Growth will sink in 2013, but Poland won't go under Shutterstock

One thing just about everyone agrees on is that 2013 will be a tough year for the Polish economy. In recent months, economists, financial institutions and the government have all lowered their expectations for GDP growth next year as recent macroeconomic indicators give little cause for optimism.

The economy grew at just 1.4 percent in Q3, the slowest pace since the second quarter of 2009.

The IMF, the European Commission and the OECD now all predict Poland’s GDP will expand by less than 2 percent in 2013. The Polish government remains slightly more optimistic, recently passing a 2013 budget that assumes 2.2 percent growth for the year, significantly less than its previous assumption of 2.9 percent.

When he presented the budget in December, Finance Minister Jacek Rostowski said the “global, European and Polish economic situation [at the end of 2012] is similar to the situation at the end of 2008, although we should point out that the situation is less dangerous now than it was then.”

“Today, we have a mild crisis in Western Europe, back then we had a gigantic breakdown,” he added.

Q1 the worst

So what do Polish economists think?

“Next year we will have an economic slowdown, a drop in investment and weak consumption,” said Grzegorz Maliszewski, chief economist at Bank Millennium.

Jarosław Janecki, his counterpart at Société Générale, predicts growth of 1.7-1.9 percent next year while Przemysław Kwiecień, chief economist at X-Trade Brokers, puts the figure at 1.5 percent.

Mr Kwiecień said the “worst period” in 2013 will be the first quarter. “Firms will be careful about organic investments and that will affect growth. But then things will improve a bit as the year goes on,” he added.

All of the economists interviewed by WBJ for this story pointed to the unresolved euro zone crisis as the major headache for Poland’s economy.

“The euro zone crisis will have a negative effect on Polish exports next year,” said Mr Maliszewski. However he added that he believes the złoty will not appreciate too sharply, helping keep Polish products competitive.

But Mr Kwiecień was decidedly bearish on the chances of the economy during a euro zone slowdown. “Until the situation improves in Europe, we cannot expect improvement in Poland,” he said.

A quarter of Poland’s exports go to Germany, and so the condition of that country is key for its economy. Mr Janecki sees cause for optimism on this front. “Plans for looser fiscal policy and tax cuts in Germany will lead to salary increases there,” he said, suggesting that Poland’s western neighbor might not be forced to drastically cut down on imports.

Ready to enter a trouble zone?

In December, Prime Minister Donald Tusk announced that his government’s final decision on whether to take Poland into the euro zone will be made in the “nearest months.”

The prime minister also said Poland has to decide whether to be part of the “heart of Europe,” or a “peripheral country with its own currency,” tacitly indicating his view on the matter. President Bronisław Komorowski also recently voiced support for joining the currency union.

But if the government does decide to take the plunge, it will not have an easy sell. A November poll showed 58 percent of Poles think adopting the euro would be bad for Poland.

And while Mr Maliszewski thinks the government announcing a concrete date for Poland to join the euro zone would have a “positive effect on the economy,” Mr Janecki said it would have “no effect.”

Mr Kwiecień said he does not expect Poland to join the euro zone anytime soon, and called Mr Tusk’s statements a “publicity stunt.”

“The euro zone is not ready for such a big economy as Poland right now. [The euro zone] first has to improve its situation before we can talk about [Poland] joining,” he concluded.

And so even though Poland’s economic fundamentals are in order and its financial system healthy, the situation in the euro zone will be crucial in determining whether 2013 will go down in history as a good year for the CEE’s largest economy.

Remi Adekoya, Marta Mardosz

Economists weigh in

Here are some of the other important issues that the economists we interviewed mentioned.

Przemysław Kwiecień
chief economist at X-Trade Brokers

“Many bad-case scenarios have already materialized – there is less demand for exports and a careful approach to organic investment by international corporations.”

Jarosław Janecki
chief economist at Société Générale

“If the government announces that we are joining the euro zone, then the most important thing will be how Polish fiscal policy shapes up in the following months. It would have to be restrictive. Monetary policy would also have to be more restrictive.”

Grzegorz Maliszewski
chief economist at Bank Millennium

“The economic situation in the EU and the slowing economy in Poland will mean that the government will aim to keep the Polish currency because it improves the competitiveness of our firms.”