While most of the world is still feeling the affects of the global economic slowdown and unemployment woes, Poland’s industrial output is showing double-digit growth.
January’s output according to the Central Statistics Office was 10.3 percent, exceeding the average forecast of a 9.4 percent predicted by a survey conducted last year.
Poland, which joined the European Union just seven years ago, was the only member of the 27-nation bloc to post Gross Domestic Product growth in 2009. Additionally, last year’s GDP expansion of 3.8 percent made it the only EU country to have back-to-back years of growth.
Polish industrial sector output is rising faster than expected due to surging exports, encouraging companies to increase production and add jobs. The result was the third month of double-digit output growth.
A survey by Markit Economics shows new orders rolled into Polish manufacturing firms at the fastest pace since May 2004. Export orders posted the biggest jump on record. An advantageous business climate in Poland has other EU countries outsourcing material and component production to industrial complexes all across Poland.
In the past year, Polish companies increased employment by 3.8 percent, the fastest annual growth since the global financial meltdown began. Wages also ballooned 5 percent for the second month in a row. Bankers predict that industrial output growth, along with vigorous job creation, solid wages and rising inflation currently at 3.8% will make an interest rate increase by Poland’s Monetary Policy Council necessary this month.
Producer prices, which are an early indicator of inflationary trends, grew by 6.2 percent and were the highest in at least six years. One of Poland’s banks expects the rates to increase by 0.25 percentage points to 4.00% in March. By the end of the year interest rates may grow as high as 4.5 percent in an attempt to keep inflation at bay.
Besides factories humming along at a fast pace, exploratory wells in the natural gas shale fields are showing great promise. Until now, Poland had very little luck with domestic energy resources. New techniques developed recently can crack shale strata releasing vast amounts of trapped gas. If things go nicely, Poland could become a net exporter of natural gas in addition to supplying its own energy needs. The natural gas bonanza could also be the source of thousands of new jobs for the nation’s economy.
While the figures are not audited and made official yet, it is likely that Poland’s deficit for last year will come in at around 7.9 percent. Although nearly half the size of extremely troubled big deficit countries like Greece, Ireland, Spain, Portugal and Great Britain, the EU economic affairs commissioner Olli Rehn admonished Poland that it needs to get inline with the official EU limit of 3 percent of GDP by 2012.
There’s no need to hike taxes to bring the deficit in line according to Poland’s Financial Minister Jacek Postowski. He told reporters, “The government's policy is a quick balancing of public finances and achieving the 3% deficit target by the way of spending cuts.”
The Minister avoided going into details about planned spending cuts under consideration other than to say expenditure constraints have already been written into a Polish law that took effect last year. Commissioner Rehn, confirmed that the commission sees the goal of Poland's deficit falling to 3% of GDP by 2012 as "achievable and do-able".
If world markets avoid a deepening crisis, Poland will be sitting pretty with its manufacturing and new natural gas growth prospects. The move to decentralize healthcare from government hands and making sensible modifications to state pension plans held over from the Marxist era will further bolster Poland’s economic fortunes.
The key is to make adjustments in a carefully prudent manner. Although plans are on the table, meaningful action probably will not come until after next year’s parliamentary elections since President Komorowski is not showing strong leadership regarding much needed reforms. Maybe well-educated physicians will be more prone to actually stay in Poland. After all, what good is a healthcare system if it forces good doctors to migrate to countries where they can make a decent living? A hot economy is good. Hopefully, Poland will keep it that way.