Blog by Michael Clay

Retail Sales Likely to Grow Record High Ahead of VAT Hikes

Polish retail sales in December may be 13.1 percent higher year on year, which would be the best monthly result since mid-2008, the daily Rzeczpospolita writes citing stats office GUS' and Invest-Bank's forecasts.

The high spending is mainly the result of consumers' haste in purchases ahead of the VAT hikes expected next year, Invest-Bank economist Jakub Borowski told the daily.

Can such increases in spending just be attributed to the proposed increase in the VAT rate - after all it will be a 1% increase - hardly a real hike in final retail pricing.

Perhaps this is just an increase in the business which naturally takes place every December due to the Christmas spending spree and the fact that Poles are generally better off now than ever before.

Poland May See Short-Term Price Growth After Euro Adoption - Finance Ministry's Report

Poland may see its general price level rise by 0.5-1.7 percent in the short term after euro adoption due to the process of rounding up to "attractive prices," Finance Ministry's report on the balance of advantages and costs of euro adoption showed.

"The rise in the general level of prices in Poland resulting from rounding up to attractive prices could range from 0.5 percent to 1.7 percent," the document read. "That result is largely homogenous in a cross-section of various social groups and the rounding up effect is the strongest with respect to goods with low unit prices (price increase for goods priced up to PLN 1 may amount to 20 percent maximum)."

The document also mentions the possible effect of "euro illusion," that is a general perception of greater price increases than in reality due to the fact that goods with low unit prices are also the most frequent purchases.

"This poses a threat of increased wage demands and a temporary reduction in consumption," the report reads.

In spite of these short term effects, the report stated that the "estimated net balance of the integration [with euro zone] is visibly positive both in the short and in the long term."

Poland's government maintains its plans to adopt the euro in a fast and safe way, deputy Finance Minister and government point person for euro adoption Ludwik Kotecki told reporters earlier on Tuesday as the government adopted strategic framework for the national plan of euro adoption.

The official estimated short-term benefits "in the range of 0.9 percent of GDP (in the pessimistic scenario) to 1.9 percent of GDP in the optimistic scenario) or - using a different perspective - 0.3-0.9 percent of private consumption respectively."

Long-term net benefits are estimated at 2.5-2.75percent of GDP or 0.9-3.6 percent of private consumption," the framework showed.

Poland Improving Amid Crisis

Mid-September marked two years since the Lehman Brothers bank filed for bankruptcy, an event that had triggered the worst financial crisis around the world since the Great Depression. The turbulence on global financial markets led to the spectacular collapse of a string of high-profile financial institutions and large companies. Some countries found themselves in serious trouble. Greece even faced a threat of bankruptcy.

Poland, meanwhile, avoided most of these problems and was one of the few developed countries that did not plunge into recession. Paradoxically, Poland’s international profile improved thanks to the crisis. Financial markets started to perceive Poland as a large and growing European economy rather than merely a part of Central and Eastern Europe.

The improvement in Poland’s ratings abroad is coupled with an increased interest in the country among investors. According to the Polish Information and Foreign Investment Agency (PAIiIZ), in the first half of this year, foreign direct investment in the country was more than 80 percent higher than in the same period of 2009, even though 2009 was quite a good year in terms of FDI.

What attracts investors to Poland is that its economy is growing despite the global crisis. But the fact that the Polish economy is increasingly open and competitive is also an important factor. In a league table compiled by the World Economic Forum, Poland is ranked 39th among 139 economies in terms of competitiveness, ahead of Italy, Spain and Portugal, but behind the Czech Republic and Estonia. Although this 39th place does not seem to measure up to Poland’s potential and aspirations, the country has made significant progress compared with the previous league table in which it ranked 46th.

In producing its tables, the World Economic Forum takes into account economic statistics and views expressed by business executives. It uses criteria such as the quality of the institutional environment, the legal and administrative framework in which businesses operate, the quality of infrastructure, education and the health service, technology and innovation. Poland traditionally receives poor marks for the state of its infrastructure. Innovation is not a strong point of the Polish economy, either. In this year’s league table, Poland ranks 53rd in terms of innovation. The reason is that there is no tradition of collaboration between business and science in Poland. In developed economies, a third of the money spent on innovation comes from the state budget and two-thirds from private companies. The size of spending on innovation is another important factor. In Poland, this spending accounts for 0.6 percent of GDP, compared with around 3 percent of GDP in Switzerland and Japan. This shows that Poland still has a long way to go to become an innovative country.

Polish GDP to Grow 3.1% in 2010: IMF

The Polish economy is likely to grow 3.1% this year and 3.5% next year, according to the International Monetary Fund’s latest World Economic Outlook report.

Poland should continue structural reforms, make the structure of public finances more flexible and complete reforms of its pension system, International Monetary Fund analysts said.

In an early draft of next year’s budget, the government assumes GDP will grow 3.5% and average annual inflation will rise 2.3% , the PAP news agency reported.

The government expects domestic demand to be the main driver of economic growth in 2010, according to PAP.

Government experts believe exports remain something of an unknown, with many risks to the European growth outlook, PAP said.

It added that the government expected the zloty to appreciate as sentiment on global financial markets calms down and the economy returns to a path of growth.

Poland must avoid tax hikes and focus on spending cuts, including adjustments to legislatively fixed spending, according to Finance Ministry documents cited by PAP.

Under the Polish constitution, the 2011 budget must be put to parliament by the end of September.

Poland to Receive Over EUR 10 bn From Cohesion Funds

Poland will receive EUR 10.2 bln from the EU cohesion fund in 2011, according to the draft EU budget accepted by the European Commission on Tuesday.

