Warsaw Business Journal's Made in Poland 2013 – our third annual edition of this export-focused publication – officially launches April 10. We've been hard at work putting the finishing touches on it, and we hope you'll like the result.
As always, we'll have analysis of Poland's most important export sectors, plus commentary from partners, including the Polish Agency for Enterprise Development and the National Centre for Research and Development.
We'll also have a macroeconomic overview – this year, writing it up was my responsibility. Below, find my report. Enjoy!
The macroeconomic data coming out of
Poland continues to be ugly. Could exports save the day?
Poland’s economy is expected to grow
by about 2 percent in 2013 – perhaps somewhat less, depending on
which economists you prefer to believe. That’s disappointing
growth, considering the strong figures the country had seen in the
past: after the difficult year of 2009, when Poland was the only EU
economy not to go into recession, with gross domestic product growing
1.9 percent, the economy rose by 3.6 percent in 2010 and by 4.3
percent in 2011. Last year was tough, as the economy grew by just 2
So could Poland’s economy in 2013
underperform its growth of the global economic crisis year of 2009?
It looks increasingly likely. While first-quarter GDP figures had not
been revealed by the time Made in Poland went to press,
most economists had expected growth to come in at less than one
percent – the lowest quarterly figure since the first quarter of
2009. The economy was expected to pick up in the second half of the
year, if the euro zone manages to extract itself from the ongoing
sovereign debt crisis.
Nevertheless, ratings agency Moody’s
expects Poland’s GDP to grow 1.9 percent in 2013, HSBC expects it
to grow by 1.6 percent and the Gdańsk Institute for Market Economics
(IBnGR) expects 1.4 percent growth this year. On the lowest end, the
European Commission expects it to grow by a mere 1.2 percent. As of
press time, Poland’s finance ministry was holding to its prediction
of 2.2 percent growth.
All this begs the question as to why
the Polish economy has been slowing, after seeing such strong numbers
throughout the crisis. One answer is fatigue – Poles and Polish
businesses only had so much savings to burn through as the global
economy sank. They have now come to the end of that and with
economies in Europe still growing only moderately if at all, the
avenues for growth are few and far between.
Consumer spending figures bear this
out. During the first years of the Great Recession, Polish consumers
continued to spend as if there were no economic crisis. Up until
March 2012, retail sales regularly grew at rates higher than 10
percent per month. But April last year saw a deep slowdown – retail
sales grew only by 5.5 percent year-on-year and never returned to
anything higher than 7.7 percent. Finally, in December 2012, retail
sales declined for the first time in years, by 2.5 percent, as Polish
consumers began to really feel the squeeze, and spent less than usual
on holiday gifts and meals.
Retail sales grew again in January, at
a stronger rate than expected (2.3 percent), but screeched to a halt
in February, falling by 0.8 percent year-on-year.
Inflation, interest rates drop
As Poles stopped spending, businesses
slowed, price risen. Inflation has dropped like a rock since June of
last year, when it hit from 4.3 percent, to 1.3 percent in February –
below the central bank’s target of 1.5 percent to 3.5 percent. Core
inflation (without food and energy prices) has slowed as well, from
about 2.3 percent last summer to 1.1 percent in February.
In turn, Poland’s Monetary Policy
Council (RPP), the National Bank of Poland’s interest rate setting
body, has slashed rates. It began with a quarter-point cut each month
from November through February, and then cut rates by a further half
point in March. That put Poland’s main interest rate at a record
low of 3.25 percent.
Economists were mixed, however, as to
whether the RPP would continue to cut. The 50-basis-point cut at the
beginning of March shocked analysts, most of whom were expecting the
slow-moving council to trim rates by just 25 basis points, if at all.
Since February, NBP president Marek Belka, who also heads the RPP,
had been indicating that the easing cycle was coming to a close. He
called the March cut a “full stop” at the end of the series of
cuts – but in the same breath refused to rule out more if
macroeconomic data continued to come in worse than expected. He said
that the council was now in “wait-and-see” mode, but after the
surprising March cut, analysts were unable to say whether more cuts
could or could not be expected.
