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Poland Business Forecast Report Q3 2012 - New Market Research Report

New Country Reports market report from Business Monitor International: "Poland Business Forecast Report Q3 2012"


Boston, MA -- (SBWIRE) -- 07/26/2012 -- Core Views Notwithstanding an increasingly grim outlook for global growth in 2012, we maintain our relatively constructive view on the Polish economy. Underlying our 3.5% real GDP growth forecast for 2012 is a solid domestic demand story, which helped Poland be the only European economy to avoid recession in 2009. F ollowing Prime Minister Donald Tusk's re-election on October 9 2011, we expect the government to establish fiscal consolidation as its main priority. The country is fast approaching a constitutionally mandated debt ceiling which, if breached, would bring automatic retrenchment measures into effect. We believe that the government will take the necessary steps to prevent a fiscal crisis, and we reiterate our budget deficit as percentage of GDP forecasts of 6.2% in 2011 and 4.3% in 2012. O n the back of a progressive softening of Poland's economic performance, inflationary pressures have started to moderate, with the change in consumer prices coming in at 3.9% year-on-year (y-o-y) in September 2011, down from 4.3% y-o-y in August. Moreover, with our Commodities team currently forecasting a moderation in commodity prices as global growth continues to slow, we see further scope for price growth moderation in Q112. Major Forecast Changes We have amended our current account forecast for 2012 and now expect the deficit to narrow to 5.4% of GDP, from 5.5% in 2011, as opposed to our previous forecast for a 5.0% shortfall. The revision comes on the back of downward revisions to our eurozone growth outlook. Given that the common currency bloc absorbs 55% of Polish exports, we now expect a 13.2% increase in nominal goods exports in 2012, from 14.1% previously, while nominal imports will increase by 13.0%, as opposed to 17.2% previously. We have revised our interest rate forecast for end-2012 to 3.50%, from 4.50% previously, on the back of our deteriorating outlook for global growth. With inflation forecast to ease, we expect the National Bank of Poland to shift its attention to growth, as fiscal consolidation will act as a further brake on an already slowing economy. Key Risks To Outlook Poland is growing increasingly dependent on short-term funding to finance its current account deficit. A sudden outflow of hot money amid high financial market volatility and lack of risk appetite could force the National Bank of Poland to draw down foreign exchange reserves, leaving Polish accounts exposed to a sharp correction. This would, in turn, limit the central bank's ability to cut rates at a time when global growth is softening. A lthough not our core scenario at this juncture, rising recessionary risks in the eurozone may force us to further revise downward our growth forecasts for Poland. At a time when countercyclical fiscal policies are not an option because of a constitutionally mandated debt limit (55% of GDP), a recession in the country's main trading partners could severely harm the country's growt

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