Clouds on the horizon
Stanisław Owsiak, considered a moderate member of the RPP, has said that a strong złoty and weak domestic demand have weighed down the Polish economy, after GDP and investment growth figures for Q1 came in much lower than expected.
In December the Finance Ministry was making noises of five percent GDP growth for this year - a number that was later revised down to 4.5 percent, and then down further to 3.7 percent after last quarter's disappointing growth figures. Still, says Owsiak, this forecast carries a "downside risk."
"The assumption that economic growth will be at 3.7 percent in 2005 is optimistic," he said in an interview last week. And though most analysts have kept their chins up, saying the economy will pick up in the second half despite the litany of disappointing results, Owsiak remains pessimistic about the economy's future.
"There seems to be nothing that could push the economy forward," he said. "The strong złoty is one of the reasons why growth is weakening. It would be better for growth if the złoty were weaker. The economy is also choked by weak domestic demand."
Analysts blame stagnant wage growth for much of the lack of demand on the domestic market.
Owsiak also revealed that the government is now considering ways to boost investment. Analysts were shocked by growth of just one percent in Q1. "A return to investment incentives is mulled," he said.
On the currency markets, he warned that the złoty's value would become increasingly volatile as September's parliamentary elections approached.
"Here we could have surprises [in the złoty rate], which calls for a substantial dose of caution in monetary policy."
On the positive side, the gloomy outlook portends low inflation for the rest of the year.
"There should be no inflation pressure in the second half of the year which could threaten the target," said Owsiak, adding that he saw inflation hovering between 1.5 and two percent for the rest of the year - below the Finance Ministry's 2.5 percent target.
All of this makes it increasingly likely that the RPP will look to cut interest rates in the near future. Currently, the council's policy bias is 'neutral', and when asked if it would cut rates at its meeting next week without switching its policy bias to 'easing', Owsiak said: "This is a delicate matter, we are divided on this in the Council. I am not a supporter of surprises, I favor gradual moves. First the bias should be switched and then the rates." (Reuters)
In December the Finance Ministry was making noises of five percent GDP growth for this year - a number that was later revised down to 4.5 percent, and then down further to 3.7 percent after last quarter's disappointing growth figures. Still, says Owsiak, this forecast carries a "downside risk."
"The assumption that economic growth will be at 3.7 percent in 2005 is optimistic," he said in an interview last week. And though most analysts have kept their chins up, saying the economy will pick up in the second half despite the litany of disappointing results, Owsiak remains pessimistic about the economy's future.
"There seems to be nothing that could push the economy forward," he said. "The strong złoty is one of the reasons why growth is weakening. It would be better for growth if the złoty were weaker. The economy is also choked by weak domestic demand."
Analysts blame stagnant wage growth for much of the lack of demand on the domestic market.
Owsiak also revealed that the government is now considering ways to boost investment. Analysts were shocked by growth of just one percent in Q1. "A return to investment incentives is mulled," he said.
On the currency markets, he warned that the złoty's value would become increasingly volatile as September's parliamentary elections approached.
"Here we could have surprises [in the złoty rate], which calls for a substantial dose of caution in monetary policy."
On the positive side, the gloomy outlook portends low inflation for the rest of the year.
"There should be no inflation pressure in the second half of the year which could threaten the target," said Owsiak, adding that he saw inflation hovering between 1.5 and two percent for the rest of the year - below the Finance Ministry's 2.5 percent target.
All of this makes it increasingly likely that the RPP will look to cut interest rates in the near future. Currently, the council's policy bias is 'neutral', and when asked if it would cut rates at its meeting next week without switching its policy bias to 'easing', Owsiak said: "This is a delicate matter, we are divided on this in the Council. I am not a supporter of surprises, I favor gradual moves. First the bias should be switched and then the rates." (Reuters)
