Page 19 - Sample PRO weekly report Poland

Standard and Poor’s affirms Poland at BBB+ with stable outlook
Standard and Poor’s affirmed Poland at BBB+ with stable outlook on April 21.
The rating is based on the assumption that an acceleration of GDP in 2017 will prevent government finances from deteriorating significantly. That is despite extensive social spending measures, a reduction in the retirement age, and persisting political uncertainties, S&P said.
The rating agency expects growth to pick up speed to 3.3% in 2017, supported by a recovery in investment, especially EU co-sponsored public investment. Consumption growth should remain robust as the low unemployment rate, healthy wage growth, and last year's government measures bode well for consumer spending.
That said, consumption could suffer from a potential Sunday shopping ban that may be passed this year. S&P also forecasts that export growth will persist, although still slower than import growth, as economic recovery in Poland's main trading partners, especially in the EU, continues.
In the medium term, however, structural factors will hinder potential growth, S&P observes. Growth will likely average 3% in 2018-2020, as demographics and a reduction in the minimum retirement age will likely drag on labour supply. Private investment could also have second thoughts because of a number of “elevated domestic and external risks,” the agency notes.
Poland remains in conflict with the EU over the Constitutional Tribunal, and has put itself at odds with the rest of the EU over the re-election of Donald Tusk as the head of the European Council. Domestically, tensions between the ruling party and the opposition remain high, S&P adds.
Poland’s fiscal position remains under the influence of fiscal measures the government took last year. “In particular, the Family 500+ program - in place now for a full year - will cost up to 1.3% of GDP,” the agency said.
In effect, the general government deficit could reach 3% in 2017 and will only gradually decline over the medium term. Improving the collection of taxes sufficiently to cover spending plans will be challenging, S&P argues.
“Should government finances appear at risk of breaching the 3% of GDP Maastricht hurdle, the government may be forced to cut capital expenditure, which could drag on growth, or it may resort to additional sectoral taxes such as the postponed retail sector tax,” the agency noted.
The agency forecasts that general government debt will gradually increase to around 54% of GDP by 2020. It also expects a slight widening of the current account deficit as domestic demand fuels import volumes while rising import prices, especially higher commodity prices, increases import values.
This PDF is intended for Ben Aris at Intellinews.
Systematic forwarding is a breach of subscription compliance obligations.
Written by bne IntelliNews, New Sparta Media and Emerging Markets Direct Media Holdings LLC. We make no warranty, express or implied, as to the accuracy or completeness of the information. The views expressed reflect our best judgment as of the date of publication and are subject to change without notice. Opinions are not necessarily those of New Sparta Media, Emerging Markets Direct Media Holding LLC or its affiliates. New Sparta Media and Emerging Markets Direct Media Holdings LLC and take no responsibility for decisions made on the basis of these opinions. Unauthorized redistribution of this information is strictly prohibited.