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GDP growth at 4.4% y-o-y in Q1


Poland’s gross domestic product amounted to just over PLN 349bn (approx. €88.4bn) in the first quarter of 2011, which in real terms translates into an increase of 4.4% compared with the same period a year ago, according to a preliminary estimate from the Central Statistical Office (GUS). The growth rate, only slightly slower than in the previous quarter, was broadly in line with market expectations.

The main growth engine was domestic demand, which contributed 4.5 percentage points to GDP growth in Q1. Of this, consumption delivered 2.9 p.p. while gross capital formation added 1.6 p.p., thanks in roughly equal measure to stock rebuilding and investments. The contribution of net exports was marginally negative at -0.1 p.p.

In 2010 Poland’s GDP grew by 3.8%.

Coming as it does after a series of robust data about output and retail sales, the news that GDP growth reached 4.4% y-o-y in the first quarter of the year is no surprise. When one examines the underlying growth components, it is noteworthy that private consumption maintained its high rate of expansion and remained the main engine of economic growth in Q1 even despite the rise in VAT rates and the surge in inflation. Gross fixed capital formation recovered somewhat following a period of stagnation, but it should be kept in mind that the increase was driven mainly by public investments, and was substantially flattered by a very low comparative base. Another positive contributor to GDP growth in Q1 were rising inventories, though it seems that the process of post-crisis stock rebuilding is gradually coming to an end. Meanwhile, the fact that the contribution of net exports was only marginally negative reflects the strength of external demand during the quarter, helped by an improvement in global economic conditions (and particularly by the strong rebound in Germany) as well as by the relative weakness of the zloty, which boosted the international competitiveness of Polish products.

In our view, though the growth mix in Q1 was relatively balanced, a rising reference base (especially in the second half of the year) means that maintaining GDP growth at such a high rate in the coming quarters is going to be very difficult. Whilst solid private consumption should continue as the chief driver of economic growth, we expect companies to remain cautious about expansion and investments amid persisting global uncertainty, particularly as latest surveys of business conditions suggest that the pace of the global recovery seems to be slightly weakening. Therefore we forecast that in 2011 as a whole GDP growth in Poland will be only slightly above 4%.

Paweł Sionko

Senior Economist

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