Production continues to grow, but only export is pushing on the Polish economy at the moment. Consumption is trying to break down. Poles prefer to save. They have 467 billion PLN in their accounts and deposits. It is 20 per cent more than at the beginning of the year.

According to the CSO data published in mid-August, industrial production was by 10.3 per cent higher in July than last year. However, economists emphasize that dynamic growth is mainly determined to foreign demand for Polish goods and services at present. Domestic demand is losing its power. Pausing from the purchase must cause a decline in demand, what means a slowdown in the economic growth. Export will be able to maintain a good pace of the Polish GDP, if the European Union economies, and particularly the German economy, do not get breathless. What could be the result of slowdown in consumption?

Poles do not want to buy

Poles spend money more and more reluctantly. According to the latest research of the Economic Development Institute at the Warsaw School of Economics, a tendency to buy durable goods decreased by 6 per cent in the second quarter 2010. An interest in buying houses, buildings or cars has been decreasing. Indexes, which measure it in summary form, fell by 3.5 and 10 per cent respectively.

Poles have begun to save. The National Bank of Poland data shows that the cash deposited in bank accounts and deposits in July exceeded 467 billion PLN. This means that from the beginning of the year they have been increased by almost 90 billion PLN, which is over 20 per cent. Economists and sociologists say that it is a result of fear and uncertainty fueled by politicians recently. - Unclear situation with the state budget, the pension scheme, and uncertain condition of the world economy makes people prefer to keep money in their accounts - Prof. Krzysztof Rybinski, former vice president of the NBP said.

The outlook for consumption is not good. Employment is growing, but wages do not change. It is very difficult to get consumer credit, especially for people with lower incomes. This will cause the decline in sales of cars and other durable goods. Some of the less affluent people who have so far bought on credit, will dispense with the purchases.

It will also be harder to get a mortgage. The Recommendation of the Financial Supervision Commission took effect on the 23rd August. It prohibits financial institutions from lending mortgage in foreign currencies to persons who do not have at least 20 per cent of purchased apartment's value.
The increase in consumption may also be hampered by freezing wages in the public sector and by increasing VAT by 1 per cent what has announced the Polish government.

According to data about the industrial production in July, the export industries are the best. The production of computers and electronic appliances grew by more than 54 per cent per year. A revival of industry is possible thanks to the industries that benefit from the upturn in business of our trading partners, mainly in Germany - Maciej Reluga, chief economist at BZ WBK said. In fact it is Germany that benefits from a revival of global trade most of all and is pushing on the whole euro area. German GDP grew by 3.7 per cent per year in the second quarter.

We are waiting for news from the USA

However, what is the fuel of the Polish companies today, may harm them tomorrow. The dynamics of production and the whole Polish GDP depends primarily on the international situation which is not clear. Piotr Kalisz from BZ WBK estimates that if the situation in the USA deteriorates, it may cause a slowdown in production growth in Poland. That would be bad for the Polish consumption. Today there is a chance of gradual accelerating, because the export companies will have to look manpower. The industry uses its capacity in just 79 per cent. But this rate has been increased steadily for several quarters.

Exporters will need a staff to produce. Thanks to the rising employment a total income of Poles increases more and more. That should cause growth of the demand and strengthening foundations of the economy.

Monika Skarzynska

PHOTO: ISIFA