Political changes to trigger growth

"The decrease of our quarterly index from 55 to 51 points mirrors worse than expected national demand tendencies, which doesn't presage significant growth of GDP in Q3," Stanisław Kobielas, an expert with the Polish Confederation of Private Employers Lewiatan said at a conference last week. "There are chances to increase consumption speed, however, thanks to favorable macroeconomic parameters such as low inflation and stabilization of the budget deficit as well as the good financial condition of Polish companies."

According to Citibank Handlowy chief economist Katarzyna Zajdel-Kurowska there is a number of factors that encourage optimism about future consumption trends. "First of all, it should be borne in mind that this year we witnessed a real boom on the Warsaw Stock Exchange. Because of many interesting IPOs, the interest of households in bourse investments grew considerably - many people decided to take a loan for the purchase of assets. In the months of PKO BP and Lotos' debuts, demand for loans rocketed."

According to Kurowska, average consumers, for whom deposit accounts constitute the traditional way of saving, realized that instead of waiting for a mere four percent annual interest, they can try their hand at bourse speculation.

The Lewiatan index also shows that the volume of loans drawn by households and companies has reached a similar level, with individual consumers borrowing even more than companies in May 2005. Such a significant growth in individual loans was also spurred by a growing interest in mortgages. On the other hand, corporate entities were discouraged from new investment by the high price of petrol.

The level of consumption is expected to grow further. "The increase of remunerations combined with employment growth is soon likely to translate into much better results for retail trade. People will finally be able to consume," Kurowska enthused.

The Business Index of the Polish Confederation of Private Employers Lewiatan is an indicator of the economic situation of the country calculated and published on a monthly basis since the beginning of 2003. It is based on the forecast of leading Polish economists estimating the economic situation for the current quarter, half a year and the whole year. It is calculated using a 100-point scale, where 50 corresponds to an expected economic growth within 3-3.5 percent of GDP per year.

Stanisław Kobielas, PKPP Lewiatan expert

"The banking sector turned out to be the biggest beneficiary of last year's growth, especially the retail sector. The net profit of banks was in some months 200 percent higher than in the same period the year before."

Katarzyna Zajdel-Kurowska, Citibank Handlowy chief economist

"The slow domestic investment dynamics in spite of the low interest rates is mainly due to the steady increase in oil prices. However, this year we witnessed a record number of foreign direct investments, which is very good news."