn in Poland
The market is a solid single-digit one: the upside is that 20% of firms forecast high-single
digits this year with 16% planning double-digit growth
Again when we combine the large volume of sales with these growth figures and
compare them with others in the CEE regional and across Europe, the picture is positive
As one regional director of one of the Top-10 global FMCG companies commented in
Vienna: “Poland is getting impressive. It’s still a very hard market with all the features of
tough western retail BUT it now has a bit better growth than almost anywhere”.
We repeat that the current maintained rally will not translate into booming business
rather it will be upside, on a big, steady, competitive market
This year almost 60% of companies predict single-digit sales growth with another 12%
expecting flat sales after a solid 2014; some 12% forecast negative sales this year
Business outlook (2)
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The profit outlook mirrors the sales trend
In 2016 the picture actually improves with fewer companies budgeting for negative or
flat sales (3% and 4% respectively)
Those forecasting single digits jumps to 78% with 14% planning for double-digit sales
So the numbers are solid and steady and reflect the good economic/business news of
the last two years but it is still mainly a single-digit sales market
That said, in terms of rate of sales growth in consumer products Poland ranks only
mid/bottom-table in 2015 because 20% of companies plan flat growth or negative
growth this year with all others (88%) lumped into single digits (mostly low-single digits)
Given real wages growth and rising bank credits, this figure should actually be a little
conservative; and we see this in the fact that in 2016 all CP companies are clustered in
single digits (100%) spread evenly over low and high-single digits which is not bad for
such a mature market
The B2B sector in 2015 is comparatively strong on the back of good investment and
industrial figures and Poland ranks 6th in this sector with no company expecting
negative growth or flat sales in 2015 (and that is a strong highlight for this sector) while
85% forecast single digits and 15% predict double digits
Business outlook (3)
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2016 for B2B sales sees stabilisation with 100% of respondents budgeting for single
digits and most of those in low-single digits
The fairly good results for 2015-16 are supported by domestic bank financing and EUrelated co-financed projects which are still giving a positive boost to the economy
The Polish IT sector is “not bad” but of course again very tight on price: some 80%
forecast low-single digit growth in 2015 with the reminder looking at high single digits.
Interestingly no company budgets for flat or negative growth and so some sort of minirally is going on here
The IT industry has been a bit counter-cyclical and entered the recession late as
companies and consumers stocked up on efficiency-inducing IT products in 2009-10 and
parts of 2011 but the sector hit a partial brick wall from about early 2012
In pharmaceuticals and health Poland ranks mid-table in our Survey with a very even
spread of companies reporting flat, single digits and low-double digits and as in other
markets much depends on market share and whether you supply to government,
private sector or OTC
Next year there is a marginal improvement with fewer companies forecasting flat sales
(17%) and a similar number (18%) predicting low-double digits
Poland
Latest forecasts: revenue and profit results by sector, 2015
From our June 2015 survey
Poland
Latest forecasts: revenue and profit results by sector, 2016
From our June 2015 survey
Economic outlook (1)
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Famously, Poland was the only major European economy which did not dip into
recession in 2009 and it then posted a couple of good years in 2010 and 2011 when
GDP growth averaged 4.2%. But then the Eurozone crisis and global jitters pulled
growth down to an average of 1.8% in 2012-13
But low inflation, low interest rates, rising wages, stronger consumer confidence,
steady-good exports and very strong investment and industrial output which in turn
reduce unemployment all combine to boost the economy last year, this year and in
2017-20
The several factors we alluded to above will now ensure GDP growth this year of 3.6%
with a good sustainable and steady/strong outlook of 3.4% in the coming years
Poland has the potential to be the biggest and one of the best growing economies in
the region and could be set to record a faster rate of growth than Russia for the next 47 years
Another key element has been the government’s reluctance to engage in austerity
measures adopted by other Eurozone and CEE regimes to their detriment
The government has given itself some extra “fiscal space” by part-nationalising the
private pension fund assets which allows for public sector spending (in this election
year) to rise by about 3% compared with 2.7% in 2014
Economic outlook (2)
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After wobbling at the end of 2014 given regional volatility and the Russian rouble
collapse, business confidence declined but bounced back at the start of 2015
Since then it has recovered and stabilised at close to record levels of 6.1 in June this year
The steady industrial/investment outlook is supported by the very strong PMI number of
54 over the last 18 months compared with a more vulnerable figure below 50 for most of
2011-13. The PMI figure improved along with GDP from the start of 2014
Investment levels picked up very strongly last year at 9.2% and we think that investment
and industry will grow 5-6% this year (2015) and in the mid-term
So far this year monthly industrial output numbers have fluctuated quite bit from 8.8%
growth in March to “just” 2.8% in May
But we think that average industrial output will average about 5% this year helped by
solid exports and trade figures also rising 5-6% this year, close to last year's figure
The on-going rally in the Eurozone and Poland’s many and sophisticated supply chains
into the EU will help buttress trade and overall investment
Low (negative) inflation, strong real wages (+4%) and solid new bank credits (at 4-6%
expansion) all add to the positive picture
Economic outlook (3)
