Poland could delay euro adoption: PM

Poland’s Prime Minister Donald Tusk on Wednesday said his government could delay its 2012 target for the adoption of the euro currency should the global financial crisis pose risks to the Polish currency or financial system.

Before joining the eurozone, would-be members must spend at least two years in the exchange-rate mechanism known as ERM-2 which tests the stability of their national currency.

In order to meet the 2012 euro target date Poland must enter the eurozone’s required Exchange Rate Mechanism (ERMII) in the first half of 2009.

"I’m not sticking to the doctrine that if I’ve said May (for ERMII entry) it must be so," Tusk told Poland’s commercial broadcaster TVN24.

"If it will be the case that (entry into ERMII) will be risky for the Polish currency and our financial system, we will delay it," Tusk said.

The Polish central bank and government insisted Wednesday there was no need for intervention to prop Poland’s currency the zloty, which has plunged to a five-year low against the euro and Swiss franc.

The zloty tumbled from 3.50 to the euro in September 2008 to a five-year low this week hovering around 4.50.

The fall comes despite forecasts that 2004 EU entrant Poland will be just one of two of the 27 member bloc’s states to achieve economic growth over two percent this year.

Poland committed itself to joining the eurozone and replacing its currency, the zloty, with the euro as part of its 2004 European Union entry agreement. No deadline for the switch was set.
Source:montrealgazette.com

Poland's Pulawy says Q2 net loss 10.2 mln zlotys

WARSAW, Feb 3 (Reuters) - Polish chemical maker Pulawy had a net loss of 10.2 million zlotys ($3 million) in the second quarter of its fiscal year, compared with a 91.5 million profit a year earlier, the company said.
Source:By Adrian Krajewski, John Stonestreet
forbes.com

Poland’s car market goes under

Despite aggressive promotion, the demand for new cars plummeted by over 10% m/m in January, an initial report by Samar Automotive Marker Research Institute is quoted by ‘Puls Biznesu’.
REKLAMA

‘December saw massive sales and an increased number of purchases in fear of prices rising due to the deteriorating zloty. The number of cars bought in January was significantly lower’ Wojciech Drzewiecki, head of Samar Institute, is quoted as saying. The drop in sales is expected to deepen because of a price hike. ‘The cars manufactured in 2009 are going to be more expensive by at least 10% because of the unfavourable rate of the zloty to the euro which will be followed by a lower number of purchases and a further slowdown on the market’ Adam Kołodziejczyk, president of Ford Poland, says.

The Volkswagen manufacturing plant in Poznan, central Poland, has already been faced with the diminishing demand for new cars. The factory discontinued production for 3 days due to an insufficient number of orders. Piotr Danielewicz, the spokesman for Volkswagen Poznań, informed that the company had more downtime planned. ‘Cars are produced on specific orders. Due to a drop in demand the production had to be withheld. According to an agreement with the trade unions, Volkswagen is keeping the work places and is not lowering the workers wages. The production stoppage is planned for February 2-4 and 23-27’ he said. Workers are to take days off then, wnp.pl reports.
Source:polishmarket.com.pl

UPDATE 1-Polish c.bank hawks say Feb rate cut may be needed

WARSAW, Feb 3 (Reuters) - Poland's central bank may cut interest rates again at the February meeting of its rate-setting panel, two hawkish policymakers said on Tuesday, in comments underlining the pace of the country's economic slowdown.

The bank's 10-strong Monetary Policy Council (MPC) has already cut its main rate by 175 basis points to 4.25 percent since November to buttress growth hit by the global crisis and now expected to fall to about 2 percent in 2009.
'We're still in an easing cycle... Every sharp decline in industrial output breaks the balance in the economy. We can't allow for that now,' policymaker Marian Noga told the Gazeta Prawna daily in an interview.

'I do not rule out that in February we might have another rate cut,' said Noga, who consistently backed rate hikes during the bank's previous monetary tightening cycle.

Halina Wasilewska-Trenkner, one of only two council members to oppose November's cut in interest rates, said the chances were equal of the bank cutting rates or making no move when it meets later in February.

She signalled the central bank's inflation projection, which policymakers traditionally obtain before the MPC's February meeting, would be key to the decision.

Noga also said it would be more appropriate now for the central bank to move in cuts of 25-50 basis points. Wasilewska-Trenkner did not elaborate on her preferred scale of easing.
In a further sign of the slowdown, the head of the state investment agency said foreign direct investments into the European Union's largest ex-communist member were likely to drop to 7-10 billion euros in 2009 from about 12 billion in 2008.

Labour Minister Jolanta Fedak said on Tuesday unemployment could jump to as much as 12 percent by the end of this year if economic growth continues to slow.

Poland's unemployment has recently started to rise after a prolonged downward trend, hitting 9.5 percent in December.

Source:By Adrian Krajewski, Kuba Jaworowski
forbes.com

Poland's zloty falls 0.5 pct to key 4.50 vs euro

WARSAW, Feb 3 (Reuters) - Poland's zloty fell 0.5 percent against the euro on Tuesday and hit a key level of 4.50 zlotys against the single currency, Reuters systems showed.

These are speculative moves aimed at breaking stop losses as many people bet that currency options will force companies to buy euros. The weak economic situation adds to the grim outlook,' a trader at a Warsaw bank said.
Source:By Kuba Jaworowski, forbes.com

Commerzbank's BRE sees much higher provisions in 2009

Poland's No. 3 lender BRE Bank BREP.WA expects its provisions to grow significantly this year as worsening economic conditions weigh on its corporate clients, management board member Wieslaw Thor said on Tuesday.

