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(Updates with more comments starting in seventh paragraph, zloty in fifth, PMI index in ninth. For more Kotecki, click HERE.)
Sept. 1 (Bloomberg) -- Poland’s government is keeping its estimate of about 4 percent economic growth this year, which will help cut the budget gap to less than 5.6 percent of gross domestic product, Deputy Finance Minister Ludwik Kotecki said.
GDP grew 4.3 percent in the second quarter from a year earlier, more than economists expected, as the fastest investment increase in 2 1/2 years outweighed slowing exports and consumption. Poland, which has 50 billion zloty ($17.3 billion) in cash to cover expenses, may start to raise funds for next year’s deficit, planned at 3 percent of GDP, compared with last year’s 7.9 percent, Kotecki said.
Risks to economic growth in Poland, the European Union’s only country to avoid recession in 2009, have increased as the global economy slows, Kotecki said. Growth in the euro area, which buys the majority of Polish exports, slowed to 0.2 percent from the previous quarter in the April-June period, the worst performance since 2009.
The Polish figures show that the economy “has enough strength to shield against any potential slowdown,” Kotecki said in an interview in Warsaw yesterday. “We estimate that the central-government budget deficit will be at least 10 billion zloty below plan, while the general government deficit will be narrower than our target.”
The zloty traded at 4.1476 per euro at 12:30 p.m. in Warsaw, compared with a three-week high of 4.1278 late yesterday.
The government’s priority is narrowing the deficit to within the EU’s 3 percent of GDP limit and any decline in revenue will be offset by savings to ensure reaching that goal, Kotecki said.
A recovery in fixed investments, including an estimated 8 percent increase in private investments, as well as public investments that are the highest in Europe and a record for Poland, will secure Poland next year in case of an economic slowdown, according to Kotecki. The Euro 2012 soccer championships, which Poland is organizing together with Ukraine, will also act as a stimulus, while consumption growth should remain stable, he said.
“I don’t see any serious risk of a decline there,” Kotecki said.
The Polish purchasing managers’ index slowed to 51.8 from 52.9 in July, HSBC Holdings Plc said today in a survey by London-based Markit Economics. The median estimate of 20 economists surveyed by Bloomberg was 51.6. A reading above 50 indicates growth.
The reading, the second-weakest since January 2010, resulted from lower output growth, which slowed for the third time in four months, according to Markit. It also reflects a third successive monthly decline in new export orders “as the domestic market continued to underpin expansion,” Markit said in an e-mailed statement.
August industrial output, which Poland’s statistical office will report on Sept. 19, will be “a bit higher than in July,” Kotecki said, adding that “the 1.8 percent July reading wasn’t weak at all” when compared with Western Europe.
“We can’t expect double-digit output growth anymore because we’re no longer getting a boost from a weak year-earlier base and because of the slowdown on Poland’s main export markets,” he said.
--Editors: Balazs Penz, Andrew Langley
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