Danske Bank, for one, was convinced
that more cuts were on the way. “We strongly believe that the NBP
has been overly hawkish and that further monetary easing is needed,”
the bank’s analysts said. “We believe that macroeconomic data
over the coming months will confirm that not only is growth
continuing to slow but that inflation will also significantly
undershoot the NBP’s own 2.5 percent inflation target in the coming
year. Therefore, more rate cuts are likely.”
At the same time, economists from
Morgan Stanley said that no more rate cuts were in store, and that
the next move we would see in terms of interest rates would be a
rise, likely sometime in 2014. “We think that the next move in
rates is up, in 2014,” economist Pasquale Diana wrote in a
statement for the investment bank.
Data showing that both industrial
output and retail sales had fallen in February, was unlikely to
influence another rate cut, Mr Diana said. “The Monetary Policy
Council is set to wait and see for some months, and we think there
are no further cuts from here,” he added.
So consumers and businesses will also
have to “wait and see” what the RPP decides to do in upcoming
months. Much of that will be tied to whether or not the Polish
economy shows signs of deterioration or recovery. And it will
especially depend on inflation.
But whether Polish consumers decide to
spend more – and hence whether businesses decide to begin raising
prices again – will depend on whether there are jobs. And on that
front, the outlook is far from rosy.
Unemployment up, up, up
The days when Poland was recording
figures of 20 percent unemployment are gone – but certainly not
forgotten, and the monthly figures continue to inch toward that
number. In February, unemployment reached 14.4 percent – in line
with expectations, but nonetheless putting a significant drag on the
And while February is traditionally the
month of the year that sees the highest unemployment rate due to
seasonal factors (construction firms hire in the summer and lay off
workers for the winter), the long-term trend is disheartening. In
February of 2012 unemployment was at just 13.5 percent, in February
2011 it was at 13.4 percent and in February of 2010 it was 13.2
percent. In July, when unemployment is typically at its lowest,
unemployment has been increasing as well. In 2010 it was at 11.5
percent and in 2011 it was at 11.8 percent, but in 2012 it was 12.3
Most economists expected the
unemployment rate to remain high throughout the year, dropping to 13
percent in the summer and coming back to around 14 percent by
Exports the savior?
With that outlook, it seems that
consumer spending won’t be the savior of the Polish economy, as it
was in the 2009-2011 period. There is, however, much hope for
The continuing uncertainty in the euro
zone has significantly impacted the złoty, keeping it relatively
weak against even the euro itself. While that is a tough pill to
swallow for Poles who took out mortgages denominated in euros and
Swiss francs during the boom years, it remains a source of strength
for Poland’s exporters, who gained large chunks of European and
other international markets when the crisis hit – and the złoty
tanked – in 2009.
Already in 2012, Poland’s exports
were picking up. In the Q1-Q3 period, Polish food exports reached
€12.5 billion, some €1 billion more than in the same period of
2011, according to Poland’s ministry of agriculture. Various
estimates for the whole of 2012 put the final figure at €17
billion. If those numbers are confirmed by Poland’s statistical
office, it will make 2012 the best year ever for Polish food exports.
A decade previous, food exports had only reached half that figure.
Another sector that saw significant
growth in exports last year were cosmetics (5 percent higher than in
2011). Auto exports, while lower than in 2011, were likely to finish
2012 better than expected, despite lower car sales in key European
As a whole, exports rose 4 percent in
2012, to €146 billion, according to the National Bank of Poland. A
study by Oxford Economics and HSBC expect it to continue to grow, by
5.8 percent in 2013 and by 7 percent in 2014. Despite sluggish
economies in Europe, Polish firms are expected to find more markets
for their goods in Eastern Europe and Asia. In the 2016-2020 period,
the study found that Polish exports would rise by some 55 percent.
Since exports account for 47.5 percent
of Poland’s GDP, all of that positive data could indicate that
exports will prove the engine of Poland’s growth in the coming
years. With Polish firms becoming ever more modern, quality-oriented
and export-savvy (see sector analyses, pp. 29-69), it’s not so hard
Some of you may remember the stories we
did a couple of weeks ago on US Congressman Lamar Smith's opposition
to expanding the Visa Waiver Poland to include Poland. You can find
those stories here and here.
Representative Smith, the chairman of
the House of Representative's judiciary committee, did get back to
us, and I wanted to post his response here, without any comment of my
“Poland is a close friend and ally to
the United States and my concern has nothing to do with Poland, but
rather with the Visa Waiver Program itself,” Rep. Smith writes.
