Poland Business Forecast Report Q1 2013 - New Market Report

Recently published research from Business Monitor International, "Poland Business Forecast Report Q1 2013", is now available at Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 05 January 2013

Core Views

Although we have revised down our expectations for real GDP growth in 2012 from 2.5% to 2.3%, we are above consensus with regards to our forecast for Polish growth in 2013, expecting an expansion of 2.6%. Net exports and investment are likely to be key drivers of this out-turn.

Poland's external position remains relatively strong. We forecast the current account deficit to narrow from 4.3% of GDP in 2011 to 3.0% in 2012 and to 2.9% in 2013 as the economic slowdown reduces import demand. However, a large stock of foreign-owned government paper and ongoing private sector deleveraging represent the two major risks to our sanguine outlook.

We continue to expect the Civic Platform-led government to serve out its term. The government won a recent parliamentary vote of confidence, suggesting its parliamentary majority is safe for the time being. We also believe that the opposition will struggle to broaden its appeal despite the current government becoming increasingly unpopular, limiting the opposition's ability to challenge the ruling coalition.

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Major Forecast Changes

We expect the National Bank of Poland began easing monetary policy before the end of 2012, forecasting rates to be cut to 4.00% by end-2013.

We forecast Polish fiscal deficits of 3.5% and 3.0% of GDP in 2012 and 2013 respectively, in line with recent official revisions. Although we expect the government to loosen the fiscal reins more than it currently envisages in 2013, our above-consensus outlook for the economy is likely to offset the effect on the budget deficit.

Key Risks To Outlook

Although not our core scenario, we highlight the risk of Greece leaving the euro, potentially leading to a disorderly breakup of the common currency bloc. This would likely push Poland into recession.

A zloty sell-off in response to a downturn in risk appetite could prompt the central bank to hike rates in order to contain imported inflation. This risk would be heightened if domestic demand holds up better than we currently expect.

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