Right, right - Left, wrong

When conservative PiS was elected to the first majority since free elections in 1989, most folks on the left side of the political spectrum forecast a sputtering economic climate for Poland. However, quite the opposite is the case.

The rating agency Moody's has recently adjusted upwards the economic forecast for Poland as domestic demand and overall fiscal performance outpace most other EU countries.

The Polish economy grew at 3.9 per cent in the second quarter, which outperformed previous expectations. Now, there is a good chance full year growth may post a 4.3% increase making Poland the envy of other countries around the world.
 

Mo' money, Mo' money, Mo' money

Predictions of economic growth seem to be continually readjusted upward by significant gains even though many economists warned that the right-wing Law and Justice party’s 2015 election victory would damage Poland’s economy.

Unlike debt redden America, Poland is on pace to limit their deficit to 2.5% of GDP down from an earlier forecast of 2.7%.

Poland continues to attract foreign companies to relocate there and there is no signs of a slowdown. 

Gold in them thar hill

Poland was the only EU country to escape the present recession and economic crisis. Industrial output jumped by double digits, while employment and wages are up and out pacing inflation. The discovery of natural gas shale fields that equal more than 300 years of the country’s consumption have major oil companies beating a path to Poland’s door. Then there’s a luxury goods market that is growing faster than any other European country and a debt to GDP ratio that is one of the lowest in the world. The Warsaw Stock Exchange had more IPOs (initial stock offers) than any other European exchange in the past 12 months including foreign companies clamoring to be listed. These are all admirable attributes envied by other countries.



What else could Poles ask for in economic terms?


How about hitting a motherload of gold and silver that was just confirmed in dolny Śląsk!


A few million years ago, way before brothers Lech, Cech and Rus came from the east to establish the Slavic nations, the Kaczawskie Mountains located in southwestern Poland were erupting with volcanic ash and lava flows that glowed in the darkness of night. The apocalyptic looking event heaved tons of wealth to and near the surface of the earth’s crust. Today, in the land of extinct volcanoes modern testing methods indicate substantial mineral riches not previously exploited since mining started there in the 12th century are ripe for the picking.


Mining has always been an essential part of the Polish economy and is one of the most time-honored professions in Poland. Through the centuries going deep under the earth was dangerous and often deadly. Although there is no caste system, Poland’s miners traditionally have been elevated to a special social station of their own. Not only for the Feast of St. Barbara (patron Saint of miners), but also for weddings, funerals and other important political or social ceremonies, miners wear an especially smart looking black uniform adorned with red feathers and act much the same as honor guards.


Perhaps the most wondrous and largest mine in the world is in Wieliczka. Salt is a very important mineral, which seemed absent in Poland until the 13th century when Saint Kinga a Hungarian princess on her way to marry King Bolesław threw her engagement ring into a Hungarian salt mine near her home only to have it found where she indicated Polish miners dig upon her arrival. For over 700 years salt had been scooped out of the depths where Kinga’s ring miraculously appeared.


At the Wieliczka works the vast subterranean chambers are adorned with statues, chapels, grand staircases, dining halls and even chandeliers carved entirely of salt. There is even a clinic for people with lung ailments since the salt laden air is antiseptic.


Although another underground city like the Wieliczka mine is not in the making 150 miles to the west, the little village of Radzimowice in the Kaczawskie Mountains just might add a ton of wealth to the Polish economy.


Stara Gora (the Old Mountain) is the name used mainly by geologists for the location, since it was formerly the place where gold, silver, iron and copper once were mined and remolded. Many mine shafts beneath the peak of Zelezniak bear testimony to the heyday of a once blooming town. Lately, the few inhabitants left take their chances and run farm tourism businesses in a region famous for its panoramic views, wine production and rare plants including orchids and gentian.


Last month four high tech borings nearly a half-mile in depth confirmed the presence of high-grade gold, silver and copper veins, which appear to be untouched in the extensions of the historic site. New veins were also discovered and include significant amounts of gold with about one ounce of gold per ton of earth.


The area has a long history of mining covering 1,000 years and anecdotal evidence suggests and that up to 18,000 ounces of gold were recovered from nearby rivers and shallow digs over the years.


