Strong industrial output gives economy a boost
Polish industry in February turned out a promising 16.3% year-on-year increase in production, adding support to analysts' forecasts of a strengthening economy.
"The month was very positive for the sector producing energy. It also was quite good in the sector producing vehicles," said Dariusz Filar, chief economist at Bank Pekao, noting that tobacco and clothing producers were February's losers.
The same industrial output figures were up 7.2% from January after falling 19% year-on-year in that month. Producer prices (PPI) rose 8.1% on an annual basis in February from January's 8.2%.
Analysts said consumers should soon begin seeing lower producer prices reflected on store shelves. After hiking 1.8% in the month of January, consumer prices eased to rise only 0.9% in February. March figures should come in even lower, at around 0.8%, Filar said.
Erik Nielsen, a London-based economist with Goldman Sachs, said that prices for goods and services should actually start falling sometime in the next several months. "The economy is doing very, very well," he said.
He attributed recent positive trends of increased production and growth in gross domestic product (GDP) to macroeconomic policies and a fairly dynamic enterprise sector. "I don't think there's anything mysterious going on," he said.
He said high interest rates are responsible for a leveling off of growth rates. Those rates, however, won't keep Poland from experiencing a roughly 5.5% growth in GDP by year's end, he said.
Poland recorded GDP growth of 4.1% in 1999, after getting a kick in the fourth quarter when growth came in at a high 6.2%, the Central Statistical Office (GUS) said last Wednesday.
Maciej Reluga, an economist with ING Barings, said he agrees that clearer economic skies seem to lie ahead. He said that exports will hopefully report a long-awaited boost when figures are released at the end of the month.
Last Wednesday's GUS statistics also showed an $18.5 billion trade gap in 1999, compared to 1998's $18.8 billion. Based on customs receipts, Polish consumers paid nearly $46 billion for imports in 1999 while exports brought in just over $27 billion.
Reluga also said that when figures are adjusted to take into account the leap day in February 2000, industrial output rose only 11% since last February. Despite that, output still looks strong, he said.
Other indicators also point toward the economy shaking off some of its sluggishness, Reluga said. Though credit issued to households grew at an annual rate of 51.7% in February, household savings also increased by 15.2%, he said.
Looking at the situation from a monthly perspective, Pekao's Filar said, consumer debt grew by zl. 200 million ($48.78 million) in January and by zl. 400 million ($97.56 million) in February. But those numbers are low compared to December 1999's consumer debt growth rate of zl. 1.6 billion ($457 million), he said. During the same time period, consumers saved heavily. Savings at banks came in at zl. 6 billion ($1.5 billion) in January and zl. 3 billion ($732 million) in February, compared to only zl. 600 million ($171.43 million) in December 1999.
The sharp rise in household savings, Filar said, should indirectly help curb imports and bridge the gap in the current account deficit, which stands at 7.8% of GDP.
ING's Reluga said inflation up 10.4% in February from the previous year is also under control and that the government should be able to hit the higher reaches of its 5.4% to 6.8% year-end target. "In my opinion, there is no need to tighten monetary policy again," he said.
The zloty also strengthened on positive news, setting daily 14-month highs, and opened Wednesday at 7.57% above the parity rate set by the central bank. It was valued at 4.0455 against the U.S. dollar. On Friday, the zloty closed at 7.37% above the parity and at 4.0385 against the U.S. dollar. The central bank sets the currency's parity rate daily, which can fluctuate within a band of +/15%.
