Export exodus

The rapid appreciation of the złoty combined with stagnation in the euro zone have negatively affected Polish exports and GDP, according to the Polish Economic Outlook for Q2 2008 report issued by the Center for Social and Economic Research (CASE). Moreover, these factors will continue to hamper the economy.

While the Polish economy grew faster than expected in Q2, CASE experts believe falling exports will slow economic growth more than previously predicted. Although GDP growth reached 5.8 percent in Q2, CASE predicts third-quarter growth of 4.4 percent and growth of four to five percent for several quarters thereafter. This year will see overall GDP growth of 5.2 percent, while in 2009 it will amount to 4.9 percent.

The złoty has appreciated by 18.9 percent since September 2007 according to the European Central Bank. According to Maciej Krzak, the head of CASE's macroeconomic team, mostly small firms have been worst hit by this. "The appreciation of the złoty is happening too fast and exporters can't catch up with it," Krzak said.

According to Central Statistical Office data, in H1 2008 Polish export growth amounted to 6.9 percent, a significant drop compared with the 14.9-percent growth seen in H1 2007. CASE experts forecast that export growth will slow further and that GDP growth will still be driven by business fixed investment and private consumption, although private investment will slow considerably.

The slowdown in economic growth will affect employment, too. "While this year will see 4.3-percent growth in payroll numbers, 2009 will see only 2.4-percent growth," said another CASE expert, Mateusz Walewski. "Employment offices have already noted fewer employment offers," he said.

Nominal wage growth is also expected to stabilize. Wages grew by 11.7 percent y/y in Q2 and they are expected to grow by 11.7-11.8 in Q3 this year. "The salaries of educated and well-qualified employees will grow fastest," Walewski said.