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Steady trends in trade are also helping the current account deficit which is under good
control and fell from levels of -3% to -4% in 2011-12 to -1.3% last year
We expect he current account to improve a bit more this year to -0.4% and then to drift
back to about -1% or slightly worse in 2016-19 which is perfectly fine and manageable
Given this is an election year (autumn), we presume that the government will boost
spending and benefits and government spending will tick up to about 3% this year
After the shock defeat in the presidential elections, there is a rising chance that the
current administration of Civic Platform could be ousted by the Law and Justice Party
While we think that “political risk” is very limited, any Law and Justice regime might be
more pro-growth and for more social spending but again we question whether any new
government would take Poland out of it’s “sweet spot”
Bank credits used to be a hindrance and a weak spot for all CEE markets; Poland was
often best in class but at levels too weak to drive sustainable growth
But for more than a year now overall new bank credits have accelerated from a “not
bad” level of 2-3% expansion to a best-in-class of 4-6% with some recent deceleration
These new credits also serve as a stimulus for consumer spending
The banks are doing their job and it shows
Economic outlook (4) – Consumer spending
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Consumer spending was strong at an average of 4.2% growth in 2010-11 but then
softened to an average 1.0% in 2012 and 2013. As with other indicators, consumer
spending rallied last year to 3.1% and will be higher again at 3.4% this year and
averaging 3.2% in 2016-19
Rising employment, falling unemployment, more bank credits and especially much
stronger real wages on the back of deflation will all buttress household spending this
year and for subsequent years
The positive mood has filtered through from other parts of the economy to consumers
and thanks also to government policy (not austerity fixated) and the Central Bank’s
approach of ensuring that interest rates are not excessively high: loose money has
helped the economy
Consumer confidence was -30 in January 2013 and ranged weakly at -30 to -20 for
much of 2010-13. This improved to -15 in 2014 and to -16 in the first quarter of 2015
and to a recent record level of -12 in June
Retail sales varied from 5-10% growth in 2010-11 and then stabilised at 3-4.5% in 201214. retail sales have been a bit mixed so far this year and not really reflected the other
positive drivers in the economy: they averaged + 0.5% in the first 5 months and were
growing at 1.8% in May
Economic outlook (5) – Consumer spending
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Given all the positive consumer factors, we expect retail sales to rally in the second half
of the year and to reach +3% average for 2015 and to record a similar figure in 2016-19
The negative impact of the Swiss franc seems largely to have been absorbed
Deflation and/or weak price rises are boosting real wages: as recently as 2012 these
were negative but were already not bad at all in 2013 at 1.6% growth
But with inflation flat last year and nominal wages up about 3.6%, then real wages
jumped last year by a similar 3.6%
In 2015 we see nominal wages at 4-5% with inflation negative, so again real wages will
be rising 4-5%. For example with a negative inflation number in June of -0.8%, real
wages rose in that month above 5%, one of the very best levels in Europe and indeed
the world!
Real wages will be supportive of consumer spending for several years although as
inflation rises moderately in the next 2-3 years, so too real wages will come down to 23% range which remain good
Unemployment has been Poland's weak link but is getting better: unemployment was
still a high 13% just 17 months ago but fell to recent low of 10.4% in June 2015. We see
both job creation expanding and unemployment coming down in the next 18 months
What about the Swiss franc?
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The elevated Swiss franc is bad news for CEE banks and non-preforming loans as well as
for consumers especially those directly impacted (holding Swiss franc mortgage loans)
Poland does look the most exposed for Swiss franc loans but even here the exposure
has lessened in recent years: from a big 60% among all loans in 2009 to a recent lower
figure of 22% of retail loans and 15% of all loans in November 2014
But about 32% of “household debt” including mortgages is denominated in Swiss francs
Put another way, some 30bn Euros of mortgages are reported to be Swiss-franc based
Only 3.5% of Polish mortgages are in arrears and with well-funded banks and good
capital adequacy levels, Polish banks ought to be able to ride out the storm
Debts and mortgage payments were helped in recent months, and will be in 2015, by
low interest rates and this is one compensation to the spiking Swiss
Presumably the government and National Bank will sit down to discuss methods to ease
the pain for households faced with 20% mortgage payment increases
Approximately 500,000 households face surging mortgage repayments and this could
harm consumer confidence and spending patterns (at the margins)
But we do not think that at the moment this will cause severe rupture to the GDP
outlook or even consumer spending levels, except at the margins
Inflation outlook (1)
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Poland is following and matching deflationary/low inflation trends as in the rest of the
CEE region (excluding CIS)
We do expect with the consensus that prices will rise moderately over the next 15
months and that process is underway at low levels
Inflation is low for all the standard reasons: energy costs are now low, food prices are
weak thanks to a good harvest and food prices are generally lower than usual as exports
to Russia are re-directed back into Poland or other CEE/EU markets; the zloty is steady
against the Euro so there is no inflationary push from the currency as import prices are
low (-2.3% in 2015); Eurozone prices are also very low; prices are generally very
competitive in the “Germanised” retail market with downtrading a common feature
As a result of all this, prices turned negative in July 2014 where they have remained
negative for one year with average 2014 inflation at precisely zero.
