Poles ready to shrug off shortest of European economic downturns

By Marcin Goettig and Patrick Graham, Reuters

WARSAW — Only months after a stagnant winter marked the end of one of Europe’s few recent economic success stories, financial experts are increasingly convinced Poland is mounting a robust recovery. The question when the European Union’s biggest eastern member stalled at the end of 2012 was whether a decade of growth after its entry to the bloc in 2004 had been a one-off honeymoon, or could be repeated. No doubt Poles are feeling the effect of the slowdown after a rise in joblessness and insecurity. Living standards still trail a long way behind those of their western neighbors, or even the Czech Republic. But all signs in Warsaw this week are that the conditions are in place for a gradual and sustainable revival. “The economy is still weak overall but there are green shoots now which we can say are firmly in place,” said Peter Attard Montalto, emerging markets economist with Nomura in London. Profits and productivity gains had proven easy in the years after EU entry as a population used to low wages, cramped housing and the search for a cheap solution to every problem discovered new ideas like easily available consumer credit.

Millions of Poles headed west to work — far more proportionally than any of their eastern European neighbors — and sent cash pouring back that has bought cars, built houses and bolstered small businesses. But many wondered how long the credit boom could run as cash-strapped Western banks cut back on funding for subsidiaries; whether Polish firms were capable of investing to compete with bigger companies in Germany and elsewhere; and how long labour costs would remain competitive as wage expectations rose. The answers on all those fronts are looking positive. Investment in longer-term and bigger scale projects both public and private has been strong throughout the boom and the results are beginning to show. Warsaw is finally well connected by road to Germany, the Czech Republic and the country’s other major cities and — importantly for a population of 37 million in this year’s heat wave — lake, mountain and coastal holiday resorts. Exports, whose long-term growth slowed after 2008, rose 6 percent in the first six months of 2013 compared to a year earlier, including a rise of 2 percent to other EU countries and some 22 percent to other emerging economies.