“The Visa Waiver Program should not be expanded because half of the
countries already participating have not met specific security
requirements mandated by Congress and we do not have a functioning
biometric exit system. We know that terrorists have used this program
to enter the U.S. and about 40 percent of illegal immigrants in the
U.S. are here because they overstayed their visas. Why should we
expand a flawed program that facilitates illegal immigration and
leaves the U.S. vulnerable to terrorist attacks?”
I leave it to you to judge
his arguments. What do you think? Should the US refrain from
expanding the Visa Waiver Program on security grounds? Is it fair for
allies such as the UK and France to be included in the program, but
for Poland to be left out?
Please let us know what you think in
the comments section or on Facebook.
President Obama's ugly gaffe Tuesday has Poland's media and politicians in a tizzy. It's no wonder, Poles
don't like being held responsible for Nazi crimes, and terms such as
“Polish death camp” risk doing just that.
The matter isn't trivial. Millions of
Poles died in Nazi German death camps during World War II – a fact
that is sometimes glossed over in the West. If we want to make sure
crimes such as the Holocaust never happen again, we have to get the
Alex Storozynski, the president of the
Kościuszko Foundation, pointed this out a couple of years ago in a
lovely post at The Huffington Post.
While some pooh-pooh the possibility of
anyone confusing the Polish victims with Nazi perpetrators of World
War II crimes, the risk is very real. Mr Storozynski mentions a
documentary by Canadian filmmaker Violetta Cardinal in which she
interviews school children who, when asked who built the Auschwitz
concentration camp, answer “I guess the Polish people,” citing
the very words “Polish concentration camp.” Find that at the
1:25-minute mark here.
He also quotes the Wall Street
Journal, which points out that the term “Polish concentration
camp” isn't even accurate geographically, since Auschwitz, for
example, was on German Reich territory during World War II.
Mr Obama obviously didn't intend for
his words to offend. He was honoring a hero of the Polish resistance,
after all. But time and again Mr Obama has shown too little regard
for the sensibilities of Poles. That's no way to treat a staunch
ally, and speaks volumes to where he prioritizes the Polish-American
relationship. Could you imagine him making a similar mistake
regarding the British, Canadians or Chinese?
The White House contends that “The
President has demonstrated in word and deed his rock-solid commitment
to our close alliance with Poland.” I beg to differ. His
sluggishness in working to put Poland in the Visa Waiver Program, his
announcement that he was scrapping President Bush's missile-shield
plans on the anniversary of the Soviet invasion of Poland, and his
administration's decision to send inactive Patriot missiles to Poland
when the Poles were expecting operational ones, all tell a different
Perhaps the Polish-American
relationship just isn't that important to President Obama. Who could
blame him? He's got bigger issues on his plate. But at some point, he
will need an ally in Europe.
Despite the slaps in the face mentioned above, Poland will be
there. Poles know that words – and what they mean – are
important. And Poles know the meaning of the word “ally.”
Does President Obama?
Below find my comment to readers that will appear in Monday's edition of Warsaw Business Journal. We felt it was appropriate to place it here, on the blog, before WBJ went to press.
It is rare that I take the opportunity as editor-in-chief to address you directly. As a newspaper, we like to keep to the standard Western newspaper profile, with simple news and opinion sections, and no weekly comment from the editor, which many weekly magazines have.
This week we break from that tradition for a very important reason – a missing little girl. Six-month-old Magda was kidnapped on Tuesday, and so far no trace of her has been found.
Some might ask why we, a business newspaper, would carry this story at all, much less place it in one of our most important sections (see this story, an edited version of "In the Spotlight" in next week's edition), as well as deviate from our standard opinion-page format. Unlike our usual coverage of politics, current events or economics, this story can in no way be construed to have any relevance to business, our main area of interest.
But we also have a very clear sense of community. Poland is our home as well, and the citizens who live and work here are members of a society to whom we feel a sense of responsibility. We cannot shirk this responsibility, with the resources we have at hand, to tell this story in the hopes that we may be able to contribute to bringing this saga to a happy end.
Therefore, not only are we devoting two pieces in this week's paper to Magda and her story, but we will also be following this story closely on our website and in future issues.
