C/A deficit blow to government
A weak euro likely dealt a heavy blow to Poland's trade gap, pushing the current account (C/A) deficit in August to $991 million from July's $701 million.
The government had hoped that C/A figures would be $700 million-$900 million.
"The euro was especially weak against the dollar," said Dariusz Filar, chief economist at Bank Pekao. "(Polish economists') greatest dream would be a very strong euro and weak dollar because oil imports, first of all, would be affected."
Poland receives its oil mainly from Russia, Norway and the Middle East, but it's always paid for it in dollars, Filar said.
A strong dollar contributed to the increase in imports for August, which were up $120 million from July, he said. About 70% of Poland's exports are contracted in euros, but shown statistically in dollars, he added.
The "dollar effect" is taking a toll on the C/A gap. Although exports netted $132 million less than in July, Filar said actual measurements of bulk-goods shipments were comparable.
In an effort to support the faltering euro, the European Central Bank, along with the central banks from the United States and Japan, recently engaged in euro-buying sprees to prop up the currency. The euro, which has lost more than a quarter of its value since its introduction in 1999 and was at an all-time low of $0.85 before the intervention, traded closer to $0.90 more recently.
But independent of a weak currency, high oil prices at around $30-$32 per barrel during August are adding weight to the import side of the scale, analysts said. Prices in September, which climbed to $33-$36 per barrel, could push harder on the C/A deficit, although analysts are predicting a downward trend in the coming months.
An upsurge in quantities of oil imports in August could have taken a toll as well, said James Owen, economist with SG Bank.
"No one was expecting imports to be so high," he said. "It's out of line with everything else we know about imports or domestic demand."
Also, Owen said, a potent zloty in August, particularly against the euro, could have caused companies importing goods to speed up payments to maximize savings.
However, "That's purely speculation," he said.
Owen said that the August C/A figure is a one-off and not the beginning of an upward trend.
The Monetary Policy Council (RPP) forecast a current account figure of 7.2% of gross domestic product (GDP) by the end of the year. Bank Pekao predicted 7%. Analysts' estimates put the C/A at 7.3-7.6% of GDP.
"Nothing has changed radically," Filar said. "However, there is some disappointment because we were expecting better exports."
Exports fell 5.4% on the month to $2.34 billion, while imports rose 3.4% to $3.63 billion, a high for 2000.
