The lull before the storm
Main economy indexes boosted by the EU accession in 2004 are now stuck in second gear. Industry production fell, GDP growth slowed and exporters reported lower than expected profit margins. As a result, the economy index of the Polish Confederation of Private Employers (PKPP) fell by eight points to 51.
Experts are far from worried, however. According to the vice-president of the Gdańsk Institute for Market Economics, Bohdan Wyżnikiewicz, the temporary slowdown is primarily the result of seasonal factors, as the end of the year always brings a decrease in demand in every sector. Secondly, the base indicators against which the most recent numbers were compared are quite high already. It would be difficult to maintain such growth dynamics.
The acceleration of the privatization process this year is expected to bring long-awaited investments. Foreign direct investment (FDI) grew for the second year in a row and reached roughly $7 (zł.21.83) billion, which is still far below its 2000 level of more than $11 (zł.34.3) billion. Stanisław Kobielas, an economist with PKPP, expects FDI to rise by 15-20 percent in the next 12 months. The growth of domestic investments should be less impressive (10 percent year-on-year), but given the volume (approximately zł.150 billion), it will be of greater importance to the economy.
Leszek Balcerowicz, the president of the National Bank of Poland, is more concerned about government actions. "Without determined implementation of restrictions on [state] expenses, Poland won't be able to expand rapidly," he said, commenting on rumors that reform of the farmers' social security system should be softened or postponed. Indeed, higher than expected revenues from entrepreneurs' tax did lessen the budget deficit by some zł.5 billion, but the zł.35 billion gap predicted for 2005 remains huge and threatens the country's economic growth.
Experts are far from worried, however. According to the vice-president of the Gdańsk Institute for Market Economics, Bohdan Wyżnikiewicz, the temporary slowdown is primarily the result of seasonal factors, as the end of the year always brings a decrease in demand in every sector. Secondly, the base indicators against which the most recent numbers were compared are quite high already. It would be difficult to maintain such growth dynamics.
The acceleration of the privatization process this year is expected to bring long-awaited investments. Foreign direct investment (FDI) grew for the second year in a row and reached roughly $7 (zł.21.83) billion, which is still far below its 2000 level of more than $11 (zł.34.3) billion. Stanisław Kobielas, an economist with PKPP, expects FDI to rise by 15-20 percent in the next 12 months. The growth of domestic investments should be less impressive (10 percent year-on-year), but given the volume (approximately zł.150 billion), it will be of greater importance to the economy.
Leszek Balcerowicz, the president of the National Bank of Poland, is more concerned about government actions. "Without determined implementation of restrictions on [state] expenses, Poland won't be able to expand rapidly," he said, commenting on rumors that reform of the farmers' social security system should be softened or postponed. Indeed, higher than expected revenues from entrepreneurs' tax did lessen the budget deficit by some zł.5 billion, but the zł.35 billion gap predicted for 2005 remains huge and threatens the country's economic growth.
