As indicated by focus di Intesa Sanpaolo and one previous article on FIRSTonline, with the spread of the global financial crisis, the dynamics of Polish GDP dropped significantly in 2009 (1,6%) compared to the average of the previous five years (5,4%) but, unlike other Central European countries -Eastern like Hungary or Slovenia, the country has not entered a recession. The dynamics of GDP then continued to maintain a positive dynamic, albeit weak, even with the worsening of the sovereign debt crisis in the Eurozone. The economy grew by 2,2% in 2012, down sharply from 4,4% in 2011 due to the combined effect of the weak domestic demand, given the difficult conditions on the labor market with unemployment at 14,3%, and del slowdown of export due to the recession in the euro area, while the need to stabilize public accounts prevented the expansion of public demand. In this context, in 2012, despite the slowdown in exports, the contribution of the trade balance to the GDP trend was positive and even better than the previous year due to the contraction in imports. The growth in loans to households in December 2012 was 0,2%, against 12,0% in the same month of the previous year, where the more difficult credit conditions have also disadvantaged the investments, the dynamics of which were also significantly lower than in the previous year.
The economic indicators point out that the economy is still losing momentum. Domestic and external demand weakened further in the first quarter of 2013, leading to a slowdown of export to 3,2% (from 7,1% in January), with the sale of industrial products which decreased by 2,1% in the same month and fell again in March (-2,9%). If the eurozone recession continues to weaken exports in the first half of this year, the slightly weaker exchange rate compared to the average of recent years should help keep exports competitive in the markets. A positive boost to growth could also come from recovery of investment in infrastructure thanks also to the 75 million euro loan from the EBRD to build the regasification terminal which will satisfy a third of the country's gas demand. In this sense, GDP growth is expected to strengthen in 2014, but the intensity of which will nevertheless depend on the degree of foreign demand which last year was the main driver of the Polish economy. Not forgetting that persistent deflationary trends nationwide have dampened inflationary pressures in the first months of 2013, bringing inflation from 2,4% in December to 1,0% in March.
Poland significantly reduced the public deficit to 3,5% of GDP in 2012 from 5,1% the previous year, but nevertheless failed to bring it below the 3,0% threshold as required by the EU treaties. A more significant reduction of the deficit is instead expected in 2014 as, with public debt close to 55% of GDP, the constitutional dictates will require the country to adopt decisive measures to stabilize the public finances. In fact, the Polish Constitution sets a limit on public debt of 60% of GDP and the law imposes severe restrictions on the freedom of public spending when the debt exceeds 55% of GDP.
If portfolio investment has had a net surplus, it has been recorded a net outflow of foreign direct investment. In the current situation, with a current deficit stably around 3,0%, the country's net foreign financial position, currently negative and estimated at around 69% of nominal GDP, would persist in the negative trend but would in any case tend to correct itself in the medium-long term term, stabilizing at 55% of GDP. On a short-term horizon though the country needs to strengthen its degree of liquidity. Here then is that last January the IMF granted theextension of the Flexible Credit Line (FCL) program, the maturity of which has been set at January 2015, with the possibility of resorting to a loan of up to SDR 22 billion to finance the financial needs in case of need.
And if also in Poland, as for other Central-Eastern European countries, the CDS suffered strong tensions during the first half of last year due to the concerns of international investors on sovereign debts in the Euro Area, starting as early as May 2012, when CDS in Poland stood at 235bps, tensions on the government bond market eased, allowing for a gradual decline in the related spread to its current level of 102bp.