Extensive underground shafts were developed in Radzimowice until the mine closed around 1930 due to low metal prices and the onset of the Great Depression. The underground workings were well documented during earlier mining operations and indicate that most of the ore was mined from six veins. During the 1950s some refurbishment of the mine was undertaken by the Communist government but ceased when the Kupfershiefer copper deposit was discovered at a different location.


With private companies free to explore with the profit motive incentives of capitalism, what was overlooked by the previous socialist regime’s central planning seems to be panning out rather nicely in a market where gold and silver have had a huge run up in value.


The energy and precious metal resources just recently discovered under Polish soil is bound to bring increased economic wealth to the nation just as the discovery of salt did 700 years ago. However, there is a sinister plot being hatched by EU environmentalists that might cripple the heavy industry and coal mining sectors of the Polish economy. The what else Poles could ask for question might just be requesting some sanity regarding EU carbon emissions policies. Stay tuned to this column for a look into the absurdia the environmental whackos may thrust upon the only shining economy of the western world.

Glitz in Poland

Więcej diamenty, proszę

Aren’t you just doggone tired of reading how great the Polish economy is doing in this column month after month? The rest of the world seems to be mired in economic crisis and here in America the all mighty dollar continues to take a devaluation beating with quantitative easing by the Fed, stimulus programs, bailouts and no true spending reform.

Polish-Americans unjustifiably have been the brunt of Polish jokes for years. At least now in one small corner of the world where our ancestors come from - throwing off the yoke of socialism and a totalitarian regime of market control and central planning has provided a cornucopia of plenty, while other nations go wanting.

Purchasing of luxury goods in Poland is off the charts. It’s been that way for quite a while and right through the economic meltdown most western nations are experiencing. In the past five years almost all luxury item categories registered impressive double-digit sales growth. Brisk economic growth and the increasing number of high-earning households fuel the growing accumulation of high-end items.

Poles have the cash to spend and are continually seeking more sophisticated international brands. International luxury item producers rushing in to set up shop in Polish shopping malls confirm Poland’s strong taste for luxury goods. 2011 will see even more new glitzy and glamorous brands battle for the favor of Polish customers.

The Polish economy has undergone an extreme transformation since the end of Communism. Booming exports and increased investment made Poland the only economy in the EU to escape an economic recession in 2009 thanks in large part to its strong domestic consumption of consumer goods and the lack of credit crisis in banking as well as very low individual household debt.

Topping of the list of lavish item purchasing is jewelry including timepieces. This category has seen over a hundred percent increase in the past five years alone. The aggressive marketing campaigns have also dumped a tremendous amount of money into media and advertising agencies. So, radio, television stations, newspapers and billboard companies are experiencing nice fat numbers on their income statement bottom lines.

The second largest category includes fine wines, champagne and spirits. The 45% increase is helped along by the proliferation of new fashionable nightclubs, bars, and luxury boutique hotels all across the country. The secondary affect in the drinks category has been the synergy with commercial real estate and construction transactions as well as massive new hiring in the hospitality field.

The next largest market segment is designer fashions. Interestingly Polish designers still dominate the couture niche while brands such as Armani, Hugo Boss, Burberry and others are making a bigger and bigger dent in the top end clothing category. If you find it hard to believe Polish designers are fabulous, remember Oleg Cassini’s birth name was Oleg Loiewski.

While the global forecast for luxury goods is rather modest, the Polish market for luxury goods has become increasingly desirable and in greater demand. Success builds on success and encourages new players to enter the game. Italian luxury car giant Ferrari is a newcomer to Poland and Louis Vuitton is set to open its first Polish store this month. These established brands along with all the other merchants coming into the Polish market bring with them the development of new distribution channels and infrastructure further boosting a hot economy in terms of revenue and new hiring.

