“Poland provides a reminder that central and eastern Europe’s economic outlook is not entirely dismal,” says the FT’s Lex. After reports that at least ten governments are in talks with the International Monetary Fund (IMF) for aid programmes, the fact that Poland managed to sell $2bn of government bonds at a relatively low premium to US Treasuries was a rare piece of good news from the region.
Altogether, Poland is in better shape than many of its neighbours, thanks to “prudence and a dash of good luck”. To some extent, it avoided their worst excesses, such as profligate public spending and runaway credit and housing bubbles. A sharp slide in the zloty has made its manufacturers more competitive in the export market. In particular, a government-backed scrapping scheme has sent car sales in Germany up 40% since March, to the benefit of Polish factories.
“The fashionable cars of the austere moment are small and economical,” says Ian Campbell on Breakingviews. “These are the cars Poland produces.” Thanks to this export boost, it may be the only European economy to grow this year, although a small contraction is more likely.
But investors shouldn’t get too carried away. Following a 35% rally in the WIG20 index since March, we should expect some weakness, says Maciej Bombol of ING on Bloomberg.com. Banks may be “among the key drivers behind a correction” as non-performing loans rise.
More worryingly for the long-term, Poland’s strength may mean it puts off much-needed fiscal reforms, creating a drag on future growth, says Capital Economics. While Hungary, Romania and Latvia had to agree to tough conditions to get IMF aid, Poland (and the Czech Republic) didn’t. So while the recession will be worse in the former group, they may emerge in “better structural shape than their supposedly less-risky peers”.