Prices then touched a low of -1.6% in February and were -0.8% in June and we expect
inflation to average -0.4% this year but then inflation will tick up moderately
Inflation outlook (2)
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Retail fuel prices and farmers’ market prices started to creep from March
Importantly the low base effects from last year’s collapsed oil price will start to filter out of
the numbers this autumn as will low food prices and prices will pick up
The so-called output gap is not small but diminishing so there was room for non-inflationary
growth but as this indicator shrinks further this year, then so too will inflation rise
Energy prices have also ticked up from their late autumn 2014 lows and when that is
combined with the change in base effects, we expect inflation to turn positive in
September-October
We thus see prices rising in 2016 by an average of 1.7% and then with low inflation across
most of Europe and competitive retailing, we see moderate inflation in subsequent years
averaging at very most at 2%
The Monetary Policy Committee cut the key rate to 1.5% in March having held the rate at
2% since last October. The Committee made an unambiguous statement that there would
be no further easing in the near-term. But given current deflation and given the change in
composition of the Committee’s personnel in early 2016, we share the consensus view that
rates could be on holding pattern of “wait and see” for the next 12 months
We could see a total of 0.5% rate increases in the second half of 2016
Currency and interest rate outlook
•
•
•
•
•
•
•
•
There is no/very little currency risk with the zloty
It has fluctuated versus the Euro from mid-2012 to end-2014 in a range of 4.10 to 4.25
The zloty strengthened against the Euro at the start of 2015 (to 4.0) thanks to Eurozone
QE and we think that in medium term further Eurozone QE will support the zloty
But in recent weeks the zloty has dipped down to 4.20 given Greek volatility and some
reaction to perceived political risk after the spring presidential election result
Medium-term we presume some zloty strength or stability given good growth outlook,
low inflation, improved current account and further QE in the Eurozone and thus an
average rate of 4.08 in 2015 and trending to 4.0 to 3.9 between 2016 and 2018
The zloty ranged at 3.00 to 3.25 versus the US dollar in 2012-to mid 2014 but then fell
against the strong “greenback” from 3.23 last July to 3.80 in July 2015, a fall of 17% which
is far from unusual compared with other currencies; as US interest rates rise later this
year, then so too the zloty could fall a bit further against the dollar in line with other
emerging market currencies but we do not envisage any collapse
We see an average dollar-Euro rate this year of 1.10 and then to average 1.05 in 2016-17
Given the zloty stability with the Euro, the Polish currency will probably move in line with
the Euro versus the dollar and presumably downwards a bit in the next 1-3 years
Poland - forecast table
2012
2013
2014
2015
2017
3.5
5.2
5.4
3.1
2.4
2.0
2.0
-2.9
-1.5
2018
3.4
4.9
5.2
2.8
2.1
2.0
1.8
-2.7
-1.8
2019
-0.4
2016
3.6
5.6
5.4
3.3
2.5
2.7
1.7
-2.8
-0.9
GDP
Fixed investment
Industrial output
Household spending
Government spending
Real wages
Consumer prices (average)
Budget deficit (% of GDP)
Current account (% of GDP)
2.0
-1.7
0.5
1.2
0.1
-0.2
3.7
-3.9
1.6
1.1
1.8
1.1
2.0
2.0
0.9
-4.0
3.3
9.2
3.5
3.1
2.4
3.6
0.0
4.5*
3.6
6.1
4.6
3.4
2.9
4.6
-0.4
-2.9
-3.5
-1.4
-1.3
Exports
Imports
Zloty/Euro, average
Unemployment (%)
3.8
-1.7
4.19
12.8
6.5
3.5
4.20
13.5
6.8
6.1
4.18
12.2
6.0
5.5
4.08
11.3
5.9
5.5
4.00
10.2
5.0
4.6
3.93
9.8
4.5
4.3
3.90
9.4
4.8
4.4
3.88
10.3
Notes: Real annual % change unless stated
* The budget suddenly moves into a surplus in 2014 because of the one-off transfer of private pension
funds to the state fund. Without the transfer, the underlying deficit is around 3.6%
3.3
4.4
5.0
2.8
1.9
1.6
1.8
-2.7
-2.5
Disclaimer, copyright, sources
© 2015 CEEMEA Business Group*
CEEMEA Business Group currently works with senior leaders of over 400 large multinational companies operating in
the Central Eastern Europe, Middle East and Africa regions, helping them understand economic and business
outlooks globally, regionally and at country levels. Regional and global executives also receive regular advice and
updates on best practices for expansion and success in emerging markets. Executive members of the CEEMEA
Business Group can also attend regular peer group meetings held throughout Europe and in Dubai.
Source: DT-Global Business Consulting GmbH and CEEMEA Business Group research
Basic data sources come from central banks, own intelligence network, CEEMEA Business Group corporate survey, governments and
other public sources. Interpretation, views, forecasts, business quotes and business outlooks by DT-Global Business Consulting GmbH and
CEEMEA Business Group.
This material is provided for information purposes only. It is not a recommendation or advice of any investment or commercial activity
whatsoever. The CEEMEA Business Group accepts no liability for any commercial losses incurred by any party acting on information in
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