Poland the only EU country to register growth in 2009

Poland was the only EU country to register economic growth last year, at 1.7%, according to the preliminary estimate of the Polish Central Statistics Office. Robust domestic consumption was the main driver of this development, as unemployment had decreased over the past couple of years, and both households and companies are, in general, less indebted than in other countries.

While both exports and imports have decreased in the last 12 months, exports have exceeded imports. Polish exporters continue to benefit from a weak zloty, especially in price sensitive segments and markets, which compensates in part for the overall decrease in foreign demand. However, the zloty has shown an appreciating trend since end of 2009, and Crédito y Caución forecast a further strengthening against US-$ and Euro in the course of 2010.

For the average Polish company the main issue is liquidity, as payment delays pile up, creating a domino effect along the supply chain. The same sectors as in 2009 will be affected in the coming months by above-average payment delays and defaults: steel distribution and construction, construction materials, construction transport and consumer electronics. Construction has been severely affected by adverse weather conditions in recent months. The retail sector has suffered from disappointing consumer spending at Christmas, especially in the household electronics sector. In contrast, Crédito y Caución sees pharmaceutical and food as the most stable industries.

Companies face tougher borrowing requirements

Polish companies still face tough negotiations with their banks to extend lines of credit, and many suffer from increased financial burdens, as banks seek to strengthen their balance sheets. Banks also seem to be shying away from critical sectors, and are steadily reducing their exposure to them. Crédito y Caución also has concerns about the effect that audited 2009 company results will have on banks decisions to prolong available credit lines and on capital costs. Consumer credit loans will also suffer from tighter credit conditions.

Consensus forecasts currently predict GDP growth of 2.2% in 2010, subject to a recovery in exports and spending of EU funds to improve infrastructure [the government plans to modernise roads and railways and to build about 2,000 km of new fast roads in time for the Euro 2012 Football Championships, co-hosted by Poland]. However, rising unemployment and decreasing credit growth could further dampen consumer spending.

Crédito y Caución still expects an increase in the number of insolvencies in 2010, especially in the steel and construction industries, as those sectors are traditionally most exposed to payment delays.