Poland's Economic Growth Probably Accelerated in First Quarter

Poland may have recorded the fastest economic growth in two years in the first quarter as record-low interest rates spurred consumer and corporate borrowing, a survey of economists shows.

Gross domestic product may have risen an annual 5 percent in the January-March quarter after a 4.2 percent increase in the previous three months, according to the median estimate of 10 economists surveyed by Bloomberg. The statistics office will publish the report today at 10 a.m. in Warsaw.

Trade and direct investment jumped in the last two years after Poland, the biggest eastern European economy, joined the European Union. Average wages are up 11 percent since then and the jobless rate has fallen to 17.2 percent from 20.6 percent, prompting consumers to borrow and spend and increasing Polish banks' combined profit by 42 percent in the first quarter.

``An expansion in individual credit together with strong real wage increases and gains in employment should have boosted consumption,'' said Maciej Krzak, chief economist at Credit Generale in Warsaw.

The central bank lowered the benchmark repurchase rate to 4 percent in March, from as high as 6.5 percent in February 2005, as inflation slowed. The inflation rate, 0.7 percent in April, is the lowest in the 25-nation EU.

Falling borrowing costs helped the economy grow 3.4 percent in 2005 from 0.9 percent in 2002. The government on May 10 raised its full-year forecast for growth this year to 4.6 percent from 4.3 percent.

`Conservative' Estimate

Prime Minister Kazimierz Marcinkiewicz on May 15 called the Finance Ministry's predictions ``conservative'' and said economic growth this year and next will be 5 percent.

Bank lending rose 15.3 percent to 269.2 billion zloty ($87.8 billion) in the first quarter and the value of mortgages taken out surged 46.1 percent to 55.4 billion zloty in the same period.

The average gross monthly wage in Poland was $840 in April, compared with $950 in the Czech Republic and more than $4,000 in Germany.

Corporate investment rose 9.8 percent in the final quarter of last year, including foreign direct investment. Janusz Witkowski, head of the statistics office, said on May 24 that he expects similar growth in the first quarter.

Prokom Software SA, Poland's biggest software company, said May 16 it almost tripled first-quarter profit to 12.1 million zloty after winning contracts with state-owned power company Koncern Energetyczny Energa SA and Poland's postal system.

Shell, Carlsberg

Foreign investors including Royal Dutch Shell Plc, Europe's second-largest oil company, Carlsberg A/S, the maker of Tuborg beer, and Hewlett-Packard Co., the world's second-largest computer maker, are moving accounting operations to Poland. Shell announced its plans April 13, following Carlsberg's statement April 10. H-P opened a Polish center at the start of the year.

``In delivery of IT systems in the first quarter, the growth in the economy is visible at the level of small and medium-sized companies as they increase their orders,'' said Prokom Chief Executive Officer Dariusz Gorka in a May 29 phone interview.

The EU has pumped more money into Poland for road construction and environment protection. Between 2004 and 2006, the EU transferred 15 billion euros ($17 billion) in aid and will provide another 60 billion euros through 2013.

The zloty has soared 17 percent against the euro since Poland joined the EU, and 2 percent since the beginning of this year. The zloty closed at 3.9286 per euro in Warsaw yesterday, compared with 3.926 a day earlier.

``The first quarter is a good start for the full year,'' said Jan Krzysztof Bielecki, CEO of Bank Pekao SA in Warsaw. ``We are quite optimistic about the Polish economy this year.''

Source:bloomberg.com