On May 1st 2004, ten European countries joined the European Union (EU) in a move that marked the largest expansion of the union in terms of territory and population. Seven of those countries were members of the former Eastern Bloc, among them Poland, the Czech Republic and Hungary. Poland’s accession to the EU was the result of long term negotiations that had started back in 1990, when the country’s communist regime collapsed.
The fall of communism made Polish governments plan and follow a policy of economic liberalization which sparked the country’s economic growth. The key goal was to restore the development capacity of the country, so it would be able to compete with other countries in global markets. Small and medium state-owned companies were privatised and new, more liberal, laws regarding the establishment of new firms helped the economy expand.
Polish economy rises
The Polish economy has come a long way since 1990. It now ranks eighth in size among the EU economies and first among the former Eastern Bloc members of the union. During 2007-2008, the Polish economy was the only one that withstood the consequences of the economic downturn, avoiding a recession. According to a Eurostat report, published in January 2010, during 2009 the Polish Gross Domestic Product (GDP) had grown by 1.7%, on an annualized basis while the total European Union GDP had dropped by 4.1%.
A JP Morgan Asset Management report, released in October 2017, said that Poland is experiencing a period of high economic growth, low unemployment and manageable inflation hovering around 2%. During the second quarter (Q2) of 2017, the Polish economy expanded by 4.4%, almost doubling the EU’s 2.4% average in the same time period. It should be noted that in the Q2 2017, the German economy grew by 2.1% and the French by 1.7%, on an annualized basis.
JP Morgan’s analysts suggest that robust economic growth and low unemployment make tax revenues increase, thereby improving state budget and making Poland more attractive for investors. Data published by the European Central Bank (ECB) have also shown that Poland has benefited a lot from the ECB’s asset purchase program and the monetary easing policies followed in recent years.
National Bank of Poland (NBP) keeps interest rates stable
On March 7th 2018, the Monetary Policy Council of the National Bank of Poland (NBP) decided to keep the Bank’s benchmark interest rate unchanged at 1.50%. The rate has been kept on hold for 36 consecutive months. The majority of economists polled by the Polish Press Agency (PAP) said that they don’t expect changes to the interest rates before the end of 2018. The NBP’s head, Adam Glapinski, told reporters in January 2018 that raising borrowing costs in the future would mean that there is a specific reason for doing it such as rapid wage or price growth.
In the last Monetary Policy Council statement, published on March 7th 2018, the inflation trajectory was revised lower to 1.6-2.5% in 2018 from the previous forecast of 1.6%-2.9%. Governor Adam Glapinski commented that the latest official projections reflected the lack of substantial inflationary pressures. The NBP’s head comments made the Polish Zloty (PLN) slump against the Euro and the United States (US) Dollar. Rabobank’s analysts noted in a report published on March 8th 2018 that “the market sent the NBP’s Governor and the other members of the Monetary Policy Council who share his view, a warning signal that the strong commitment to stable rates could be a policy mistake.”
Poland’s economy set to grow more
The Rabobank report mentioned that consumer spending rose by 4.9%, on a year-to-year basis, in the fourth quarter (Q4) of 2017 as Polish households benefited from strong wage growth, low unemployment and subsidies for families. Private consumption helped the GDP grow by 5.1% in Q4 2017, a bit higher than the 4.9% figure recorded in Q3 2017. Investments also increased by 11.3%, on an annualized basis, in Q4 2017 thanks to an influx of EU funds.
The European Commission’s (EC) survey on the Polish economy, released in February 2018, seems to agree with Rabobank’s report. The EC’s report said that the Polish real GDP growth is forecast to remain strong at 4.2% in 2018 and 3.6% in 2019. Domestic demand is expected to be the strongest contributor. According to EC’s data, record-high consumer confidence and an increase in wage growth are going to fuel the growth of private consumption, while a strong rebound in public investment in 2018 should be anticipated.
Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.