Keeping expectations low
At the beginning of February, Finance Minister Mirosław Gronicki assured everyone that economic growth is likely to reach five percent in 2005, and that the strong złoty posed no threat. In March, however, the Minister changed his story, stating that chances are relatively small for a five percent growth in GDP.
"In 2005 economic growth will be from 4.5 to five percent, contrary to the expected five percent. In 2006 it will be about 4.8 percent," claims Gronicki. Economists and the Polish Central Bank are not that optimistic. The former predict growth will not exceed 4.5 percent and according to the latter it might be even lower, from four to 4.5 percent.
Gronicki promised that by April 15 his department would present preliminary macroeconomic data for the 2006 budget. The Minister stressed that the project will assume 4.8 percent GDP growth.
The government and the Polish Central Bank agree that inflation is likely to fall below 1.5 percent in some months this year. "Inflation will be at around 1.5 percent at the end of this year. In March we expect inflation to touch the upper end of the central bank's range, or 3.5 percent," says Gronicki. By June 2006 inflation should not exceed 2.5 percent.
After the Central Bank cut rates by 50 basis points, its president of the Central Bank, Leszek Balcerowicz, said that annual CPI may fall below two percent in the second half of this year. Now the expectations on the market are that the improving inflation outlook and slowing economic growth will prompt the bank's rate-setting council to cut interest rates by a further 75 basis points from the current six percent, to 5.25 percent.
"In 2005 economic growth will be from 4.5 to five percent, contrary to the expected five percent. In 2006 it will be about 4.8 percent," claims Gronicki. Economists and the Polish Central Bank are not that optimistic. The former predict growth will not exceed 4.5 percent and according to the latter it might be even lower, from four to 4.5 percent.
Gronicki promised that by April 15 his department would present preliminary macroeconomic data for the 2006 budget. The Minister stressed that the project will assume 4.8 percent GDP growth.
The government and the Polish Central Bank agree that inflation is likely to fall below 1.5 percent in some months this year. "Inflation will be at around 1.5 percent at the end of this year. In March we expect inflation to touch the upper end of the central bank's range, or 3.5 percent," says Gronicki. By June 2006 inflation should not exceed 2.5 percent.
After the Central Bank cut rates by 50 basis points, its president of the Central Bank, Leszek Balcerowicz, said that annual CPI may fall below two percent in the second half of this year. Now the expectations on the market are that the improving inflation outlook and slowing economic growth will prompt the bank's rate-setting council to cut interest rates by a further 75 basis points from the current six percent, to 5.25 percent.
