Bloomberg News

Polish Central Bank Cuts Inflation, GDP Forecast for 2012

July 09, 2012

Poland’s central bank cut its inflation and economic growth forecasts for 2012-2014 as a stronger zloty, an interest-rate increase in May and a slowing expansion curb price pressures.

The inflation rate will fall to 1.8 percent in 2014, below the central bank’s 2.5 percent target, from 2.7 percent in 2013 and 3.9 percent this year, according to updated projections in an e-mailed copy of the central bank’s inflation report today. The English version of the report is also available on the bank’s website.

The forecast helped The Narodowy Bank Polski, the only one in the 27-member EU to raise borrowing costs in 2012, leave its benchmark interest rate unchanged at 4.75 percent July 4, after a quarter-point increase in May. Governor Marek Belka said after last week’s decision he’s “more worried about economic growth and less worried about inflation” than a month ago.

The central bank, which raised borrowing costs in May as inflation topped the target for 20 months, has maintained a bias toward tightening as consumer prices rise at the third-fastest pace in the European Union. Poland’s economy is set to grow 2.7 percent this year, the fastest pace in the 27-nation bloc.

EU Funds

The economy has so far resisted the slowdown in the euro- area, which buys more than half of Poland’s exports, on “high absorption of EU funds and a related rise in public investment, a relatively favorable situation in Germany as well as on a weakening zloty,” the bank said in the report.

“The positive impact of these factors will gradually fade,” the bank said, pointing to expectations that the German economy, the main buyer of Polish exports, will slow and the zloty will appreciate as “the recently observed depreciation was not driven by fundamental factors and was largely due to increased aversion risk.”

Economic growth will ease to 2.1 percent in 2013 from 2.9 percent this year, before rebounding to 3 percent in 2014, according to projections prepared by the Economic Institute of the Warsaw-based Narodowy Bank Polski.

The zloty rose to 4.2394 per euro at 9:30 a.m. in Warsaw from 4.2492 late Friday. The two-year bond was unchanged at 4.61 percent.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at David McQuaid at

To contact the editor responsible for this story: Balazs Penz at

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