Poland’s economy will grow at a slower rate this year than it did last year, but will still outperform most of the region, the World Bank said in its Regular Economic Report on the 10 Central and Eastern European EU countries plus Croatia, which will join the bloc on July 1, 2013.
The World Bank puts its forecast for Poland’s GDP growth rate at 1 percent for 2013, a cut of more than one percentage point from its previous forecast six months ago, and significantly less than the 1.9 percent GDP growth Poland recorded in 2012. Nevertheless, Poland’s growth will still be stronger than five of the 11 countries included in the report.
The three Baltic states, Latvia, Lithuania and Estonia, expect growth exceeding 3 percent in 2013, while Romania and Bulgaria will see their GDP increase by 1.7 and 1.2 percent respectively, the report said.
“Poland’s growth is still strong, compared to the region, but it is not the only green island anymore,” Ewa Korczyc, country economist for Poland at the World Bank, told WBJ. She was referring to the Polish government’s oft-repeated mantra in 2009 and 2010 that the country was a “green island” of positive economic growth in a red sea of recession across Europe.
Consumption on the rise
The economists who put together the report see Poland’s domestic consumption beginning to grow again, after a significant and unexpected slowdown last year. Domestic consumption had been keeping Poland’s economy growing throughout the duration of the global economic crisis and subsequent euro zone sovereign debt crisis, but finally came to a screeching halt last year. A rise in net exports, especially at the end of the year, was what kept the economy growing, said Ms Korczyc.
But that situation is due to change this year. “The question is whether this slowdown in consumption is cyclical or structural, and we tend to believe it is cyclical,” she said. As long as the economies of Poland’s trading partners pick up as expected, then Polish consumers will begin to spend again as the benefits filter through to the country’s economy.
Still, what happens in the European Union and especially Germany, Poland’s largest trading partner, is the biggest question mark for the Polish economy going forward. Though Ms Korczyc said the hard economic data coming out of the EU15 is “sending out mixed signals,” the World Bank does see the situation in the EU improving.
“If the EU bounces back, Poland will follow suit – though it will take time, since both positive and negative developments in the EU affect Poland with a lag,” she said.
Indeed, the institution expects economic growth in Poland to reach only 2 percent in 2014, also because there will be a delay in EU funds flowing back into Poland, once the new 2014-2020 budgetary period begins.
Nevertheless, the bank sees lower interest rates and the government’s new credit line for small and medium-sized enterprises as having a positive effect on consumption – which will consequently pick up growth.
But the most important factor remains the economic environment outside Poland. “The biggest worry for the Polish economy is uncertainties in its European trade partners,” Ms Korczyc said.
With the exception of 2009, last year was the region’s weakest since 1996, Ewa Korczyc, country economist for Poland at the World Bank, told WBJ. This year, the 11 countries’ GDP growth together is only expected to come in at around 0.8 percent – the same as last year. In 2014, the World Bank sees growth of 2 percent for the entire region.
Last year, four out of the 11 countries saw negative growth. This year, the World Bank expects three countries – Slovenia, the Czech Republic and Croatia – will continue to see their economies shrink (Hungary is expected to swing from -1.7 percent growth last year to 0.3 percent this year).
The Baltics will continue to be the top performers in the region. In 2013 Latvia (3.6 percent), Lithuania (3.0) and Estonia (3.0) will show the highest growth by far. In 2014, their economies will grow by between 3.5 percent and 4.1 percent, the World Bank forecasts.
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