Exports under threat as the złoty continues to appreciate

According to market watchers, the złoty is likely to strengthen even more, as it is being boosted by the inflow of foreign capital. Investors from abroad who are hoping to benefit from interest rates gaps between Poland and Western markets and the approaching privatization of PKO BP. The strength of the złoty is positively affecting internal demand and this is underlined by the fact that Poles are using the power of their złoty to go on more and more foreign holidays. The situation is also acting in favor of importers and companies sourcing materials from abroad. Thanks to this situation the risk of public debt exceeding 55% of GDP in 2004 is receding. However there is a downside, "The falling profitability of exports is already visible and can be seen in shrinking industrial output," believes Iwona Pugacewicz-Kowalska from CA IB Securities. Up to now exports had been the main engine of the economy and other factors are not powerful enough to compensate for an appreciating złoty. (Parkiet, p. 7) M.M.