The total pool of cohesion and structural funds in 2011 will amount to EUR 42 bln out of a EUR 142 bln budget, i.e. 17% more than in 2010.

The draft budget assumes an unprecedented increase in spending on cohesion policy in 2007-2013 financial perspective, Commissioner for Financial Programming and Budget Janusz Lewandowski said.

"Cohesion policy is anti-crisis policy," he added.

These funds from the EU are a wonderful opportunity for Poland to develop the infrastructure and ensure a firm place for the future BUT somehow the process of spending this funding is taking on a very slow processing system.

Unless the powers that be, begin to work much more quickly at utilising these funds and spending them on a properly planned basis, the money will be withdrawn. It is a question of 'Use it' or 'Lose it

The time has surely come for the spending of this money and not the constant delays and indecision which are plaguing the system.

Poland's Euro Adoption in 2015 Seen Possible" - Dep FinMin

Poland's adoption of single European currency in 2015 is "realistic", but is not a "target", deputy Finance Minister Ludwik Kotecki told reporters.
"Once this target is set, it has to be credible," he added.

Back in 2008, Poland declared it would enter the euro-zone in 2012, but had to abandon the plans due to the global economic prices. Ever since, government officials have been reluctant to name any dates for potential euro adoption.

It seems that the date by which Poland finally does join the single European currency is once more being considered as a further delay. We were all expecting this to take place in 2012 - the so called ' Golden Year' as it would coincide with the 2012 UEFA football being hosted by Poland and the Ukraine.

Now however, we hear that there are no targat dates set - once again no one wants to make a commitment - perhaps 2015 will be the date  and in view of the Polish economy and the way in which Poland is leading Europe right now, it deserves to make it sooner rather than later.

Poland's GDP to Grow by 2.75 pct This Year – IMF Forecast

Poland's economy is expected to grow by 2.75% in 2010 and 3.25% in 2011, the latest IMF forecast shows.

"We expect a revival in the domestic demand, especially in public investments," IMF noted. "The economy is still below potential and wage growth is limited by increased unemployment."

IMF expects inflation to be contained, the report also noted.

All the signs are right for Poland and yet still the British Exports to Poland are at a low level. WHEN will the British SME's and even larger firms realise that the potential to do business in Poland is just waiting for them to take action.

Now is such an ideal time for businesses to open up in Poland - now more than ever is the time to establish a business in Poland or export product there whilst UK sterling prices are at an all time low.

Please do contact us at Export Poland for a free consultancy on YOUR opportunity in Poland - you may be surprised at the result.

European Commission Predicts Poland's GDP Growth Highest in EU

Poland's GDP is expected to grow by 2.6% in 2010 versus 1.8% forecast earlier, while HICP is seen at 2.3% vs November assumption for 1.9%, the European Commission's revised forecast shows.

"The recovery would continue to be driven by exports, which will benefit from the rebound in external demand and the lagging positive effects of the past exchange rate depreciation," the interim forecast reads.

The FX effect will however gradually fade away and domestic demand will become the main driver of growth in 2010, the forecast reads on.
Investment is projected to recover slowly after the drop recorded in 2009, which will reflect "robust public spending in capital expenditure, firming-up production expectations and improved perception of the Polish economy among foreign investors," the EC forecasts.

"Private consumption is expected to contribute moderately positively to growth," supported by a marked increase in social transfers and better-than-expected developments in the labor market.

Poland's 2009 GDP Grows 1.7 pct y/y

Poland's GDP grew an estimated 1.7% year-on-year in 2009, slightly above expectations for 1.6%, while investments fell 0.3% with domestic demand down by 0.9%, the stats office GUS reported yesterday citing preliminary estimates.

The data are a bit better than expected and suggest that the economy grew about 3.2% year on year [in Q4]. This isn't especially controversial given the data on production, sales and construction that we've had. BNP Paribas analyst Michal Dybuła told PAP news agency.

The story we hear every day confirms that Poland has come through this past two years not entirely unscathed but nevertheless in amazing shape. Economically, Poland has really surpassed all expectations, for when the Global Crisis started, no one had even thought of the way in which the world would change.

The majority of EU members and the rest of the Western World never saw their economy grow during the past 12 months and it is really a credit to Poland and it's Government that the results we see now are confirmed to be BETTER than had been anticipated.

NOW is the time for British exporters to take advantage and begin to view Poland as an exciting place to export to. Where the value of the British product is considered to be high whilst the real costs are LOW due to the value of the POUND on the world money market.

I plead with British manufacturers and those supplying goods and services - LOOK AT POLAND - this is a country that wants to buy from you - you are just turning a blind eye and losing this wonderful opportunity.

Polish Businessmen Take Their Businesses Out of Poland

The number of Polish companies deciding to register companies outside Poland grew 20% y/y to over 4k annually, the daily Puls Biznesu writes citing Polish trust companies association SPP's data.

Poles register their business abroad to save on taxes or take advantage of better conditions for business, trust company Opustrust CEO Agnieszka Rzepecka told the daily.

Perhaps Polish companies realise the potential of exporting and trading overseas more than their British counterparts do at the moment. The ease with which Polish companies can set up in the UK is just one example of why Polish exports are on the increase and British exports to Poland are reducing year on year.

Why is it that the British Exporter FAILS to see the opportunity that is staring themin the face by exporting to Poland? With sterling at such a low value the opportunity is sitting there for the UK companies to grab with both hands - yet they fail to do so. WHY?

Perhaps the new ' Business Incubator' service which Export Poland has just started will help to resolve this. With the Business Incubator, British and overseas companies can be trading in Poland within 48 hours of setting up with a Company, Bank account and all relevant tax registrations. They will look after every aspect of the incubation and create the business opportunity for the company as well.

Contact Michael Clay for more details:-