Weekly Economic Report - 30.06.2008

Poland hoists interest rates_
As we expected and in keeping with market consensus, Poland’s Monetary Policy Council (RPP) raised all interest rates by 25 base points. Not surprisingly RPP’s main reason for the move were pessimistic inflation forecasts and the resulting risk of second-round effects.

May retail sales as expected
May’s retail sales figures were 14,9% higher year-to-year in keeping with our forecasts and market consensus, but slightly below April’s 17,6% - most probably in effect of May’s four bank holidays. Lowest were auto sales, which closed at 2,7% y/y against 27% y/y in April.

Inflation up
No important macro-economic data from Poland is expected in the coming week as domestic financial investors focus on the Finance Ministry’s July 1-announced inflation report for June. According to our estimates the CPI index rose 4,7% y/y from 4,4% y/y in May. ECB’s interest rate decisions are expected Thursday. As most analysts, we expect a 25-point main rate hike to 4,25%.

Dollar down to PLN 2,12
RPP’s visible mildening since its last statement as well as statements by its members J. Czekaj and D. Filar and the rising aversion towards global market risks weakened the PLN in the second half of last week. On Friday the EUR/PLN rate rose to around 3,3780, almost 3 groszes above Thursday, but this proved short-lived as the Złoty soon returned to its appreciation trend. At the outset of this week one Euro cost PLN 3,35 and one USD PLN 2,1140, the lowest rate since December, 1993.

This weekly market analysis was compiled by Millennium Bank.

Polish Market

ECONOMIC MONITOR

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• ● In December 2009 and January 2010, as in previous months in the second half of 2009, the Polish economy stood out against other countries in terms of GDP growth. Poland’s economic growth was higher than projected and higher than in other European countries.
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• In 2009 construction output increased by 3.7%.
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• Retail sales increase in most product groups.
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• On the Warsaw Stock Exchange, stock prices were very volatile in January 2010.
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• At the end of December 2009 the registered unemployment rate (claimant count rate) amounted to 11.9% versus 11.4% in November.
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• At the end of January the president signed the 2010 budget bill into law. The bill was adopted by the parliament on December 18.
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• In the fourth quarter of 2009 the Polish economy turned out to be more resistant to the global crisis than had been projected and than the economies of Polish neighbours, something which boosts optimism in forecasts for 2010 and the next years.
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PODCAST

• Poland and China: two partners unscathed by the crisis

• Polish artist turns around Polish-Jewish stereotypes

• Unconventional natural gas – Poland’s secret weapon

• Shock and outrage at Warsaw underground ‘saucy sheep’ mural

• Gdansk reinvents Elizabethan theatre tradition

• Poland kicks off Chopin Year

COMING UP

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WEEKLY MARKET ANALYSIS

The last portion of macroeconomic data for January will be released on Friday when the National Bank of Poland (NBP) is expected to publish balance of payments figures. We estimate that the current account deficit reached EUR580 million while the consensus of the “Parkiet” daily is EUR614 million. We expect that growth in exports slowed slightly in January to 10.9% y/y. We also predict that imports had already made up for last year’s losses and rose by 7.7% y/y in January.

MARKET INFO

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