Polish economy in Jan 2011 among the slowest growing in C. Europe

Central Europe countries may be in trouble again if high inflation will cause an increase of interest rates - says European Bank for Reconstruction and Development in the recently published the report:Regional Economic Prospects in EBRD Countries of Operations: January 2011 (Polish Council for the Monetary Policy has already increased interest rates in January 2011).

In January 2011 Polish GDP (like Slovak and Hungarian economies) increased 0.3 percent as in the same month of previous year. Among faster growing economies in the region were also Albanian, Estonian, Georgian, Macedonian and Moldovian.

Russian economy in Jan 2011 stopped. (zero GDP).

From some reasons the EBRD report seems to be very optimistic although economic realities on the ground are much worse. EBRD analysts are convinced that the US stimuli will be especially an impulse for growth of Central European economies.

Stronger-than-anticipated growth in the core Eurozone and fiscal and monetary stimuli in the US are likely to especially boost external demand for Central and south-eastern Europe and the Baltics.

And, according to the EBRD analysts, further strength also the Polish economy:

Given the perceived fragility of the recovery in the US and the persistent difficulties in Eurozone financial markets, global liquidity is expected to remain abundant, with loose monetary policy in advanced countries. This may result in stronger net capital inflows into the region which may strain monetary policy frameworks of the larger and more liquid financial markets in the region (Poland, Turkey and Russia).

In the meantime The Wall Street Journal describes Polish government debt situation (which according the other local economists maybe even very optimistic):

Poland’s public debt measured according to European Union rules was 57% of gross domestic product at the end of 2010, Mr. Kazmierczak says. That’s a more pessimistic view than that of the government which said public debt, in a domestic measure that excludes certain categories, was about 53% of GDP.

Every 5th Pole is bankrupted

According to the TNS-OBOP survey, 55 percent of Poles remains in debt. Almost 36 percent took money from bank to be able to pay bills and food. More and more families have difficulty with paying for gas, electricity, rent and food. And 17 percent of families spend more than half of their income for that.

By the end of December almost 2 mln were registered as bankrupted in the Homeland Registry of Debtors. Between Jan 1st, 2010 and Dec 31st, 2010 that number increased about 970 000.

Polish government lowers public debt... on paper.

Polish Ministry of Finance spent Euro 4 bln of reserves to decrease the debt for EU Commission approval. Thanks to this intervention the level of the debt looked better on the paper than in reality.

Few days before New Year the debt was 53 percent of GDP. Although earlier, there were speculations whether the debt will not grow more than 55 percent of GDP (the second threshold for public debt, according to the EU regulations). Before that unexpected news was announced, Polish foreign currency reserves decreased from Euro 5.6 to 1.6 bln. According to the report, the Ministry used swaps to decrease the debt.

However true level of Polish government debt will be known only in 3Q of 2011.

In April 2009 Poland received access to the Flexible Credit Line: Poland can get 20.5 bln dol. loan in 12 months from International Monetary Fund. In December 2010 Warsaw received informal approval for an extension and increase to its running FCL, which bears now 29 bln.

It is worthy to remind, that former National Bank of Poland president Slawomir Skrzypek, who died in a tragic government plane crash in April 2010, believed FCL is not needed for Polish economy.

Jobs lost in Poland

Unemployment rate increased to 13.1 percent according to the Ministry of Labor. It was 0.8 percent growth from December 2010. There were 2 111 600 unemployed by the end of January 2010. Unemployment increased in all of regions in Poland. In December 2010 umployment increased about 0.6 percent from the previous month.