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BNP Paribas reduces Poland growth forecast


BNP Paribas on 26 August revised downwards its forecast of economic growth in Poland in 2011 and especially in 2012. The French bank now expects the Polish economy to expand by 2.5% next year, rather than by 2.9% as earlier predicted. In 2011 GDP growth is projected to be 3.5%, down from 3.6% forecast in June.

BNP Paribas’ expects a broad-based deceleration in Poland (as well as in three other major Central Europe economies, the Czech Republic, Hungary and Romania) in 2012, amid a weakened growth outlook for the eurozone and US economies. Sluggish growth in these markets will hurt exports from Central Europe and, together with rising aversion to risk on financial markets, will dampen investments in the region, markedly slowing down employment growth, the bank said. Under these circumstances, domestic demand in Poland will not grow as strongly as previously thought, as anaemic labour market recovery puts a brake on wage growth and hurts consumption, which will be additionally weakened by the strength of the Swiss franc. At the same time, rising deficit and debt levels mean the Polish government has no room for a further fiscal stimulus of the kind it used in 2008-2010, especially since weaker growth will slow the pace of fiscal retrenchment.

In its revised inflation forecast, BNP Paribas predicts that consumer inflation will remain below the central bank's target of 2.5% y-o-y at least until mid-2013. The bank therefore expects interest rates to start falling already this year, and forecasts a cumulative reduction of 75 basis points until the end of 2012, from 4.5% at the moment.

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