Zloty's current run against the dollar could threaten exports, analysts warn

Analysts are warning that the zloty's record run against the U.S. dollar in recent weeks, a sign of foreign investors' positive evaluation of Poland's macroeconomic fundamentals, could soon backfire by choking exports. Several billion dollars flowed into Poland recently as a result of positive inflation and current account figures and the very high interest rates, causing the zloty to strengthen to record levels against the dollar. The strong zloty is likely to soon cause renewed problems with exports, which only picked up in the second half of 2000 after a poor start this year. Stanislaw Gomulka, a professor at the London School of Economics, said that in order to avoid an economic disaster, the Monetary Policy Council (RPP) should immediately cut interest rates, because the dollar could drop to as low as zl.3.8. He added that the current level of interest rates is not only a threat to exports, but also to economic growth. Yesterday the zloty depreciated slightly from zl.4.06 to zl.4.11 to the dollar, after RPP member Boguslaw Grabowski admitted that the Polish currency is already too strong. (Gazeta Wyborcza, p.14) T.J.