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PKPP Lewiatan: strong private consumption should help achieve broader investment recovery


The recently-published data for Q1, which showed a 2.6% y-o-y rise in capital expenditures by large companies and a 6% y-o-y increase in gross fixed capital formation in the national economy, are widely seen as a sign of a much-awaited revival in investments, but closer analysis reveals that the recovery is uneven and far from assured, according to a report by the Polish Confederation of Private Employers (PKPP) Lewiatan.

The report shows that the increase in business investment in Q1 was driven mainly by three sectors: manufacturing, trade, and healthcare services, and that the absolute value of gross fixed capital formation in the three months to March was actually 7.4% lower than in Q1 2008 and 9% lower than in Q1 2009. As a result, the share of net new investments in capital assets in the country’s GDP dropped below 20%. Whether or not the recovery in investments strengthens and broadens in the coming months will depend to a large extent on the external environment, most notably the financial situation of eurozone countries and the performance of EU economies, as well as inflation. In this connection, first-quarter GDP figures in Germany, Sweden and most other countries in Northern Europe were a positive surprise. However, there are signs of a possible weakening of conditions in the latter part of the year. Yet the continued strength of private consumption in Poland means companies will be unable to hold back investments in new capacity, new products and services or distribution channels for too long, PKPP Lewiatan reckons. This, according to the Confederation, represents an important source of cautious optimism going forward.

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