Poll

Key trends in the economy

1.6% growth
in Gross Domestic
Product in 2013 
Central Statistical Office data

Gross Domestic Products and its components

Based on the data published by the Central Statistical Office, the economic growth in 2013 was slower than in 2012 and the rate amounted to 1.6%. The first half of the year was particularly difficult for the economy, as the economic slowdown was the most severe in the first quarter. According to the Central Statistical Office the rebound was observed in the second half of the year and in the last quarter of 2013 the GDP growth reached 2.7% year-on-year. The key driver of the Polish economy in 2013 was export of goods and services accompanied by relatively slow increase in imports, while the domestic demand growth reached -0.1%. Deterioration of the situation in the labor market resulted in lower household consumption. In 2013 it increased by 0.8% only, i.e. the least since 1995. Additionally, investment outlays in national economy dropped by 0.4%, but the decrease was lower than in 2012. Investment outlays shrunk in the first six months, to start growing slowly in the second half of the year and reach the growth rate of 1.3% in the last quarter year-on-year.

GDP growth structure

GDP growth structure

Labor market

In 2013 the condition of the labor market deteriorated comparing to the previous year. In the first quarter the unemployment rate exceeded 14.0% and was the highest since the first quarter of 2007. The rate levelled out in the second half of the year thanks to Labor Fund outlays on activating the unemployed. Mild weather at the end of the year favored seasonal works, which improved employment statistics. Despite a further slowdown in the economy in 2013 versus 2012, the unemployment rate reported in December 2013 reached 13.4%, i.e. the level of December 2012.

The employment figures reported by the business sector confirm the downturn in the labor market. In December 2013, 5,491 thousand people worked in the business sector, as compared to 5,474 thousand in December 2012. Employment in the business sector dropped from January to October year-on-year, only the last two months saw a slight increase. Employment reduction was particularly visible in the first half of the year, which translated into a very low domestic demand. In the second half of the year enterprises started to create new workplaces following growing domestic and export demand.

Redundancies and high unemployment did not create favorable conditions for pay rises in the business sector. While in 2012 average salary growth rate reached 3.5%, in 2013 it dropped to 2.9%. Thanks to very low inflation, in 2013 the growth of salaries in real terms reached 2.0% in the business sector.

Inflation

In 2013 average annual inflation amounted to 0.9% versus 3.7% a year before. Lower consumption and investment demand translated into a gradual decrease in the CPI from January to June. Implementation of amended regulations on cleanliness standards in districts and a significant increase in charges for waste disposal imposed on households resulted in an upsurge of the ratio up to 1.1% year-on-year. In the following months the inflation rate decreased again. Lower global crude oil prices comparing to 2012 also contributed to lower inflation. In December CPI amounted to 0.7% p.a., which was the lowest ratio since 2006 and significantly below the lower threshold determined by the National Bank of Poland. In 2013 core inflation (excluding food and electricity prices) amounted to 1.2% versus 2.2% in 2012,while in December 2013 the ratio dropped to of 1.0% year-on-year.

Inflation and NBP's inflation target

Inflation and NBP's inflation target

Public finance and the treasury debt securities market

The year 2013 was a difficult period for Polish public finance. Economic slowdown translated into lower income reported in the first 6 months of the year than that assumed in the Budget Act. The key reason was lower VAT inflows. Consequently, the government was forced to amend the budget in the second half of the year. In the amended budget, projected GPD growth rate was changed from 2.2% to 1.5%, average annual inflation rate from 2.7% to 2.4% and the budgetary deficit was increased from PLN 35.6 billion to PLN 51.6 billion. The government was able to increase the deficit following approval of the amendments to the Act on public finance, which suspended sanctions imposed on public finance after breaching the so-called first prudence threshold, i.e. when the public debt to GDP relation exceeds 50%. According to the data of the Ministry of Finance in 2013 the budgetary deficit was finally lower than that assumed in the amendments and amounted to PLN 42.2 billion, while the projections of income were met in 101.2% and of expenditure in 98.2%.
According to estimations published by the Ministry of finance, at the end of 2013 the public debt amounted to PLN 890.6 billion (54.8% of GDP) versus PLN 840.5 billion (52.7% GDP) in 2012.

