Despite Its European Peers, Poland Remains Remarkably Attractive
February 21, 2010 | about: CEE / PLND
Soner Kistak 11
Poland remains a remarkably attractive market. The Polish economy is showing many positive surprises, expanding 1.7% in the last year, making it the sole EU member which has avoided recession. Moreover, the economy is forecast to grow 3% in 2010.
The most recent employment figures also confirm the tenacity of the Polish economy. The job losses slowed down in January, suggesting consumer demand may bolster a rebounding economy. According to Bloomberg news, employment at companies with more than 9 employees fell 1.4 percent from a year earlier, after declining 1.8 percent in December. The median forecast of 10 economists was for a 2.1 percent decrease.
Analysts find the improving employment outlook very positive on two accounts: a) it shows that the revival in exports is positively impacting the job market; b) the strong job market would be positive for internal consumption.
The current government led by Donald Tusk is planning some very bold reforms in order to meet EU’s expectations that Poland brings the budget deficit below 3% before adopting the Euro. They will be limiting spending growth, change pension rules and stepped up asset sales. On the whole, during the last two decades, Polish politicians kept the promises that they made to the EU officials. In this regard, Poland is a well-trusted member country in the eyes of EU bureaucrats.
Moreover, Poland has well resisted the panic waves originating from the Greek debt crisis. As can be seen from the below CDS graph, compared to its peers, Polish CDS did not surge significantly. Poland’s public debt will likely increase to 57% of GDP in 2010; however this level is comparatively lower than that of Greece or Spain. Moreover, Polish government debt reduction plans are credible and tangible.
The two main pillars of the economy are industrial production and the financial sector. Both of these two pillars remain in good condition. Polish local banks were not seriously impacted by the credit crunch. Furthermore, the recovery in Germany, Poland’s biggest trade partner, is likely to boost Polish industrial production during the coming months.
Besides the good macroeconomic factors, the Polish stock market exhibits some very attractive characteristics. Unlike other emerging markets, which have rebounded significantly in 2009, Poland still has significant upside potential. Together with Russia, the Polish stock market is among the most appealing in terms of P/E and upside potential. The stock market needs to increase some 70% to reach the 2007 highs.
Polish Economic Situation
About the author: Soner Kistak
PhD Candidate at EDHEC Business School