Polish Economy Results in Mid-2010 – Better than Expected
On 30th August 2010, the Central Statistical Office reported that the Gross Domestic Product increased in the second quarter of 2010 by 3.5 percent, in comparison to a 3 percent growth in the first quarter.
Market forecasts have estimated a growth of GDP by 3.2 percent in the second quarter. Experts point out that “the strength of private consumption”, i.e. “individual consumption”, constitutes the biggest surprise.
Economists emphasize that “it is a sign that something is happening in terms of Polish internal demand, and that we are not so exposed to the world economic downturn”. They also point to a similar situation in Germany, where the noticeable optimism of both consumers and companies has translated into good economic results.
However, the optimism is being dampened by fears of a slowdown in the United States or Asia, which may translate into a slowdown in Germany. Similarly, lower GDP growth may also occur in Poland.
A significant import increase is indicated in the analyses, which may be partially due to stock replenishment – it may also be a sign of hidden optimism. Companies may have made surplus purchases in order to cover export orders. However, we have to wait for confirmation of the aforementioned data. Another financial market expert states that data concerning GDP are “good and clearly better than expected”. He has drawn particular attention to the significant increase in individual consumption. “This is a positive indicator of the situation of households and their tendency to purchase goods. At the same time, it indicates even stronger growth of consumption in the coming quarters, as the favorable tendencies on the labor market became clear only at the end of the second quarter”
However, economists were disappointed by data concerning investment demand, although, taking into account recent very weak figures regarding investment in the largest companies – such a decrease was to be expected, and the general result is “not that bad”. Analysts state that we can be moderately optimistic in regard of investment activity during the rest of this year. "The more so because weather conditions are expected to be better than in the first quarter. Moreover, implementation of infrastructural projects is also gaining momentum”.
According to the said opinions, this year’s GDP growth may be higher than the 3.2 percent GDP growth predicted by economists so far.
Stronger domestic demand was related to both the pick up in consumption, and to the continuation of stock replenishment. Investment activity has also improved after a drop by almost 12 percent in the first quarter, caused by severe frosts and snowfalls; in the second quarter, investment expenditures dropped by only 1.7 percent, due to the negative impact of floods.
A definite deterioration in Polish net export results in a situation of high turnover in foreign trade is a phenomenon that is typical for a period in which the Polish economy is entering into a phase of delayed recovery. Economists expect that in the coming quarters, the difference between the dynamics of exports and imports will increase. Data concerning GDP in the second quarter confirm that domestic consumption is increasingly becoming the main growth factor in the Polish economy. It is expected that in the coming quarters, along with an increase in utilization of production capacity the significance of investments will also rise.
According to forecasts, GDP in the third and fourth quarter should reach 3.7 percent and 3.9 percent respectively and 3.5 percent for the whole year.
The Central Statistical Office has also reported that in the second quarter of 2010, domestic demand calculated annually increased by 3.9 percent (the market expected growth amounting to 3 percent – Polish Press Agency) and total consumption by 2.8 percent (individual consumption by 3 percent and public consumption by 2.2 percent). On the other hand, gross expenditure on tangible assets (investments - Polish Press Agency) in the second quarter of 2010 was 1.7 percent lower than in the previous year (the market expected investments to rise by 1.1 percent - Polish Press Agency). The Central Statistical Office informed that in comparison to the previous quarter, the so-called seasonally adjusted GDP (corrected for seasonal factors, e.g. public holidays, calculated at constant prices for the year 2000) increased in real terms by 1.1 percent and was 3.8 percent higher than in the previous year.
Prepared by BIM, 31st August 2010
