Bloomberg News

EU Sees Poland’s Economy Expanding at Fastest Pace in Bloc

May 11, 2012

The European Commission raised its economic-growth forecast for Poland to 2.7 percent, the fastest in the European Union, citing domestic demand and public spending on the Euro 2012 soccer championship.

The estimate was increased from a February outlook of 2.5 percent, the EU’s executive arm in Brussels said in a statement today. The EU’s largest eastern member’s economy may slow to 2.6 percent growth in 2013, it said.

The EU’s forecast is above the 2.5 percent prediction by Prime Minister Donald Tusk’s government for 2012. Poland is weathering the recession predicted for the 17-nation euro region, its biggest trading partner, driven by domestic demand and public investment in preparations for the Euro 2012 soccer championship.

“Domestic demand is projected to remain the main driver of growth, but the focus is expected to continue to shift from consumption to investment,” the commission said. “Companies are set to benefit from the currency depreciation and use their profits to renew their machinery in preparation for an expected upturn in the cycle.”

The zloty weakened 0.4 percent to 4.2431 per euro at 11:31 a.m. in Warsaw, data compiled by Bloomberg show.

Narrowing Deficit

The commission estimates the Polish government will narrow the budget deficit to 3 percent of gross domestic product this year from 5.1 percent in 2011, suggesting the country will meet this year’s deadline set by the EU to narrow the shortfall within the bloc’s limit. Failing to do so would have cost the country access to development grants that helped the country avoid recession in 2009.

“In 2012, despite a considerably slower GDP growth, the deficit is expected to decrease to 3 percent of GDP on the back of the 2011 package of structural consolidation measures,” the European Commission said in its report.

For next year, “the headline deficit is expected to fall to 2.5 percent on the back of slowing but still relatively robust GDP growth and further sharp decrease in public investment,” it said.

Debt may fall to 55 percent of GDP from 56.3 percent in 2011, the report said.

The commission also raised Slovakia’s growth forecast to 1.8 percent this year from a previous estimate of 1.1 percent. It kept the 2013 forecast unchanged at 2.9 percent.

“While the sizable increase in manufacturing production underpinned a sustained increase in export market shares in 2011, the outlook for 2012 appears less rosy,” for Slovakia, the commission said. “With four-fifths of the total exports directed towards the single European market, where activity remains subdued, exports are expected to grow below their long- term trend in 2012.”

To contact the reporter on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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