Polish GDP Probably Slowed After Zloty Hurt Exports: Week Ahead

By Monika Rozlal

Aug. 25 (Bloomberg) -- Poland's economy probably slowed for the third consecutive quarter as the zloty's strength and waning foreign demand curbed exports.

Gross domestic product expanded an annual 5.5 percent in the second quarter, the slowest pace since the last three months of 2005, compared with 6.1 percent in the first three months of the year and 6.5 percent a year earlier, according to the median estimate of seven analysts surveyed by Bloomberg. The Warsaw-based Central Statistics Office will release the report Aug. 29.

The economy is losing momentum after advancing in 2007 at the fastest pace in a decade as growth in the European Union, the destination of 78 percent of Polish exports, slipped to 1.7 percent in the second quarter. The zloty traded at an average 3.409 to the euro, 10 percent stronger than a year before.

``A gradual slowdown'' is ``the most likely outlook'' in the next few quarters, said Adam Antkowiak, an economist at Bank BPH in Warsaw. ``Still, the economy is not at risk of a hard landing, while fast inflation and wage growth require further monetary tightening later this year.''

During the quarter, industrial output rose 2.3 percent in May, the slowest pace in three years and below the 7.4 percent predicted by economists in a Bloomberg survey.

That's one of the indicators that led all 12 analysts in a Bloomberg survey to predict the central bank, Narodowy Bank Polski, will keep interest rates unchanged for the second month in a row when its Monetary Policy Council meets on Aug. 27, two days before the GDP data.

Retail Sales, Unemployment

The July retail sales report due on Aug. 26 may provide another argument for delaying interest-rate increases, with economists predicting annual growth slowed for the fourth consecutive month to 13.9 percent, from 14.2 percent in June.

On the same day the Central Statistical Office will report the July unemployment rate, which probably fell to a 10-year low of 9.5 percent, according to eight analysts surveyed by Bloomberg.

In last week's markets, the zloty advanced 0.4 percent to 3.308 against the euro, ranking as the best emerging-market performer in the past 12 months.

The central bank rejected a quarter-point increase in its key rate last month because a majority of rate setters said the strong zloty and expected slowdown should help curb inflation, according to minutes from the meeting released yesterday.

Bonds, Stocks

The yield of Poland's two-year zero-coupon government bonds due in July 2010 dropped 3 basis points to 6.29 percent. Bond yields move inversely to prices.

The benchmark WIG20 index fell 27.96, or 1.1 percent, to 2,592.57.

New World Resources NV, the biggest Czech supplier of coking coal to steel mills, climbed 12.9 percent to 69.75 zloty in Warsaw trading after the Czech government signed a deal with Poland on exploration rights and the price of coal increased.

Bioton SA dropped 7.1 percent to 0.39 zloty after the Polish insulin maker showed a second-quarter loss and Prokom Investments SA, owned by Polish billionaire Ryszard Krauze, said it agreed to sell its 33 percent stake in the company.

Vistula & Wolczanka SA tumbled 21.6 percent to 3.78 zloty after the Polish clothing maker and retailer posted a second- quarter loss.

The following is a list of important events in Poland this week:

Event Date

July retail sales Aug. 26
July unemployment rate Aug. 26
Central Statistical Office presser Aug. 26
Central bank decides on rates Aug. 27
Second-quarter GDP Aug. 29

To contact the reporter on this story: Monika Rozlal in Warsaw at mrozlal@bloomberg.net