September current account lower than expected
Weak domestic demand and low imports ranked among the top factors for September's surprisingly low $595 million current account (C/A) gap, but whether increased exports also contributed remains a point of debate.
The C/A deficit was down from the August shortfall of $961 million despite market expectations of a gap of $700 million-$1 billion in September. However, imports valued at $3.397 billion a four-month low were up just 2.3% on a yearly basis in September while exports worth $2.432 billion were up 2.4%.
Surges in unclassified trade measured by calculating the value of foreign currencies traded at exchange points also helped the headline figure, as did a decision by the Finance Ministry to postpone foreign-debt repayments. Only $80 million of approximately $170 million in debt owed to the Paris Club was paid out in September, with the remainder held over until October.
But even adding the foreign debt back in and notching September's deficit up to $800 million would give Poland a C/A gap generally below expectations for that month, said James Owen, an economist with SG Bank.
Owen said that exports were helping the economy. "Export growth seems to be pretty solid," he said. "Import growth is weak. Domestic demand growth is weak."
The third quarter of 2000 compared to the same period last year shows a 15.5% boost in exports in dollar terms, Owen said. "That's a pretty healthy rate of growth," he said. Though exports performed poorly in 1999, "I expect them to carry on strong for the next few months."
But Maciej Reluga, an ING Barings economist, doesn't think exports will surpass $2.5 billion anytime soon. At $2.432 billion in September, exports were up approximately $160 million from August. Lower imports mean the economy is slowing down, he said, adding ING expects gross domestic product (GDP) growth under 5% for the remainder of 2000 and around 4.7% next year.
Owen thinks GDP could be even lower in 2001. "I think it could be lower than 4%," he said. "I worry that growth next year will be considerably slower than the government is hoping for."
Though domestic demand is often cited as the driving force behind Poland's inflation worries, the downside to domestic demand is that too little of it limits the government's ability to meet spending and tax projections, Owen said.
