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Poland's 1.7 pct GDP tops European Union in 2009

28 January 2010, 15:32 CET
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(WARSAW) - Poland's economic growth slowed to 1.7 percent in 2009, official data showed, but the ex-communist country was the only member in the 27-state EU to have sustained momentum during a year of global crisis.

"For Poles it is greatly satisfying when we see our positive 1.7 percent and the situation around us is much less optimistic," Polish Prime Minister Donald Tusk said Thursday in reaction to the news.

"Not that we wish anyone ill, but for Poland this kind of civilisational and economic progress is great," he added.

According to Eurostat estimates, gross domestic product across the European Union shrank by 4.1 percent overall, with Poland's Baltic neighbours suffering severe double-digit contractions.

Tusk also vowed to take action to stem the country's growing public deficit, a cause for concern among analysts and investors.

"We want to limit debt and decrease the deficit to make Poland the most attractive place in Europe to invest," he told reporters in Warsaw.

Poland's public deficit hit about 6.3 percent of gross domestic product in 2009, officials said this month, and is expected to expand up to 7.0 percent in 2010.

"Poland is by far the country in the EU with the best economic performance in 2009," senior Danske Bank economist Lars Christensen told AFP Thursday. "Its growth was also impressive compared to the global economy."

Christensen attributed Warsaw's success to "good policy and a lot of luck."

"Conservative fiscal and monetary policy prior to the crisis created a foundation for Poland to avoid falling into crisis," he said.

Income tax reforms introduced in 2009, by coincidence just as the global crisis began to bite, supported the spending-power of Polish consumers in turn keeping private consumption as a relatively strong growth factor, he said.

Analysts point to steady demand on Poland's large domestic market and relatively low dependence on exports as a mix that helped it score growth during a year of global recession.

The sharp depreciation in the value of its free-floating national currency, the zloty, also buoyed exports as markets contracted during the global crisis.

In late 2008 and early 2009 the value of the currency initially plummeted by some 30 percent compared to mid-2008, before recovering to around a 15 percent overall decline in value.

"Poland has benefitted from being outside the eurozone in terms of competitiveness," Christensen says, noting its southern neighbour Slovakia, a member of the eurozone, suffered a decline in exports.

The Danske Bank economist expects Poland to see its GDP expand by 2.5 to 3.0 percent in 2010 and predicts fourth quarter growth could hit 4.0 percent.

The exchange rate volatility and bloated public deficit forced Poland to indefinitely postpone plans to enter the eurozone.

Poland's 2010 budget foresees a 1.2 percent expansion in GDP this year. The growth trend is expected to continue with Danske Bank forecasting 2011 output to tally at over 4.0 percent.

"We expect Poland to continue to out-perform its peers over the next couple of years," Neil Shearing from the London-based Capital Economics group said in a Thursday statement.

While the group expects Poland's growth to hit 2.0-2.5 percent this year and next, the rate will "still be well below Poland's potential growth rate of around 4.0 percent per annum."

According to Witold Orlowski, an economist with PricewaterhouseCooopers, European funds were a significant driver in Poland's 2009 growth rate.

"At least 1.0 percentage point of economic growth in 2009 was generated by infrastructural investments partially financed by European funds," he told AFP.

An EU member since May 2004, Poland absorbed a net 14 billion euros (18.6 billion dollars) in EU structural, cohesion and farm subsidies over the first five years of its membership, according to a Polish government report.

An additional 68 billion euros (90 billion dollars) in aid is slated for Poland in the EU's 2007-2013 budget, according to the report.

In 2008, Poland saw GDP grow by 5.0 percent year-on-year.

Consumer prices rose by 3.5 percent in 2009 over the previous year, according to official data, while unemployment in 38.5 million-strong country continued to climb steadily in December 2009, reaching 11.9 percent and translating into 1.89 million people out of work.

"Unemployment is likely to continue to rise. We expect it to hit 12-12.5 percent in mid-2010," Christensen said.


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