High demand hits trade deficit

Poland's trade deficit between January and October 2007 rose by more than 32 percent over the same period in 2006, amounting to zł.50.3 billion, reported Poland's Central Statistical Office (GUS). Over the 10-month period, Polish exports increased by 11.3 percent, to zł.317.4 billion, but imports rose faster, by 13.4 percent, to zł.367.7 billion. Taken in US dollars, the growth rates are much higher - 23.8 percent and 26.1 percent, respectively, due to the dollar's sharp fall over the past year.

The main driver for the strong rise in imports was increasing domestic demand, according to the forecasting unit at the Center for Social and Economic Analysis (CASE). Though the trade deficit still constitutes a manageable three percent of GDP, it is rapidly rising, according to the think tank. "[Poland's trade deficit] is reminiscent of the developments in the second half of the 1990s," experts from CASE said in a statement. At that time, the trade deficit reached nearly eight percent of GDP and rising imports were halted by an economic slowdown - something which is predicted to happen again now.

"If it turns out that the fast growth of imports is only due to higher everyday consumption, and not the result of foreign investments or high-tech imports - and if it isn't covered by positive results connected with investments or technology transfer - Poland's trade deficit will be huge and it will influence the budget deficit and inflation," said Jeremi Mordasewicz, an economist at the Polish Confederation of Private Employers.

The EU again proved to be Poland's largest trading partner. Some 78.9 percent of Poland's exports went to EU member states, while 64.3 percent of imports came from the EU. Overall, developed countries in general made up 84.3 percent of Poland's export destinations and served as the source for 71 percent of Poland's imports.