CSFB sees recession looming in middle term if interest rate cut is not made

If interest rates are not lowered quickly enough and by a sufficient amount, the Polish economy will show signs of a recession by the end of this year, warn analysts from Credit Suisse First Boston (CSFB) investment bank. However, in its latest report CSFB also said that a 1-1.5 point cut within the next four months should help the economy and this is exactly what the CSFB predicts will happen. Finance Ministry adviser Stanislaw Gomulka agreed with this view and stressed that it is not just Polish economists who see the need for an interest rate cut, like some Monetary Policy Council (RPP) members implied. Gomulka said that Poland is not in danger of a recession in its classic form, i.e. negative growth. However, there is a threat of a growth slowdown, which would effect a massive rise in unemployment, already at 16%. He said that the strengthening of the zloty, deadly for Polish exporters, should make it easier for RPP to slash rates. "The zloty is too strong already and if the dollar drops to zl.3.8, we shall be one step away from a crisis," said Gomulka. (Gazeta Wyborcza, p.21) T.J.