Q1 statistics shocker
Poland's GDP growth in the first quarter of this year slowed much more significantly than expectations, rising 2.1 percent on the same period last year, while analysts had expected an increase of three percent. To make matters worse, data presented by the Central Statistical Office (GUS) showed that investment grew by just one percentage point - highly disappointing, since most were expecting a major boost in investments that would fuel growth later in the year. The złoty lost 0.9 percent against the euro in reaction to the news.
"This is very, very disappointing data," said Katarzyna Zajdel-Kurowska, chief economist at Citigroup's Bank Handlowy. "We had weak domestic demand and incredibly low investment growth. Investment came in at one percent while some had hoped for a double-digit rise," she said.
Economists said the GDP numbers, which are Poland's lowest in two years, were the result of a 'base effect' - comparing this year's figures with last year's, when a pre-accession boom lifted the Polish economy to seven-percent growth in the first quarter.
They were so flabbergasted by the investment data, however, that they said it could not completely be explained by the high-base comparison.
"It's still not clear to what extent this is the slowdown in the global and EU economy feeding through into Poland, and to what extent it is simply the result of the one-off EU effect," said Edward Parker, senior director at Fitch Ratings in London.
Some found the investment data so unbelievable, they questioned the reliability of GUS' numbers. Michał Dybuła, chief economist at BNP Paribas, calls the numbers "a kick in the face."
"[The investment growth figure] will certainly be revised up because that's absolutely not consistent with anything," he said, adding that the evidence he has seen points to at least five percent investment growth in the first quarter. That's still less than the 10-percent number many had expected, and Dybuła admits that the Polish economy was weak in other areas, especially when it comes to consumer demand.
Economists expect the disappointing data will put pressure on the Monetary Policy Council (RPP) to further slash interest rates, after cutting the cost of money by 100 basis points in March and April.
RPP member Stanisław Nieckarz said more cuts would kickstart investment and ensure a rebound in H2 of this year.
"There is some scope to reduce interest rates to support investment," he said. "GDP growth will accelerate in the second half, but looking at the entire year it may not top four percent," he said.
Poland's weak first quarter seems to confirm a regional trend. Economic growth in Hungary also fell in Q1, to 2.9 percent year-on-year, the lowest level in nearly two years. Growth in the Czech Republic is expected to slow to 3.8 percent in Q1 y-o-y from 4.3 percent in Q4 of 2004.
Central European economies have been plagued of late by weak consumer demand, high unemployment, minimal wage growth, and strong currency appreciation. There are also worries that CEE countries may experience an export slowdown as a result of stagnating economies in the eurozone - by far the biggest market for the region's goods and services. (Reuters)
"This is very, very disappointing data," said Katarzyna Zajdel-Kurowska, chief economist at Citigroup's Bank Handlowy. "We had weak domestic demand and incredibly low investment growth. Investment came in at one percent while some had hoped for a double-digit rise," she said.
Economists said the GDP numbers, which are Poland's lowest in two years, were the result of a 'base effect' - comparing this year's figures with last year's, when a pre-accession boom lifted the Polish economy to seven-percent growth in the first quarter.
They were so flabbergasted by the investment data, however, that they said it could not completely be explained by the high-base comparison.
"It's still not clear to what extent this is the slowdown in the global and EU economy feeding through into Poland, and to what extent it is simply the result of the one-off EU effect," said Edward Parker, senior director at Fitch Ratings in London.
Some found the investment data so unbelievable, they questioned the reliability of GUS' numbers. Michał Dybuła, chief economist at BNP Paribas, calls the numbers "a kick in the face."
"[The investment growth figure] will certainly be revised up because that's absolutely not consistent with anything," he said, adding that the evidence he has seen points to at least five percent investment growth in the first quarter. That's still less than the 10-percent number many had expected, and Dybuła admits that the Polish economy was weak in other areas, especially when it comes to consumer demand.
Economists expect the disappointing data will put pressure on the Monetary Policy Council (RPP) to further slash interest rates, after cutting the cost of money by 100 basis points in March and April.
RPP member Stanisław Nieckarz said more cuts would kickstart investment and ensure a rebound in H2 of this year.
"There is some scope to reduce interest rates to support investment," he said. "GDP growth will accelerate in the second half, but looking at the entire year it may not top four percent," he said.
Poland's weak first quarter seems to confirm a regional trend. Economic growth in Hungary also fell in Q1, to 2.9 percent year-on-year, the lowest level in nearly two years. Growth in the Czech Republic is expected to slow to 3.8 percent in Q1 y-o-y from 4.3 percent in Q4 of 2004.
Central European economies have been plagued of late by weak consumer demand, high unemployment, minimal wage growth, and strong currency appreciation. There are also worries that CEE countries may experience an export slowdown as a result of stagnating economies in the eurozone - by far the biggest market for the region's goods and services. (Reuters)