State budget problems did not adversely affect treasury debt securities in the first half of 2013. The strategy followed by the Monetary Policy Council and information published by the Minister of Finance concerning limiting the supply of treasury securities in the second half of the year (at the end of June the Ministry of Finance had financing for over 80% of the loans requested) and encouraged investors do invest in Polish government securities. In the second half of the year, the American Federal Reserve announced reducing the purchase of assets in 2013, which affected global debt markets, including Poland. Moreover, changes in the retirement system which were implemented rapidly in the second half of 2013 was a local factor adversely affecting the prices of treasury securities. Eventually, at the end of the year 2-year bond yield amounted to 3.05%, and for 5-year bonds it was 3.65%.

Treasury bond yield

Treasury bond yield

 

Exchange rate

At the beginning of 2013 the Polish zloty remained relatively strong and the EUR/PLN rate reached 4.10 in April. Later events in global economy and decisions of central banks, however, weakened the Polish zloty against the euro to 4.35. Fiscal cliff in the USA, solvency problems of Cyprus, further monetary policy easing in Japan, reduction of interest rates by the European Central Bank, information about the planned limitation of asset purchase in the second half of the year published by the American Federal Reserve and the actual reduction in December, a military conflict in Syria were the key factors determining currency rates. A sudden depreciation of the zloty in June made the National Bank of Poland intervene in the currency market, which prevented further fall of the value of the zloty. Domestic events, such as interest rate reductions by the Monetary Policy Council, amendments to the budgetary assumptions in 2013, changes in the retirement system and in the government had an insignificant effect on the zloty. At the end of 2013 the PLN/EUR exchange rate stood at 4.15.

Exchange rates (PLN)

Exchange rates (PLN)

Monetary policy

At the beginning of 2013 the Monetary Policy Council continued easing the monetary policy process started in 2012. Due to the economic slowdown and decreasing inflation pressure, interest rates were reduced six times, by 150 base points in total. The most recent interest rate reduction took place in July (the reference rate of the National Bank of Poland dropped from 4.00% at the beginning of the year to 2.5%) and the Monetary Policy Council declared interest rate stabilization in the long run. Interest rate reduction by the National Bank of Poland translated into lower market rates in 2013.At the end of 2013, WIBOR 3M amounted to 2.71% versus 4.11% at the end of 2012.

3M WIBOR and NBP rate

3M WIBOR and NBP rate

Economic ratios

  2009 2010 2011 2012 2013
 GDP (YoY)  1.6%  3.9%  4.5%  1.9%  1.6%
 Average inflation in the period  3.5%  2.6%  4.3%  3.7%  0.9%
 Registered unemployment rate (period end)  12.1%  12.4%  12.5%  13.4%  13.4%
 Deposits and other liabilities (in PLN billion. period end)  625.0  682.0  761.9  797.9  846.0
 Households (in PLN billion. period end)  383.6  421.2  478.0  514.9  543.6
 Enterprises (in PLN billion. period end)  164.9  181.3  203.3  187.8  206.5
 Receivables (in PLN billion. period end)  651.7  770.0  880.8  901.1  937.3
 EUR/PLN (average rate)  4.32  3.99  4.12  4.19  4.19
 USD/PLN (average rate)  3.11  3.01  2.96  3.26  3.16
 CHF/PLN (average rate)  2.86  2.89  3.35  3.47  3.41
 Reference rate (period end)  3.50%  3.50%  4.50%  4.25%  2.50%
 WIBOR 3M (period end)  4.27%  3.95%  4.99%  4.11%  2.71%

Source: Central Statistical Office, National Bank of Poland, Bloomberg

 

Annual Report 2013 - Bank Pocztowy