New Market Study Published: Poland Business Forecast Report Q2 2013

Recently published research from Business Monitor International, "Poland Business Forecast Report Q2 2013", is now available at Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 11 March 2013

Core Views

While we are forecasting relatively robust economic activity over the medium term, high unemployment and stagnant real wages will continue to weigh on real GDP growth.

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 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 (PO)-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 rising government unpopularity, limiting its ability to challenge the ruling coalition.

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Major Forecast Changes

We forecast Polish fiscal deficits of 3.0% and 2.2% of GDP in 2013 and 2014 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 should offset the effect on the budget deficit.

We have revised down our forecast for real GDP growth in 2013 from 2.6% to 1.9% and 3.7% to 3.0% in 2014 in light of Poland's increasingly depressed household segment.

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 whole 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 anticipate.

Partial Table of Contents:

Executive Summary

Core Views

Major Forecast Changes

Key Risks To Outlook

Chapter 1: Political Outlook

SWOT Analysis

BMI Political Risk Ratings

Domestic Politics

Tusk Secures Major Victory In EU Budget Deal

- Poland has managed to secure a larger share of structural and cohesion funds, despite historical cuts to the overall EU 2014-2020 budget. Assuming the new budget is passed by the European Parliament, the funds will continue to play a significant role in bolstering future economic growth in Poland, although the victory will do little to improve Prime Minister Donald Tusk's domestic standing.

TABLE: POLITICAL OVERVIEW

Long-Term Political Outlook

A Maturing Regional Power

- We consider Poland's long-term political risk profile to be on an upward trajectory, reflecting the country's maturing political institutions and greater confidence in the conduct of external affairs. Solid macroeconomic fundamentals underpin our expectation for improvement over the long run. Nevertheless, Poland still faces significant challenges to political stability in its external relations and at home.

Chapter 2: Economic Outlook

SWOT Analysis

BMI Economic Risk Ratings

Balance Of payments

Current Account Deficit Will Continue To Narrow

- We expect Poland's current account deficit will continue to narrow to 3.0% of GDP in 2013, from an estimated 3.7% of GDP in 2012, as the domestic economic slowdown weighs on import demand. While there is potential for a decline in investor interest in Polish government debt over 2013, we do not expect to see a major reversal in non-resident holdings of Polish debt over the course of the year. As a result, we expect Poland's current account deficit will remain comfortably covered by financial account flows. 16

TABLE: CURRENT ACCOUNT

Fiscal Policy

Budget Plans On Target

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