Low 3.3% GDP growth means more pressure on RPP to cut interest rates

According to Central Statistical Office (GUS) estimates, in the third quarter of this year the gross domestic product (GDP) only increased 3.3%, as compared with 5,2% in the second quarter. This is well below the 4% rate expected by financial markets. The low GDP rate is likely to increase pressure on the Monetary Policy Council (RPP) to lower interest rates. RPP member Cezary Jozefiak admitted that economic growth is slowing down as a result of an unfortunate mix of high interest rates and a loose fiscal policy. He pointed out, however, that the high interest rates also had a positive effect in stopping the expansion of the current account deficit. Jozefiak also said that he expects GDP growth to rebound in the fourth quarter and reach some 4.5% for all of 2000. Finance Minister Jaroslaw Bauc made a similar prediction, as according to him domestic demand is usually higher in December and this should boost growth. Another driving factor in the fourth quarter could be exports, as October was one of the best months for exports, which after ten months of this year amounted to $25.9 billion and were 15.3% higher year-on-year. (Parkiet, p.1, Reuters, Gazeta Wyborcza, p.26) P.J.