Exporters gearing up for stronger euro to boost sales

Morliny, a meat processing company based in the northeastern town of Ostróda, expects a stronger euro to boost revenue from exports and lower demand for imported goods. "A stronger euro gives us hope for greater profitability of our exports," said Irena Stańczak, head of Morliny's export department. The company is targeting the European Union as an export market, as do many companies - Poland sends more than 75% of its exports to the Western bloc. Last week the euro, already steadily climbing against the dollar, gained sharply following uncertainty on U.S. financial markets. The złoty ended last week pegged at 4.04 to the dollar and 4.01 to the euro, according to National Bank of Poland figures. The złoty was 4.03 to the dollar and 3.75 to the euro a month ago. Exporters are pleased with the development. Morliny's Stańczak said that Poland needs a stronger euro to improve its trade balance and to spur the economy through export-led growth. "The dollar is still too cheap, although we consider the current trend in the euro's price a green light," she said.

Consumers will pay Importers, on the other hand, are not pleased. "In the short term, we will experience a drop in sales (and) in the long term, an erosion of our market position," said Piotr Jakacki, head of the Mercedes passenger vehicles department at DaimlerChrysler Automotive Polska. The luxury car importer, which denominates prices for its products in euros, expects to lose a significant number of customers in the low-end segment of the market. "I thought that exchange rates would be more stable now," Jakacki told the WBJ last week. Other firms have hedged their bets. Optimus, a computer hardware producer, will not be affected by recent changes in exchange rates. "We have tools that enable us to avoid losses connected with exchange rate risk," said an employee in the company's financial department, who asked not to be named. "There is little need to use them since we've developed a 'natural hedging' mechanism," the source added, referring to the system of liabilities the company has in both euros and U.S. dollars.

Up or down Although the złoty has lost about 10% against the euro since the beginning of May and an additional 1% last week, this trend is not sustainable, observers said. "It is impossible to say how long this (expensive euro) will last," said Wiesława Ziółkowska, a member of the central bank's Monetary Policy Council (RPP). The German economy, which consumes the biggest chunk of Polish exports among EU member states, is affected by the U.S. market, she said. As a result, the euro is indirectly bound to the dollar and can be pulled down by it, she said. Economists had a different take. "Our analysts forecast that in the third or fourth quarter of 2002, we will see the U.S. economy rebound," said Mateusz Szczurek, senior economist at ING Bank. That, plus higher U.S. interest rates, would support the currency, he said. Meanwhile, the złoty should stabilize against both currencies, he said. "It can only be influenced by rapid GDP (gross domestic product) growth, which is not likely to happen in Poland," he said of the local currency.