There may be those who will accuse me – as a father of two children under three years of age – of emotional attachment to this story. I plead guilty. Magda's story has touched me, as it has touched many in Poland. But as a journalist covering this community, I see nothing wrong with emotional attachment to that community, as long as we hold to our honest coverage of the news. In covering Magda's plight, I see no way in which we have deviated from that mission.
We therefore include a picture of Magda here. She is six months old, and according to the police she is between 60-70 cm (23-28 inches) in height, with olive eyes and short, dark-brown hair. Her front bottom tooth has just erupted.
She was last seen at 6 pm last Tuesday in Sosnowiec, in Poland's southwestern Silesia voivodship. She was wearing a pink hat with a white triangle in the front, a beige plush jacket-and-pants set with a zipper and white gloves. She was in a pink blanket and holding a multicolored teddy bear.
Police say that anyone who may have information regarding Magda's whereabouts should call the Sosnowiec Police at +48 (32) 296-1255, or the nearest police unit. In Poland, these can be reached by simply dialing 997.
As WBJ went to press there was already a reward of zł.130,000 (€30,000, $40,000, £25,000) being offered for information that leads to Magda.
We understand that among our readership there is little chance that someone may have such information. But there is a chance – and we know that it can't hurt to spread the word.
As we go to press on Friday evening, we also know that there is a chance that Magda could be found before we even reach our readers on Monday. We can only hope that will be the case.
In the meantime, as long as she has not been found, we must do what we can to help bring her home. Our sense of community and morality demands it.
Hair: dark brown
Eyes: olive green
Height: 60-70 cm
Clothes: pink hat, beige two-piece plush suit, pink blanket
Last seen: around 6 pm, January 24, 2012, Sosnowiec
Distinguishing features: one bottom front tooth
Those with information should call: +48 (32) 296-1255
For more information, including more photographs of baby Magda, please visit the website of the Katowice police (in Polish).
As we continue our coverage of the European sovereign debt crisis, the focus has once again turned to credit agencies (see today's story
, more in next week's WBJ
). Again, European leaders are calling for a “European” rating agency that would be more “credible” and “transparent” than the current Big Three (Moody's, Fitch and S&P).
These leaders seem to be forgetting that a ratings agency created by European governments with the not-so-express purpose of being kinder on European governments in its ratings would by definition be less credible, and that a European-based ratings agency already exists (Fitch is dual-headquartered in New York and London, and its parent company, FIMALAC, is headquartered in Paris).
But besides all that, these calls seem to miss the point that what Europe needs to be doing is creating a streamlined, effective decision-making mechanism that would allow the EU to react quickly to crises. That would go much further towards increasing confidence and credibility in European structures than would an artificially created ratings agency.
Indeed, Adam Narczewski, a Polish economist who is managing director of XTB Hungary, thinks that the existing ratings agencies have lost much of their credibility themselves, and predicts that one created by Europe would spur a kind of “race to the bottom.” His preferred solution? A single, state-sponsored global ratings agency. He admits it's a “utopian” solution, but posits that the era of privately run ratings agencies – which may be inclined to give positive ratings to those companies that pay their bills – has run its course. It's an interesting perspective, at the very least.
Here's what he had to say, in full:
The importance and reputation of the main rating agencies have diminished as they are responsible for some bad calls made in the last 2-3 years. The market itself proved what it thinks of their decisions (see how cutting the USA’s rating caused its bond yields to decrease, ignoring France and EFSF’s rating cut).
Creating new, 'European' rating agencies might only worsen the situation, allowing more institutions to rate debt. If that happens, I see 'Europe' and the 'US' competing with each other to prove which one is worse (not better, that is the difference) but this could be an ugly fight. The more rating agencies, the less deciding power they have, but at the same time they can cause more confusion with their decisions.
I agree that credit rating cannot be done in the current form, changes need to be made. It seems the idea of privately owned rating agencies has been exhausted. I see a solution (a utopian one) in a global, independent, rating agency, government/state-sponsored, with the best analysts rating credit. If more agencies enter the market, the more inclined they would be to rate better the credit they are paid to rate.
Are we in for a revolution in the global credit ratings system? That's unlikely. But as these agencies continue to undercut efforts to shore up Europe's sovereign debt system, it's hard to see the status quo remain in place for much longer.