Last year, provisions at Commerzbank's (CBKG.DE) Polish unit stood at 269 million zlotys ($77.4 million).
Source: By Piotr Skolimowski, Chris Borowski
reuters.com

Poland to unveil budget cutbacks as growth slumps

Poland plans to unveil up to 20 billion zlotys in budget savings on Tuesday, as unemployment soars and investment falls, cutting into the previously plentiful income of the European Union's biggest ex-communist state.
Economists have slashed forecasts for growth this year as the global financial crisis hit home, raising concerns that a 2009 budget plan prepared almost half a year ago would fall apart due to plummeting revenues.
The head of the state's investment agency said on Tuesday that foreign direct investments coming into Poland were likely to drop to 7-10 billion euros in 2009 from about 12 billion in 2008.
Labour Minister Jolanta Fedak added that unemployment could jump to as much as 12 percent this year, having fallen into single figures for the first time since Poland's early 1990s transition from communism.
Slawomir Nowak, a top aide to the prime minister, said the government would announce a savings plan later on Tuesday and that it had found a planned 17 billion zlotys ($4.89 billion) in savings, despite doubts expressed by analysts.
But a government source confirmed for Reuters a media report that the government could increase the value of savings to 20 billion as it seeks to fill the prospective hole in revenues.
"On one hand it is rationalisation (of spending)," Nowak told Polish broadcaster TVN's morning show. "But the majority is freezing of investments (until later)."
ZLOTY HIT
Where Western European governments have upped spending to stimulate their economies, Romania and Hungary have led spending cuts by eastern European governments concerned about their ability to bring in external finance.
Poland's zloty hit a four-and-half-year low on Tuesday and the large cap WIG 20 bourse index slid close to levels last seen in 2003 as investors continued to dump riskier assets in emerging Europe in favour of more developed western markets.
Austrian and Italian officials have also warned in recent weeks that a squeeze on capital for their banks in the region could halt investment in Central Europe's once-booming ex-communist economies.
Poland, with a population of 38 million, saw its economy grow 4.8 percent in 2008, down from 6.7 percent in 2007. It is expected to slow even more sharply this year with some even expecting growth close to zero.
In response to the spreading economic gloom, growing fears over job security and weakening consumption, the central bank has cut interest rates three times since November, by a total of 175 basis points, bringing the key rate down to 4.25 percent.
Underlining the pace of the country's economic slowdown, two of the three most persistent hawks on the central bank's 10-strong Monetary Policy Council (MPC) called on Tuesday for another rate cut this month.
The deteriorating outlook in Poland has prompted even the most hawkish members of the central bank's MPC to back a further rate cut this month.
"We're still in an easing cycle... Every sharp decline in industrial output breaks the balance in the economy. We can't allow for that now," Marian Noga, who had consistently backed rate hikes during the bank's previous monetary tightening cycle, told the Gazeta Prawna daily in an interview.
Source:Adrian Krajewski and Kuba Jaworowski, /business/feedarticle/8340065

UPDATE 2-Polish rates may be cut to below 3 pct-c.banker

Poland's central bank should cut interest rates further, possibly to below 3 percent, as economic conditions deteriorate and inflation keeps falling, key Monetary Policy Council member Jan Czekaj said on Monday.

In response to the sharply slowing economy, easing inflation and the global crisis, the central bank began to lower borrowing costs in November 2008 and has reduced its benchmark rate three times by a total of 175 basis points to at 4.25 percent.
he finance ministry said on Monday it expected price growth to have eased to 3.2 percent in January, from 3.3 percent in December -- moving closer towards the bank's 2.5 percent target.

'I believe that there should be more rate cuts fairly quickly,' Czekaj told daily Rzeczpospolita in an interview released on Monday.

'Maybe the proper level for the (key) rate would be 3.5 or maybe 3 percent ... If the economy will be growing slowly it cannot be excluded that we will need to lower the rate to below 3 percent.' Czekaj is a key swing-voter on the 10-strong MPC.

He also said that he saw no reason for delaying or dropping the government's ambitious plans for euro adoption in 2012 because of the sharp global and domestic economic slowdown.

'There is no such need,' he said. '...ERM 2 entry could calm the situation on the currency market.'

Many analysts say that pushing ahead with euro adoption in 2012 could be too risky because high market volatility and the global crisis would make it harder for the zloty currency pass one of the entry tests, spending two years proving its stability in the pre-euro ERM 2 currency grid.
Analysts expect more interest rate cuts but remain split on where the key rate will end this year and how low it will fall in this easing cycle. The median forecast in the latest Reuters poll places the key rate at 3.25 percent in December.

'There are objective conditions for easing monetary policy,' Czekaj said.

Although the Polish Purchasing Managers' Index (PMI) rose to 40.3 points in January, the first rise in the index since February 2008, it is still well below the 50 growth/contraction divide, showing the manufacturing sector remains weak.

'Overall, the first batch of 2009 PMI data point to further aggressive rate cuts by the central bank in the first quarter,' said Trevor Balchin, economist at Markit Economics, which compiles the PMI data. 'Inflation concerns have eased despite the falling zloty, as the PMI showed further falls in price pressures in manufacturing.'

Poland's gross domestic product (GDP) growth in 2008 eased to 4.8 percent, from 6.7 percent in 2007, preliminary statistics office estimates showed last week, and some analysts said the sharp slowdown in investments last year indicated more trouble ahead for the Polish economy.
Source:By Karolina Sowikowska,Ruth Pitchford,
forbes.com