Bleak business outlook expected to last through 2002

What global economic downturn? "Poles tend to overreact and are never satisfied … (the Polish economic outlook) is only getting better," said Ryszard Chochel, owner of Warsaw-based Falco car rental. While Chochel's outlook is optimistic, it is also unique. Most Polish firms are saying good riddance to 2001 and they are not keen on the prospects for 2002. "(This year) will be the worst year for the Polish building industry since the early 1990s," said Waldemar Mierzwa, spokesman for Budimex, one of the nation's top builders. "We are not counting on any improvement in the economy, but we hope to see the first signs in 2003," Mierzwa added. Builders aren't alone. While the Central Statistical Office (GUS) last week said that the construction climate index fell sharply in December, it also reported that its manufacturing index slipped. The survey - which asked some 10,700 businesses to evaluate their situation - also noted a downturn in the retail sector. "Times are bad," said Marek Stopczyk, general director of Warsaw's five-star Hotel Europejski and Victoria Intercontinental. "As for 2002, I'm rather pessimistic." With good reason, said most Warsaw-based economic analysts. "Over the first and second quarters (of 2002), we'll see very weak gross domestic product (GDP) growth - possibly below zero (percent)," said Marcin Bilbin, an analyst with Bank Handlowy (BH). BH projects 2002 GDP growth limping toward 0.9%, and unemployment continuing to drag down consumer confidence. Jobless figures in November hit a post-communism high of 16.8%, up 14.5% year on year. "We don't believe it will be solved in 2002, and it could hit 20%," Bilbin said. Those who had jobs had fewer pay hikes. Average wages increased at a slower pace in both the public and private sectors, year on year. BH expects real wages in both sectors to decline in 2002. "Despite monetary easing, there is no sign of improvement," BH's 2002 outlook reads. "Moreover, the tragic events (of Sept. 11) in the U.S. have aggravated the slowdown of the U.S. economy and had an impact in the European Union (EU) ... hence, the chances for a quick rebound in Poland remain slim." Despite an overwhelmingly grim 2001 report card, and poor outlook on the new year, several firms were able to tailor products to fit market niches. "Our financials look good, although we had to cut profit margins," said Maciej Skocz, president of CDN, a Kraków-based software developer. "We saw a chance to enter different segments of the market (for example, account-management systems for banks) ... we put more stress on modern marketing and financing," Skocz said. Others in the battered tech industry said they are looking for new export markets. "We experienced a surge in turnover, although we had fewer orders," said Marek Panek, marketing director of Comp Rzeszów, whose products also target banks. "We are planning to export more, both east and west ... we're already past the worst." Indeed, some analysts believe that Poland, with the rest of the world, has bottomed-out and is at the brink of recovery. But there's disagreement over the extent of a rebound. Krzysztof Rybiński, chief economist at Bank Zachodni WBK (BZ WBK), is bullish on 2002. "We expect higher growth year on year beginning in the second quarter, Rybiński said, adding that last year's interest rate cuts would begin to be felt by mid-2002. "There are already signs that the pace of deterioration is slowing in the business-confidence index." Bilbin's BH also expects a rebound, though mild, at best. "Recovery of economic growth will result from domestic demand, but as long as consumer confidence remains negative, we should not count on a sharp increase in consumer spending," BH's 2002 outlook reads. Analysts warned of a worsening situation with the nation's public finances. With public sector debt now estimated at 5% of GDP (up from 3% in 2000), the Democratic Left Alliance (SLD)-led government has introduced measures to trim spending and increase revenue. "The real concern is that the proposed changes in expenditure are cosmetic, and will only postpone fiscal troubles for a while," BH writes.