The growing disposable incomes of Poles will continue to boost demand for luxury goods and services. Bound to help this along is a newly introduced strategy in the Polish finance ministry. While other countries are trying to debase their currencies to address repayment of structured national debt, the Poles are contemplating actions to actually increase the value of the złoty. Although this topic is a subject for another column at a future date, suffice it to say that the Ferrari with the 300,000 złoty price tag just might come down to a number more easily reached by the upper middle class in Poland. Then there will be a huge market for new bumper stickers saying, “Inne moje samochodu jest Rolls Royce Silver Cloud.” (My other car is a Rolls Royce Silver Cloud)

Poles: No Appitite for Debt

nieprzyjemny smak

Throughout the economic crisis plaguing the world for nearly three years, Poland appears to be an island paradise surrounded by a sea of red ink flooding the world. As others found out the hard way, unwarranted risk and the bundling of financial derivatives are dangerous to all aspects regarding quality of life. The wheeling and dealing that caused the bubble to burst caused immense damage across the globe causing hardship, pain and in some countries - riots, with more to come.


Could nations have escaped the intensity of economic damage and the protests that are getting more hostile across the globe?

The unique circumstances in Poland imply the whole bloody mess was easy to avoid.

Readers of this column over the last few months will remember Poland was the only EU country to post Gross Domestic Product growth in 2009 when every other member of the 27-nation bloc declined by an average of more than 4.5 percent. Continued growth in 2010 made Poland the only back-to-back year winner of an expanding economy.

The reason Poland stands head and shoulders above its neighbors and the United States for that matter is due to three basic things: Disciplined banking principles, a sound government fiscal policy and perhaps most importantly a way more cautious approach to personal debt. Essentially, Poland’s economy profited from risk moderation on every level including how individual households conducted their financial affairs.

When the bubble burst in 2008 Poland’s household debt averaged only 16 percent of GDP. Contrast that figure with 109% for Great Britain, 70% in Germany, 80% in Japan and 95% right here in America.

While property prices continue to be at the heart of the world’s economic catastrophe, the Polish real estate market did fairly well to protect wealth instead of destroying it.



With out a doubt Polish housing stock and quality of life accelerated at break neck speed after the fall of Communism and state controlled economy. One thing that lagged behind during the transition to free markets was the mortgage industry. Consequently, most homes were purchased with cash from savings or what could be raised from relatives. Mortgages in most other EU countries constituted more than half of GDP, while in Poland it was scarcely 10 percent

The individual fiscal discipline demonstrated by Poles was matched by Polish banks, which maintained firm lending standards and rejected subprime loans. And, what a unique situation: Politicians kept their noses out of the lending arena.



Double digit increases in industrial output, along with vigorous job creation, increased exports and solid wages provided secure levels of Polish household income. That led to brisk consumption of goods and services creating a good economy. These are the factors that kept real estate values stable. Property values in Poland declined only a miniscule amount.



Happy Polish super star
Ewa Sonnet shows off  her assets

While families even in the USA were struggling with household finances, Poles actually increased their bank savings accounts by double digits. Those increased deposits kept the Polish banks strong on their own merits while bailouts were as common as perch in Lake Erie in other countries.

Foreclosures and nonperforming loans even through the worst part of the economic meltdown were significantly lower than 5 percent while other nations saw defaults of up to 30 percent or more.

If you remember back to the day of busia and dzia-dzia, you might remember they were more likely to plop down cash than to buy on credit. They were credit worthy, but they tended to avoid debt because they didn’t trust it. Given the fate of Poland during the 20th century one could never predict what tomorrow might bring except the comfort in knowing there was no debt hanging over their heads like the sword of Damocles.

Easy credit makes us fat and lazy expecting things to come easy. But, as they say: easy come, easy go. Poles comprise a lean, mean economic machine. Taking a lesson from Poland and trimming the taste for debt is a good thing for all nations to consider.

Smacznego certainly should not apply to a plate full of debt.

$$ BE NOT AFRAID $$

Polish businesses are not afraid of economic crisis! What crisis?

Polish entrepreneurs view 2009 with much hope. They plan further investments and anticipate job reductions will not exceed 1-2%.

This optimism is reflected in a recent survey by the Marketing Research Center showing that the majority of managers positively assess the condition of their companies. 70% of those polled expect a repeat or even an improvement of the results from 2008, while every seventh entrepreneur even plans to increase employment.

Mateusz Szczurek, head analyst at the ING bank, says the results of the poll augur well for the state of the economy: `Cutting interest rates, greater optimism among entrepreneurs, consumption demand - all these factors can help ease the problems facing Poland's economy.'

According to the poll, every fourth company plans new investments for 2009 and only 2%consider suspending open projects.

Source: Polish Radio 03.01.2009