In light of the recent upsurge in optimism regarding recovery from the economic crisis in the Eurozone Poland may adapt its fiscal policy, specifically halting monetary easing before making further rates cuts.
Poland is the largest economy in the eastern European Union and the only member of the entire EU to side step recession in 2009.
However, although not a member of the Eurozone Poland certainly hasn’t escaped the pitfalls of the economic slowdown plaguing the currency bloc.
Recent data has suggested that Polish economic growth will slow from last year’s estimated 2 per cent to 1.5 per cent this year, whilst inflation could prove to have fallen below the Polish central bank’s target of 2.5 per cent. (Polish central bank outlook. If proved accurate it would be a ten-year growth low for Poland)
As Polish central banker Elzbieta Chojna-Duch stated: ‘That means interest-rate cuts were and are justified and monetary policy remains biased toward easing. However, a pause is likely as the Monetary Policy Council may need to see if the crisis in the Eurozone really is heading toward the end […] The mood is better in the Euro region, but the hard data to support that is missing. A oause in our rate cuts could be taken to assess whether prospects for Poland and the Eurozone are better.’
The Central Statistical Office also recently reported that Polish exports to the Eurozone shed 2.3 annual percentage points in the 11 months from January last year. The Eurozone is Poland’s largest trade market. Consequently if the situation in the currency bloc were to substantially improve it would obviously have a positive effect on the Polish economy.
Although a Polish policy maker has commented that ‘the slowdown is a fact but the risk of recession in Poland is very low’, with Polish unemployment on the up and the nation’s economy thought to have expanded below the governments expectations (at 2.2/2.3 per cent in 2012) substantial progress in the Eurozone in the near future will no doubt be a very welcome development.
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